GOMB Releases Update to 2025 Economic and Fiscal Policy Report
Updated report sheds light on unprecedented budgetary pressures inflicted by Trump’s Budget Bill & actions targeting states with Democratic Governors
February 6, 2026
SPRINGFIELD — Today, the Governor’s Office of Management and Budget (GOMB) released an update to its October 2025 Economic and Fiscal Policy Report, outlining how recent federal actions and provisions enacted under Trump’s Budget Bill will further increase costs and uncertainty for Illinois as the Governor prepares to present his FY27 budget proposal and budgets for years to come.
Over the past year, federal policy changes have altered the federal-state partnership by shifting costs to states and reducing support for longstanding programs that serve working families. Since October, budgetary pressure has only increased for Illinois and other states with Democratic Governors that have been targeted by the federal government for political retribution. Unlike the federal government, states across the country — including Illinois — are required to balance their budgets, and as repeatedly stated, Illinois cannot backfill billions of dollars as the federal government makes reductions.
Despite these headwinds, the Governor’s Office and GOMB remain committed to doubling down on fiscal responsibility and mitigating the impact on core services for Illinois residents to the greatest extent possible. As the Governor’s office and GOMB prepare to roll out the FY27 budget recommendations on February 18, the State will continue to closely monitor economic forecasts and new developments from the federal government that could further affect Illinois’ budget and fiscal outlook in unforeseen ways, both this year and in upcoming budget cycles.
Some highlights from the updated report are outlined below:
State Actions to Mitigate Revenue Losses from Federal Tax Cuts for Corporations
At a time when many large corporations are reporting record profits and benefiting from Trump’s Budget Bill, those same changes are reducing state revenue. For Illinois, automatic conformity with these federal changes would have resulted in an estimated more than $830 million reduction in General Funds revenues beginning in FY26.
In response, the Governor and General Assembly acted to decouple from select federal tax provisions to level the playing field, protect working families, and strengthen the State’s ability to balance its budget. These actions are estimated to retain approximately $243 million in General Funds revenue, reducing the overall impact of Trump’s tax provisions to approximately $587 million for the current fiscal year.
New Administrative and Implementation Costs for State Agencies
In addition to revenue impacts, H.R. 1 imposed new administrative and operational requirements on states. Illinois agencies will be required to invest in additional staff and upgraded technology to comply with new federal mandates related to SNAP and Medicaid eligibility, redetermination, and work requirements. These implementation costs are estimated to exceed $100 million over the next two fiscal years.
Impact to SNAP, Medicaid, and Child Care Funding Risks
The report also details the growing uncertainty around federal support for critical safety net programs, including SNAP and Medicaid, and also includes federally funded child care assistance, relied upon by working families. Recent federal actions have created heightened risk for child care in states with Democratic Governors, including the Child Care Assistance Program (CCAP) and Temporary Assistance for Needy Families (TANF) programs.
If federal funding for child care were reduced or withheld, Illinois would be forced to confront difficult tradeoffs between backfilling lost federal dollars or reducing services that allow parents to work and children to receive care. Loss of federal child care and TANF funding would impact Illinois through the loss of approximately $1 billion in FY27.
Other States Facing Budget Pressure from Federal Changes
Illinois is not alone in entering a challenging budget year. States both red and blue across the country are confronting growing fiscal pressures driven by federal policy changes, national economic uncertainty, and rising program costs. Several states are either projecting deficits or are being forced to cut core services, raising taxes, or pulling from their rainy-day funds to balance their budgets and also prepare for the future impacts from Trump’s Budget Bill that will only make deeper cuts. Below are some examples of the challenges that states across the country are facing.
- Iowa and Michigan are anticipating deficits approaching or exceeding $1 billion.
- Kansas eliminated more than $540 million in agency funding requested to bolster program enhancements and increase personnel workforce expansion. This followed an expected loss of $145 million from the state’s reserves following the passage of Trump's Budget Bill.
- Ohio, Missouri, Arkansas, and Tennessee — states whose economies are built on agriculture and manufacturing — are “treading water” while they struggle to navigate Trump’s tariffs. In Tennessee, nearly every state agency requested funding increases, but they were urged to decrease spending.
- Colorado faced a $1.2 billion shortfall in FY26 and is facing a budget deficit of $500 million in FY27.
- Virginia has historically maintained a surplus, but its reliance on leftover general funds to cover budget gaps may leave the state unprepared for economic swings and unanticipated costs. In the context of economic uncertainty and widespread federal job losses following workforce cuts by the Department of Government Efficiency, the state could find itself in a future deficit.
- West Virginia, one of the states most reliant on federal funding, has asked its agencies to cut program spending by 2% while proposing a 10% tax cut. West Virginia’s governor has communicated that the administration will not apply state funding to fill federal gaps.
Read the full update to the report below:
HR 1 Federal Impact - GOMB 5 Year Report Update.pdf
PDF - 376 Kb
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