(Bloomberg) -- Illinois Governor J.B. Pritzker proposes to keep spending little changed in the coming fiscal year, while continuing to fund early and higher education, as the state prepares to navigate an expected US recession. 

The billionaire Democrat, who won reelection in November, is proposing a $49.6 billion general-fund budget for the year that starts July 1. While that’s down 0.7% from this year, the budget proposes to raise spending on education, economic development and health care. Meanwhile, a projected, non-adjusted general-fund surplus of $303 million compares to a $357 million surplus for the upcoming fiscal year that the Governor’s Office of Management and Budget had forecast in November.

Pritzker’s proposal Wednesday includes a proposed $138 million contribution to the state’s rainy-day fund, given expectations that general-funds revenue will be $49.9 billion, 2.8% lower from revised estimates for fiscal year 2023. The projections come as Illinois and the rest of the US prepare for a widely expected recession. 

“Fiscal responsibility isn’t easy, nor is it a one-time fix,” Pritzker said during his first state of the state and budget address since winning reelection. “It’s an annual effort that requires persistence. It requires conservative revenue estimates, as all of my budget proposals have. But when done right, consistent balanced budgets strengthen the institutions our residents rely upon, creates new opportunities for success, and makes life easier for the people of Illinois.”

Pritzker plans to continue funding K-12 education, which includes providing funds to help recruit and retain teachers. He also intends to continue investing in the state’s colleges and universities. The budget also proposes pension contributions of about $9.8 billion. Illinois has a $139.7 billion unfunded pension liability across its five retirement systems. 

Despite proposing to keep spending relatively flat year-over-year, the budget reflects an uncertain economic and revenue outlook. A growing economy and rebounding revenue last year had enabled the state’s budget to include a one-year suspension of a grocery tax, a gasoline-tax freeze and a one-time property-tax rebate for eligible homeowners. Federal aid had also helped replace revenue lost when businesses closed during the pandemic. Looking ahead, a recession could curb revenue as federal stimulus runs out. 

Investors in Illinois have said they want to know how the governor plans to prepare for an expected economic slowdown that risks dimming the outlook for the coming fiscal year.

The governor has emphasized many times that the state’s fiscal gains have not been due to an influx of federal aid, but rather from the administration’s work with other elected officials in Illinois since he took office to reduce liabilities and improve financial practices.

Illinois has earned a series of upgrades from the three major credit raters starting in mid-2021, which pulled it back from the verge of a non-investment grade rating. The state has used revenue that has topped forecasts to build up its rainy-day fund, pay back pandemic-era federal loans, reduce its bill backlog and put more into its underfunded pensions. 

But these developments were a turnaround from past budgets when the state has had to implement hiring freezes and reduce spending for many areas other than education and vital services. The question remains whether an economic slowdown could force similar painful choices upon the state again.

The governor must now negotiate with the Democrat-controlled Illinois legislature to pass a budget.

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