{"id":75731,"date":"2017-06-18T17:33:49","date_gmt":"2017-06-18T21:33:49","guid":{"rendered":"https:\/\/stateofthenation2012.com\/?p=75731"},"modified":"2017-06-18T17:33:49","modified_gmt":"2017-06-18T21:33:49","slug":"fiscal-emergency-state-of-illinois-in-full-blown-financial-crisis","status":"publish","type":"post","link":"https:\/\/stateofthenation2012.com\/?p=75731","title":{"rendered":"Fiscal Emergency: State of Illinois in Full-blown Financial Crisis"},"content":{"rendered":"

Illinois State Official: “We Are In Massive Crisis Mode, This Is Not A False Alarm”<\/h1>\n

ZeroHedge.com<\/p>\n

Last week we reported <\/a>that as Illinois, a state which now faces over $15 billion in backlogged bills<\/a>, struggles over the next two weeks to somehow come up with its first budget in three years ahead of a June 30 fiscal year end, and faces an imminent ratings downgrade to junk – the first ever in US state history – traders finally puked<\/a>, sending the yield on its bonds surging after a judge ruled at the start of the month that the state is violating consent decrees and previous orders, and instructed the state to achieve “substantial compliance with consent decrees”, further pressuring its financial situation.<\/p>\n

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In a last ditch attempt to resolve the ongoing budget impasse and prevent a potential crisis, which may culminate with an eventual default by the distressed state, yesterday the WSJ reported <\/a>that Illinois Gov. Rauner ordered lawmakers to return for a special session this week, but the two sides still seem far apart. Republican Gov. Bruce Rauner ordered the special session starting Monday, as the backlog of unpaid bills reaches $15.1 billion.<\/p>\n

\u201cEveryone needs to get serious and get to work,\u201d he said in a video announcing the session that his office posted on Facebook.<\/p>\n

As reported previously, the state Transportation Department said it would stop roadwork by July 1 <\/a>if Illinois entered its third consecutive fiscal year without a budget – the longest such stretch of any US state – while the Powerball lottery said it may be forced to dump Illinois over its lack of budget<\/a>. For now, state workers have continued to receive pay because of court orders, but school districts<\/a>, colleges and medical and social service providers are under increasing strain.<\/p>\n

And yet, despite the sharp selloff in Illinois GO bonds which some had expected could force the two sides to reach a bargin, neither the Democrat-led legislature, nor Republicans governor Bruce Rauner appear closer to a consensus. Which probably explains today’s Associated Press <\/a>“shock piece” exposing just how serious the situation could become in under two weeks absent a resolution. It focuses on state Comptroller Susana Mendoza – who has had the unenviable job of essentially sitting at the kitchen table trying to figure out how to pay the bills – who is warning that the previously discussed 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. <\/strong>That means there would be no money left for so-called \u201cdiscretionary\u201d spending – a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.<\/p>\n

\u201cI don\u2019t know what part of \u2018We are in massive crisis mode\u2019 the General Assembly and the governor don\u2019t understand. This is not a false alarm,\u201d <\/strong>said Mendoza, a Chicago Democrat.<\/p>\n

\u201cThe magic tricks run out after a while, and that\u2019s where we\u2019re at.<\/strong>\u201d<\/p>\n

As AP sums it up, “it’s a new low, even for a state that\u2019s seen its financial situation grow increasingly desperate”, <\/strong>a state which has a website dedicated <\/a>to tracking the daily amount in overdue bills…<\/p>\n

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… and has the lowest credit rating of any state.<\/p>\n

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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 \u2014 even without a budget.<\/p><\/blockquote>\n

That, however, is being blocked by Rauner, who wants Democrats to approve changes he says are needed to improve Illinois\u2019 long-term financial health before he\u2019ll support a tax increase<\/strong>. Among them are “term limits for lawmakers, a four-year property tax freeze and new workers\u2019 compensation laws that would reduce costs for employers.” Democrats have balked at the full list, saying they\u2019re willing to approve some items on Rauner\u2019s list, but that what he\u2019s 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.<\/p>\n

In a scenario reminiscent of ongoing events in insolvent Greece, state 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\u2019re filing lawsuits to try to get paid<\/strong>. As discussed last week, 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\u2019s run by Rauner\u2019s wife. Health care plans that administer the state\u2019s Medicaid program also asked a federal judge to order Mendoza\u2019s 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 \u201cat grave risk\u201d because the state wasn\u2019t paying providers, causing them to leave the program.<\/strong>”<\/p>\n

As one after another deadline looms, on June 7, Judge Joan Lefkow ruled that Illinois isn\u2019t 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.<\/p>\n

Meanwhile, comtroller 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\u2019s \u201ccore priorities,\u201d such as those required by court order<\/strong>. And if this lawsuit doesn\u2019t do it, the next court ruling against the state will.<\/p>\n

In other words, the already insolvent state is about to be slammed with another deluge for bills which it can’t pay. Then, she\u2019s not sure what will happen, other than more damage.<\/p>\n

\u201cOnce the money\u2019s gone, the money\u2019s gone, and I can\u2019t print it,\u201d <\/strong>Mendoza said, perhaps envious of the residents of the Marriner Eccles building who have never faced a similar predicament.<\/p>\n

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Illinois State Official: “We Are In Massive Crisis Mode, This Is Not A False Alarm”<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-75731","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=\/wp\/v2\/posts\/75731","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=75731"}],"version-history":[{"count":0,"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=\/wp\/v2\/posts\/75731\/revisions"}],"wp:attachment":[{"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=75731"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=75731"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateofthenation2012.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=75731"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}