(Bloomberg) -- Illinois Governor J.B. Pritzker is proposing a $52.7 billion budget for the year starting in July that raises levies on sports betting and extends caps on corporate tax deductions.

The measures, announced on Wednesday, would leave the state with a budget surplus rather than a previously estimated deficit of about $721 million. The state expects a $128 million surplus once it contributes to its rainy day fund. The spending plan includes raising more than $800 million in revenue for fiscal 2025 in part by hiking a sports-betting tax.

Pritzker, a billionaire Democrat serving his second term, is proposing to increase Illinois’ sports-wagering tax from 15% to 35%. He also wants to extend a cap on corporate net operating losses that was set to sunset this year to keep about $526 million coming into state coffers that would have been lost if it ended. The budget also proposes to cap a sales tax rebate for retailers.

Read more: How US Sports Betting Went From Nowhere to Mainstream: QuickTake

The budget proposal “makes some hard choices,” Pritzker said in a speech on Wednesday, acknowledging that he expects some legislators will want to spend more and others less. 

“I wish we had big surpluses to work with this year to take on every one of the very real challenges we face,” he added. 

Total general funds revenue for fiscal 2025 will be nearly $53 billion, up 1.5% from the year ending in June 30. Revenue for the current year will be about $52 billion, $199 million more than projected a few months ago.

Expenditures are set to rise to about $52.7 billion, up 1.4% from this year. Pritzker is proposing $182 million more for migrant services and $500 million in bonds to invest in expanding the state’s quantum technology industry. Spending in education is set to increase 3.7% to about $13.4 billion. Increased spending for public safety and health care are also a part of the proposal.

Read more: Illinois Governor Seeks $500 Million in Bonds for Quantum Push

The state will contribute $10.1 billion to its underfunded pensions. Separately, the governor is proposing a plan to lift the funding level to 100% by 2048 from the current statutory mandate of 90% by 2045.

Illinois’ rainy day fund will receive $205 million this year and another $170 million in fiscal 2025 to bring its total to $2.3 billion.

Over the last three years Illinois has enjoyed a significant financial turnaround after enduring the initial shocks of the pandemic. The state used surpluses to pay back debt as well as unpaid bills. 

Given such efforts under the Pritzker administration, the state has received nine credit rating upgrades over the past five years, pulling it back from the brink of a junk rating during the height of the pandemic. Its penalty to borrow from the municipal bond market has also improved. 

The spread on Illinois’ 10-year bonds shrank to about 67 basis points above the AAA benchmark Wednesday. That is much lower than as much as 440 basis points in May 2020 at the height of the pandemic, according to data compiled by Bloomberg.

(Adds more detail on budget and comments from Governor J.B. Pritzker.)

©2024 Bloomberg L.P.