SPRINGFIELD — Gov. J.B. Pritzker will propose nearly $1 billion in one-time tax relief measures as part of his fiscal year 2023 budget proposal, which he will unveil in greater detail in a Statehouse address on Wednesday.

The proposed actions are intended to counteract the impact of rising inflation by keeping more money in the pockets of Illinoisans. It comes at what’s undoubtedly the most convenient time for a politician to offer tax relief — in the run-up to an election. Pritzker faces voters in November.

Under the governor’s proposal, dubbed the "Illinois Family Relief Plan," there would be a one-year freeze on the scheduled cost-of-living increase in the state’s gas tax. The governor’s office estimates the measure will save motorists $135 million next fiscal year, which begins July 1.

Gov. J.B. Pritzker is congratulated by lawmakers after delivering his first budget address to a joint session of the Illinois House and Senate in February 2019.

E. Jason Wambsgans, Chicago Tribune

But the measure also tied annual increases in the tax to the consumer price index. This fiscal year, it was 39.2 cents per gallon, with the governor’s office anticipating an increase of about 2 cents in July without a freeze.

Pritzker will also propose a one-year holiday from the 1% state sales tax on groceries, estimating that it could save taxpayers a combined $360 million.

That revenue is normally earmarked for local governments, which will still receive an equivalent cut in the form of other state revenue, officials said.

And, perhaps most significantly, the governor will propose one-time property tax rebate payments for homeowners of up to $300.

Pritzker’s proposal would, in a sense, mimics the existing Illinois Property Tax Credit, which is a credit that can be claimed on individual income tax returns equal to 5% of state property taxes paid up to $300.

Under the plan, a rebate equal to the credit will be issued, essentially doubling taxpayers’ return. The governor’s office estimates this would put $475 million back into taxpayers’ pockets.

Altogether, the one-time tax breaks would return about $970 million to Illinois taxpayers, according to the governor’s office.

The hope is to counteract the striking rise in prices. According to the U.S. Department of Labor, the consumer price index rose 7% between December 2020 and 2021, the fastest increase since 1982. Wages increased as well, but didn’t quite keep up, only rising by 4.7%.

Deputy Gov. Andy Manar, in an interview with Lee Enterprises, said the proposal is “targeted to essential everyday expenses.”

"The governor is focused on reducing the impact of inflation on items that Illinoisans rely on like groceries and gasoline," Manar said. "And the governor also understands this all has to be balanced in a balanced budget proposal. And this will be a major piece of what he puts on the table on Wednesday."

Pritzker’s proposal comes at a time of relative stability for the state’s shaky finances.

The U.S. economy grew by 5.7% in 2021, the best performance since 1984 and a strong rebound from the 3.4% pandemic-induced contraction in 2020.

This, along with more than $8 billion in American Rescue Plan stimulus funds, has filled the state’s coffers with better-than-expected revenues from income and sales taxes.

Last year, tax revenue recovered so well that Pritzker went from proposing a fiscal year 2022 budget that initially had a $3 billion deficit to enacting a $42 billion spending plan that was essentially balanced when passed.

The governor’s budget office, in a report released in November, further revised its forecasted surplus for the current fiscal year from $88 million to $418 million.

Manar said Pritzker will outline further "revisions for the remainder of the fiscal year and next fiscal year" in his combined budget address and State of the State address on Wednesday. The new fiscal year begins July 1.

"Revenue projections are positive, but we have to also recognize that they’re a moving target," Manar said. "So what the governor doesn’t want is a proposal that would send us back and return us to the days when overspending and political expediency drove the budget conversation."

Despite a run of relatively good fiscal news over the past year, which included the state’s first credit rating upgrade in more than 20 years, the governor’s budget office report from November also acknowledged that "the underlying structural deficit of the State’s budget has not been fully addressed."

In that report, budget officials projected a $406 million deficit in fiscal year 2023, $820 million in 2024 and over $1 billion in 2025.

A main culprit of this structural deficit is growing pension costs, which take up a greater portion of the state’s operating budget every year. The state is also weighed down by a $130 billion unfunded pension liability caused by years of lawmakers shortchanging the system.

Manar, however, insisted that the budget Pritzker proposes will be balanced. How that will be done remains to be seen.

Gov. J.B. Pritzker announces the Illinois Works Pre-Apprenticeship Program.

Beyond addressing longstanding structural issues, other major questions remain to be answered. Among them, how much money will be dedicated towards public education?

The state’s evidence-based funding formula calls for an additional $350 million to be spent on K-12 education every year. But with other obligations such Medicaid, human services, pensions and public safety competing for general fund dollars, it’s never a guarantee.

Then there’s the question of how to spend what remains of the $8.3 billion the state received in federal American Rescue Plan funds. Lawmakers allocated about $2.8 billion in the current fiscal year and Pritzker is allowed to spend up to an additional $2 billion to make up for "lost revenues" during the pandemic.

This leaves about $3.5 billion. Manar said Pritzker will lay out his plan for the remaining funds on Wednesday, but as with the rest of the budget, it would subject to negotiation with legislators.

Expect Republicans to push for the state use a portion of the funds to help pay down the $4.5 billion owed to the federal unemployment trust fund for the funds borrowed to pay benefits during the pandemic. Interest is now accruing on that total.

Pritzker and Democrats have not addressed the topic in great detail.

The governor’s proposal will undoubtedly be shaped by election year politics as he faces a potentially-competitive contest in November.

Along with rising crime and frustration with COVID-19 restrictions, Pritzker has been hit in some corners on taxes. Illinois has among the highest property taxes in the nation.

And Pritzker spearheaded the unsuccessful effort to enact a graduated income tax in Illinois. Though it would have resulted in only a small percentage of top earners paying more, it proved unpopular with voters.

Though top line numbers in Pritzker’s budget were not immediately available, the inclusion of tax relief may indicate a level of flexibility that likely would not be possible without the recent growth in revenue.

Not to mention it offers the chance to reset in order to run on a message of cutting taxes, not raising them.

Pritzker will give his speech at noon on Wednesday.

Illinois General Assembly spring session recap: Here’s a look at the legislation passed by state lawmakers

State budget

A new state spending plan for the budget year that begins July 1 was the main agenda item. While the plan passed both chambers, a potential hurdle arose shortly after the Senate vote when Senate President Don Harmon used a procedural move to prevent the budget from being sent to the governor. The outcome of Harmon’s maneuver remains to be seen.

Democrats introduced the roughly $42 billion budget as part of a spending package that would use $2.5 billion in federal coronavirus relief funds for infrastructure projects and other programs.

The plan also counts on generating more than $600 million in revenue by closing what Gov. J.B. Pritzker and fellow Democrats have called corporate tax loopholes, but which Republicans have labeled tax hikes. The dollar amount is less than what Pritzker had originally proposed after Democrats dropped several items from his plan that had drawn the ire of Republicans, including limiting a tax credit for people who donate to private school scholarship funds. Read more here.