Report: Trump cuts could shrink Illinois economy by $10B

SPRINGFIELD (Capitol News Illinois) — Recent cuts by President Donald Trump’s administration could reduce the size of Illinois’ economy by nearly $10 billion each year, according to a new report released Monday by the Illinois Economic Policy Institute.

The report offers a detailed look at the effects of cuts enacted by Trump through executive order or legislation, directives by federal agency leaders, or through Elon Musk’s so-called “Department of Government Efficiency.” It also sheds light on how many jobs will not come to fruition because of the cuts.

Researchers at the organized labor-tied think tank also painted a sobering picture for state lawmakers who are tasked with mitigating the effects of the funding cuts.

“The depth of economic reductions and job losses caused by federal actions cannot be mitigated by expenditure reductions at the state and local levels,” researchers Frank Manzo and Robert Bruno wrote in the report. “Policymakers will need to examine new revenue sources to counter the damage done to public schools, Illinois families, and the state’s robust economy.”

Read now: IEPI Federal Funding Cut Report

By 2029, Bruno and Manzo concluded that the cuts would decrease the state’s annual gross domestic product by $9.6 billion. The cuts would leave state revenues $540 million below where they would otherwise be and would lead to 86,000 fewer jobs in the state than there would have been without the cuts.

‘Big Beautiful Bill’ cuts

The One Big Beautiful Bill Act, the Republican domestic policy plan signed by Trump on July 4, makes significant changes to the Supplemental Nutrition Assistance Program and Medicaid eligibility and ends Affordable Care Act tax credits at the end of the year. The researchers project it will sink Illinois’ annual GDP by $5.8 billion and prevent 49,000 jobs.

The Medicaid changes could lead hundreds of thousands of people in Illinois to lose coverage because of new work requirements and other restrictions, resulting in economic activity declining by $4 billion each year.

The state will feel impacts beyond social service cuts, too.

“Phasing out clean energy tax credits, pausing Chicago-area transit projects, and freezing funding for energy projects will eliminate construction jobs for blue-collar tradespeople that would have been covered by prevailing wage standards and registered apprenticeship requirements, undermining the goal of ‘making America skilled again’ that has been advanced by the Trump administration,” the report said.

The clean energy tax credits would have been especially impactful in rural areas where there is more space for wind and solar projects, the report noted. Those losses are set to decrease GDP by $2 billion and prevent 22,000 construction jobs.

Targeted cuts

Illinois, a blue state that has dealt Trump three double-digit electoral defeats since 2016, has also seen some cuts explicitly dictated by federal agencies.

Trump’s budget director announced in early October that the administration was freezing $2.1 billion in funding for Chicago transit infrastructure projects “to ensure funding is not flowing via race-based contracting.”

Read more: Trump freezes $2.1B for Chicago transit projects in latest ‘punishment’ of blue states

The decision pulled funding for the Chicago Transit Authority’s plan to extend the Red Line more than five additional miles from 95^th Street to 130^th Street. Construction was scheduled to begin next year.

Funding for a Purple Line modernization project to rehabilitate the line between the Belmont stop in Chicago and the Linden terminus in Evanston is also frozen. Cutting funding for the project could jeopardize 16,000 jobs, according to the report.

DOGE cuts

Other federal cuts pursued by the “Department of Government Efficiency,” which Reuters reported last week has been disbanded earlier than expected, could have a $1.4 billion impact on annual GDP and leave the state with 3,000 fewer jobs, mostly in the private sector.

One of the hardest hit areas is infectious disease prevention by the Illinois Department of Public Health, where the state could lose $112.3 million in economic activity.

Read more: Trump administration blocks more than $400M in funding for Illinois health programs

But education from kindergarten through college could be hit even harder with a combined impact of $547.4 million in lost economic activity. Multiple federal agencies have put limits on reimbursement for research conducted at universities, while many K-12 public schools could see less funding, resulting in fewer after-school programs, mental health services, and teaching positions.

“By slashing funding for disease control and prevention, forcing colleges and universities to cover a larger share of indirect research costs, reducing funds for public school districts, and mandating a higher cost-share to administer food assistance, recent and proposed federal actions will strain Illinois’ budget and prevent the state from using taxpayer dollars on more productive public policies, programs and investments,” the report said.

Tariffs and executive orders

Federal budget cuts aren’t the only areas that could be a drag on economic activity in Illinois. The governor’s office released new information last week from some state agencies detailing the effect of tariffs in accordance with Gov. JB Pritzker’s July executive order.

Families and businesses will see some of the most significant impacts, according to the reports. According to the Department of Employment Security, the average Illinois household faces $3,400 in increased annual costs while unemployment claims in Illinois have risen by 16% in the last year. Businesses are also collectively seeing costs rise by $24 billion.

Food banks and other hunger alleviation programs are also struggling, not just under the weight of higher grocery prices, but with fewer donations as consumers and businesses cut costs, according to the Department of Human Services. The Department of Public Health also reports that more health care organizations are becoming unprofitable because of higher costs.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

Ben Szalinski, Capitol News Illinois

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Ben Szalinski joined Capitol News Illinois in November 2024 as a statehouse reporter covering the General Assembly from Springfield and other events happening around state government. He previously covered Illinois government for The Daily Line following time in McHenry County with the Northwest Herald. Ben is also a graduate of the University of Illinois Springfield PAR program. He is a lifelong Illinois resident and is originally from Mundelein.

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