Official warns Illinois finances in 'massive crisis mode'

Associated Press

June 21, 2017

In this June 14, 2017, photo, Illinois Comptroller Susana Mendoza responds to a reporter's question during an interview in her office about the state budget in Chicago. As Illinois nears its third year without a state budget, Ms. Mendoza must prioritize what gets paid as new court orders mean her office must pay out more each month than Illinois receives in revenue.
Associated Press

CHICAGO  During the two-and-a-half years Illinois has gone without a state budget, the previously little-known office of comptroller has had the unenviable job of essentially sitting at the kitchen table trying to figure out how to pay the bills.

Like any household, there are some items that must be paid first. A mix of state law, court orders and pressure from credit rating agencies requires Illinois to make its debt and pension payments, for example, and issue state worker paychecks and some money for schools.

Now Comptroller Susana Mendoza is warning that new court orders in lawsuits filed by state suppliers that are owed money mean her office is required to pay out more than Illinois receives in revenue each month. That means there would be no money left for so-called "discretionary" spending a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.

"I don't know what part of 'We are in massive crisis mode' the General Assembly and the governor don't understand. This is not a false alarm," said Mendoza, a Chicago Democrat. "The magic tricks run out after a while, and that's where we're at."

It's a new low, even for a state that's seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to "junk" if there's no budget before the next fiscal year begins July 1.

Rauner on Thursday said he was calling lawmakers back to Springfield for a special session, after the Legislature adjourned May 31 without approving a state spending plan the third straight year lawmakers have been unable to agree on a budget. Legislators are due at the Capitol on Wednesday, and Rauner said the session will continue through June 30 or until the two sides have a deal.

"Everyone needs to get serious and get to work," he said in a video announcing the session that his office posted on Facebook.

Lawmakers from both parties have acknowledged Illinois needs to raise taxes to make up for revenue lost when a previous tax hike expired, leaving the state on pace to take in $6 billion less than it is spending this year even without a budget.

Rauner, a former businessman who is seeking a second term in 2018, wants Democrats to approve changes he says are needed to improve Illinois' long-term financial health before he'll support a tax increase. Among them are term limits for lawmakers, a four-year property tax freeze and new workers' compensation laws that would reduce costs for employers.

Democrats say they're willing to approve some items on Rauner's list, but that what he's demanding keeps changing or goes too far and would hurt working families. Senate Democrats also note that they approved a $37 billion budget with $3 billion in cuts and an income tax increase in May. The House has not taken up that plan.

In the absence of a budget, funding has been reduced or eliminated in areas such as social services and higher education. Many vendors have gone months without being paid. And increasingly, they're filing lawsuits to try to get paid.

The courts already have ruled in favor of state workers who want paychecks, as well as lottery winners whose payouts were put on hold. Transit agencies have sued, as has a coalition of social service agencies, including one that's run by Rauner's wife.

Health care plans that administer the state's Medicaid program also asked a federal judge to order Mendoza's office to immediately pay $2 billion in unpaid bills. They argued that access to health care for the poor and other vulnerable groups was impaired or "at grave risk" because the state wasn't paying providers, causing them to leave the program.

Judge Joan Lefkow ruled June 7 that Illinois isn't complying with a previous agreement to pay the bills and gave attorneys for the providers and the state until Tuesday to work out a level of payment.

Mendoza says whatever that amount will be, it will likely put Illinois at the point where 100 percent of revenues must be paid to one of the office's "core priorities," such as those required by court order. And if this lawsuit doesn't do it, the next court ruling against the state will.

Then, she's not sure what will happen, other than more damage.

"Once the money's gone, the money's gone, and I can't print it," Mendoza said.

A look at Illinois' budget mess as lawmakers head to Capitol

CHICAGO  Already holding the title for longest state budget stalemate, Illinois is poised to enter a third year without a spending plan as the feud between Republican Gov. Bruce Rauner and Democrats controlling the Legislature drags on.

Lawmakers blew past a budget deadline last month, triggering a requirement that any new budget vote be by three-fifths instead of a majority.

They're expected to return to Springfield for a special session starting Wednesday facing higher stakes to get a budget for the fiscal year that begins July 1.

Unpaid bills are piling up. Rating agencies are threatening to downgrade the state's credit to "junk." Uncertainty about schools, transportation projects and social services grows. And campaigning for the 2018 election is well underway in what some predict could become the most expensive governor's race in U.S. history.

Here's a look at the situation:


No other state even comes close to Illinois' budget stalemate, which was unprecedented once it reached a full year.

In that time, the backlog of unpaid state bills has swelled to roughly $15 billion. Generally, bills 60 days late are considered unpaid and face late payment penalty. That tab is $800 million, according to Illinois Comptroller Susana Mendoza's office.

Illinois' already worst-in-the-nation credit rating has already sunk even further, with ratings agencies threatening a downgrade to "junk" status without a budget. Lottery officials say Powerball and Mega Millions are ready to drop games in Illinois too.

Some U.S. states have gone months without an agreement. Pennsylvania had a nearly nine-month budget impasse that ended last year. It took Kentucky nine months in 2003.

Still, Illinois holds the record.

The stalemate started in 2015 when Rauner Illinois' first GOP governor in over a decade took office. The venture capitalist holding public office for the first time has pushed for pro-business measures in conjunction with a budget that includes a tax increase. Democrats say some of those ideas hurt the middle class and they've taken up several others, but Republicans keep changing their demands. Republicans say Democrats' efforts fall short of the reforms needed.


Whether there's a budget or not, Illinois is automatically spending billions more each year than the state is taking in, because of state laws, court orders and agreements, and because legislators haven't passed a spending plan that takes into account the rollback of a temporary income tax increase.

Schools have stayed open. In 2015, Rauner vetoed everything in the budget Democrats sent him except a K-12 education bill and last year lawmakers approved a temporary "stop-gap" plan allowing schools to open on time.

Roughly 63,000 employees continue to get state paychecks, though Illinois Attorney General Lisa Madigan has sued claiming employees shouldn't get paid without an appropriation.

Other states have consequences. In 22 states, failure to pass a budget will lead to a government shutdown, according to the National Conference of State Legislatures. In 2011, Minnesota shut down for 20 days, closed state parks and temporarily laid off 19,000 employees.

Some states have measures to deter late budgets. In California, state legislators and other statewide elected officers don't get a paycheck if they fail to send the governor a budget by June 15.


It's well over a year away, but record-breaking campaign donations, ads, robocalls, endorsements and campaign mascots crop up near-daily.

The Illinois Campaign for Political Reform says the 2018 gubernatorial race might be the most expensive in the nation's history as Rauner seeks a second term.

Already, he's put $50 million of his own money into a campaign fund with more expected, and billionaire investor Ken Griffin added $20 million.

Democrats lining up to challenge Rauner are billionaire businessman J.B. Pritzker, who's contributed $14 million to his campaign fund. Two other Democrats have raised over $1 million: Chris Kennedy, nephew of the late President John F. Kennedy, and state Sen. Sen. Daniel Biss.

Rauner, who's already taken a campaign-funded state tour, began appearing in television ads in March to promote his agenda. The state GOP, funded almost entirely by Rauner, has used robocalls to target Democrats.

Pritzker, an heir to the Hyatt hotels fortune, regularly airs television commercials. His campaign, which has received union support, has also taunted Rauner at the Capitol with its "Tick Tock the Budget Clock" mascot.


The impasse has hit social services and higher education hard, with even more pain expected if there's no budget.

In a Tuesday evening speech, Rauner said a failure to act could "cause permanent damage" that would take "years to overcome."

The organizations that contract with the state to run homeless shelters, care for elderly and help domestic violence victims wait six months or more to get paid. They've made cutbacks, let employees go or closed. One shelter that helps domestic abuse victims in several southern Illinois counties some of the poorest in the state says it'll close without an infusion of funds.

The standoff also threatens enrollment at the state's colleges and universities.

In Chicago, Northeastern Illinois University had a temporary shutdown, furloughed employees and announced it'd eliminate 180 full-time jobs. Southern Illinois University in Carbondale says nearly 80 employees are losing their jobs. Northern Illinois University has said it'll cut 150 staff positions.

The state Department of Transportation says all road construction will be halted July 1 without a budget.


There are options on the table. The Senate adopted a $37.3 billion plan with cuts and an income tax increase. The House adjourned last month without taking it up and Rauner's budget chief has said it's heading in the wrong direction.

After the session ended, Republicans presented their own "compromise" budget and reform package, agreeing to a temporary income tax increase for other measures including a property tax freeze. But Democrats, skeptical of the timing, say the deal is far from bipartisan.

Lawmakers could also attempt another temporary budget.