Two years without a budget, Illinois government still can't get its act together

It's been two years since the state of Illinois conducted its business under a budget passed by the legislature.  Since then, the state's fiscal woes have increased to an unbearable level.  There have been a couple of stopgap budget deals that only made the situation worse.  State courts have ordered that the state pay for certain services relating to education, social services, and government employee pensions and health care.  But overall, the deficit continues to climb as state lawmakers have been paralyzed by partisanship.

Here are a few consequences of the state operating without a budget:

Chicago Sun Times:

180,000: Number of unpaid bills in Illinois as of Wednesday.

$14.5 billion: Dollar damage of those unpaid bills. The backlog has tripled since 2015 and, at this pace, will reach $28 billion by 2021. At that time, it will consume 80 percent of the state's budget.

7 months: Average wait for a bill to be paid by the state. Illinois is now paying bills for October 2016.

9 to 12 percent: The high interest rate Illinois must pay, by law, on overdue bills.

$800 million: Interest due on the state's unpaid bills.

6: Number of credit rating downgrades Illinois has incurred since the budgeting impasse began. Illinois now has the worst credit rating of any state in the country. Illinois is in danger of plunging into junk bond status.

$952 million: Money Illinois has promised but failed to pay to human service agencies over the last two years, short-changing care for the disabled, the poor and the elderly.

69: Percentage of social service agencies that have received no or only partial payment from the state in fiscal year 2017. This compares to 35 percent last fiscal year.

46: Percentage of agencies that have cut back on the number of clients they serve.

25: Percentage of agencies that have eliminated entire programs, such as for training for the unemployed and assistance to the elderly.

19: Percentage of agencies that have laid off staff because of delays and cuts in state funding.

57,000 cops: Their police training classes, across the state, were canceled.

$4. 6 billion: Amount the state is behind in paying health insurance claims for employees and retirees. Doctors and dentists, who say the delayed payments threaten to put them out of business, are demanding that patients pay upfront.

80 percent: Reduced funding, based on 2015 levels, that public universities have received under the last stop-gap state budget.

And the list goes on and on.  Most destructive of all, more than 37,000 people moved out of the state in 2016, the most of any state in the nation.  People are voting with their feet while the tax base continues to shrink, putting the state in a vicious spin cycle of tax increases leading to lost jobs and fewer businesses that, in turn, shrinks the tax base even further.

Now the legislature will go on a break while a self-imposed deadline to reach a deal on the budget between the GOP governor Bruce Rauner and the Democrat-controlled state legislature will pass with no action taken.  They will have to reconvene in a special session in June, where any bill needs a two-thirds majority to pass rather than the usual 51%. 

The prospects to meet the July 1 deadline for a budget appear small, indeed.

Bloomberg:

The Illinois House isn't voting on a budget on Wednesday, which means the gridlock-prone government won't pass a spending plan by midnight. That means approving a budget – a usually routine task that has eluded the state for 700 days – will become even more difficult because a three-fifths majority will be required. Democratic lawmakers, who control both chambers, and Republican Governor Bruce Rauner have repeatedly failed to agree on how to solve chronic budget deficits worsened by the expiration of tax hikes in January 2015.

"We are probably approaching that point of impaired ability to function at basic level," said John Humphrey, the Chicago-based head of credit research for Gurtin Municipal Bond Management, which oversees about $10.1 billion of state and local debt and has steered clear of Illinois. "We've already probably passed that point. We haven't seen this in a modern state before."

The self-inflicted crisis has left the fifth most-populous state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois's standing in the bond market. Unless a surprise deal emerged before midnight, it's increasingly likely that Illinois enters its third fiscal year on July 1 without a budget.

Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, blamed Rauner for "holding the budget hostage" to his agenda, and said in an emailed statement Wednesday that Democrats will keep working on a budget and hold public hearings, starting in Chicago on June 8.

In turn, Rauner criticized the Democrats, calling the failure a "complete dereliction of duty by the majority in the General Assembly" and said there should be no tax hikes without a property tax freeze and local control of those levies.

Bond-rating companies have warned of further ratings cuts, signaling that Illinois could be the first state since at least 1970 to lose investment-grade status.

Rauner is running for re-election on the same program that he successfully campaigned in 2014: end the "business as usual" fiscal follies and corruption in Illinois politics that have led to ever increasing taxes and a pension shortfall that threatens to saddle state residents with a trillion dollars in liabilities. 

Illinois is not crying wolf; the situation really is that bad, and even if the Democrats and the governor could reach an agreement, the chances of getting out of this mess without declaring bankruptcy are slim.  There are going to be massive tax increases or massive spending cuts – or both – if the state wants to avoid catastrophe.  That's the grim reality facing the legislature and the governor, and neither appears prepared to do what's necessary to prevent the inevitable.

It's been two years since the state of Illinois conducted its business under a budget passed by the legislature.  Since then, the state's fiscal woes have increased to an unbearable level.  There have been a couple of stopgap budget deals that only made the situation worse.  State courts have ordered that the state pay for certain services relating to education, social services, and government employee pensions and health care.  But overall, the deficit continues to climb as state lawmakers have been paralyzed by partisanship.

Here are a few consequences of the state operating without a budget:

Chicago Sun Times:

180,000: Number of unpaid bills in Illinois as of Wednesday.

$14.5 billion: Dollar damage of those unpaid bills. The backlog has tripled since 2015 and, at this pace, will reach $28 billion by 2021. At that time, it will consume 80 percent of the state's budget.

7 months: Average wait for a bill to be paid by the state. Illinois is now paying bills for October 2016.

9 to 12 percent: The high interest rate Illinois must pay, by law, on overdue bills.

$800 million: Interest due on the state's unpaid bills.

6: Number of credit rating downgrades Illinois has incurred since the budgeting impasse began. Illinois now has the worst credit rating of any state in the country. Illinois is in danger of plunging into junk bond status.

$952 million: Money Illinois has promised but failed to pay to human service agencies over the last two years, short-changing care for the disabled, the poor and the elderly.

69: Percentage of social service agencies that have received no or only partial payment from the state in fiscal year 2017. This compares to 35 percent last fiscal year.

46: Percentage of agencies that have cut back on the number of clients they serve.

25: Percentage of agencies that have eliminated entire programs, such as for training for the unemployed and assistance to the elderly.

19: Percentage of agencies that have laid off staff because of delays and cuts in state funding.

57,000 cops: Their police training classes, across the state, were canceled.

$4. 6 billion: Amount the state is behind in paying health insurance claims for employees and retirees. Doctors and dentists, who say the delayed payments threaten to put them out of business, are demanding that patients pay upfront.

80 percent: Reduced funding, based on 2015 levels, that public universities have received under the last stop-gap state budget.

And the list goes on and on.  Most destructive of all, more than 37,000 people moved out of the state in 2016, the most of any state in the nation.  People are voting with their feet while the tax base continues to shrink, putting the state in a vicious spin cycle of tax increases leading to lost jobs and fewer businesses that, in turn, shrinks the tax base even further.

Now the legislature will go on a break while a self-imposed deadline to reach a deal on the budget between the GOP governor Bruce Rauner and the Democrat-controlled state legislature will pass with no action taken.  They will have to reconvene in a special session in June, where any bill needs a two-thirds majority to pass rather than the usual 51%. 

The prospects to meet the July 1 deadline for a budget appear small, indeed.

Bloomberg:

The Illinois House isn't voting on a budget on Wednesday, which means the gridlock-prone government won't pass a spending plan by midnight. That means approving a budget – a usually routine task that has eluded the state for 700 days – will become even more difficult because a three-fifths majority will be required. Democratic lawmakers, who control both chambers, and Republican Governor Bruce Rauner have repeatedly failed to agree on how to solve chronic budget deficits worsened by the expiration of tax hikes in January 2015.

"We are probably approaching that point of impaired ability to function at basic level," said John Humphrey, the Chicago-based head of credit research for Gurtin Municipal Bond Management, which oversees about $10.1 billion of state and local debt and has steered clear of Illinois. "We've already probably passed that point. We haven't seen this in a modern state before."

The self-inflicted crisis has left the fifth most-populous state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois's standing in the bond market. Unless a surprise deal emerged before midnight, it's increasingly likely that Illinois enters its third fiscal year on July 1 without a budget.

Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, blamed Rauner for "holding the budget hostage" to his agenda, and said in an emailed statement Wednesday that Democrats will keep working on a budget and hold public hearings, starting in Chicago on June 8.

In turn, Rauner criticized the Democrats, calling the failure a "complete dereliction of duty by the majority in the General Assembly" and said there should be no tax hikes without a property tax freeze and local control of those levies.

Bond-rating companies have warned of further ratings cuts, signaling that Illinois could be the first state since at least 1970 to lose investment-grade status.

Rauner is running for re-election on the same program that he successfully campaigned in 2014: end the "business as usual" fiscal follies and corruption in Illinois politics that have led to ever increasing taxes and a pension shortfall that threatens to saddle state residents with a trillion dollars in liabilities. 

Illinois is not crying wolf; the situation really is that bad, and even if the Democrats and the governor could reach an agreement, the chances of getting out of this mess without declaring bankruptcy are slim.  There are going to be massive tax increases or massive spending cuts – or both – if the state wants to avoid catastrophe.  That's the grim reality facing the legislature and the governor, and neither appears prepared to do what's necessary to prevent the inevitable.

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