Every year, state legislators struggle to pass a general-fund budget, and this year was no different. But in the wee hours of the last day possible, they cobbled together a $55.9 billion budget for fiscal year 2027, of which $16.5 billion covers hard costs Illinois has to pay by law or contract, while the remaining $39.4 billion finances public services.

Fully 95 percent of those service expenditures fund the core areas of education, healthcare, human services and public safety. That percentage allocation comports with state spending priorities historically, irrespective of which party controlled Springfield.

Given that service priorities have remained relatively constant over time and across political ideology, why is it always so difficult for Illinois lawmakers to pass a budget? According to Republicans like state Rep. Patrick Sheehan of Lockport, “the problem is with spending. Illinois does not have a revenue problem.”

That’s great GOP rhetoric. It’s also completely wrong.

True, in nominal dollars, net service appropriations for fiscal year 2027 are $204 million, or 0.5 percent, greater than in fiscal year 2026. But that ignores inflation, which drives up the cost of providing public services annually, just like it increases private-sector household and business costs.

After inflation, fiscal year 2027 spending on public services will actually be 1.7 percent less than in 2026. Considered over the long haul, fiscal year 2027 service appropriations are fully $7 billion less in inflation-adjusted terms than they were back in fiscal year 2000, under Republican Gov. George Ryan. Ergo, any complaints about over spending are, well, overblown.

So what has compelled Illinois to continually disinvest in core services for over two decades? Again, the facts are clear: Illinois’ two primary revenue sources, its income and sales taxes, aren’t designed to work in the modern economy. Hence they don’t generate sufficient revenue growth to maintain funding the same level of services over time.

Fortunately, legislators can consult any fiscal-policy textbook to find definitive solutions to remedy the state’s tax-policy flaws.

Start with the state sales tax, which predominately applies to transactions involving goods, not services. Illinois taxes only 29 out of 176 consumer services — far fewer than the national average — even though service-related transactions account for 73 percent of Illinois’ GDP. That economic mismatch causes revenue underperformance.

Levying the sales tax on consumer services would generate $2 billion in new, recurring revenue, while also making the sales-tax burden less regressive than current law, because high-income households spend five times more on untaxed services than low-income households.

Then there’s Illinois’ income tax. Under its 1970 constitution, Illinois has to assess one flat income tax rate, currently 4.95 percent, irrespective of income level and hence ability to pay. Unfortunately, using a flat rather than graduated rate is indefensible from both a fiscal and a fairness standpoint for one simple reason: Since the Illinois Constitution was ratified, income inequality has exploded.

Between 1979 and 2022, real, average annual incomes for the top 1 percent in Illinois jumped from $501,320 to $2,132,780 — a 325 percent increase.

Meanwhile, real, average annual incomes for the remaining 99 percent of Illinoisans grew from $62,734 to $81,845 — a 30.5 percent increase. A flat rate simply cannot respond to this economic reality.

Despite its constitutionally mandated flat rate, Illinois can still generate additional income-tax revenue — and make the state tax burden fairer — by increasing its rate while simultaneously implementing a tax credit targeted to low- and middle-income earners, to offset any additional income taxes the rate increase would otherwise generate for them.

At the end of the day, all the data confirm that Illinois does in fact have a revenue, not a spending problem, and that can’t be fixed without comprehensive tax reform.