Illinois State Official: "We Are In Massive Crisis Mode, This Is Not A False Alarm"

Tyler Durden's picture

Last week we reported that as Illinois, a state which now faces over $15 billion in backlogged bills, 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, 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.

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 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.

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

As reported previously, the state Transportation Department said it would stop roadwork by July 1 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. For now, state workers have continued to receive pay because of court orders, but school districts, colleges and medical and social service providers are under increasing strain.

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 "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. 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.

As AP sums it up, "it's a new low, even for a state that’s seen its financial situation grow increasingly desperate", a state which has a website dedicated to tracking the daily amount in overdue bills...

... and has the lowest credit rating of any state.

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.

That, however, is being blocked by Rauner, who 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 have balked at the full list, saying 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 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’re filing lawsuits to try to get paid. 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’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."

As one after another deadline looms, on June 7, Judge Joan Lefkow ruled 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.

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’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.

In other words, the already insolvent state is about to be slammed with another deluge for bills which it can't pay. 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, perhaps envious of the residents of the Marriner Eccles building who have never faced a similar predicament.

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Aubiekong's picture

Couldn't happen to a more deserving group of people.  So your running out of other peoples money...

Gold Banit's picture

USA problems can be fixed very easy, deport all of the blacks back to Africa.

80% of the blacks in the USA do not and don't want to work.

80% of the pison population in America is black.

80% of the crime in America is caused by blacks.

80% of blacks don't have a High School education.

80% of the blacks don't know who their daddy is.

 

artichoke's picture

Or easier, put them all in Chicago and let the thing crash.  Chicago isn't a strategically important city any more.  Not much use is made of its lake frontage, commodities aren't traded there that much, doesn't Minneapolis actually have the grain exchange?

jmeyer's picture

Hey Illinois, start your own state owned bank.

tlnzz's picture

Stop paying all elected officials salaries until a budget is passed. Stop all benefits to illegals and the hood rats. Get rid of the States "ghost" employees.

artichoke's picture

They can't stop until they run out of money.

So ... keep going until they run out of money.  This is the time we all need to be wary of a bailout tucked into some federal budget bill.  DON'T bail out Illinois and their government worker pensions.

To Hell In A Handbasket's picture

TPTB must be laughing the tits off when the read this website, seeing how many regulars on this forum, take so much pleasure in the downfall of other people. Alas as only a few people on the website actually get, what comes to the niggers first, is coming to a town/city near us. The banksters first trailed forcing Detroit and Chicago to buy their crap bonds, where it was rolled out to the rest of the country. 

I'll guarantee you, when they have finished with Chicago/Illinois and the usual suspects on ZH, have wallowed in their despair, don't think for a minute this is not coming to white town USSA. The entire USSA is in debt and over budget. Alas, the niggers are merely the canary in the coal mine. How many small white towns were sold horse-shit by Golmans et al and are now effectively bust? Divide and Rule. It works almost every time.

Horse Pizzle's picture

Illinois core priority payments total about $1.85 billion each month, representing about 90 percent of the state’s average monthly revenues, Schoeben explained.

The largest chunk of that — $593 million — is the state’s monthly contribution to its five public retirement systems that pay the pensions of state workers, teachers, university employees, judges and legislators.

Next largest is the state payroll, at $370 million a month, which pays the salaries of 63,000 state employees who keep the government operating.

The state sets aside an additional $270 million each month for distribution to elementary and high school districts through the school aid formula. Another $1.7 billion owed annually to these same school districts for specific purposes such as special ed and buses is treated as a lower priority for payment.

Illinois owes about $226 million a month in debt service, Schoeben wrote. This is the principal and interest owed to bondholders on state borrowings for a variety of purposes, including infrastructure projects.

The state gives core priority status to about $160 million in Medicaid payments and other state benefits covered by federal court consent decrees for specific programs, including care for persons with physical and mental disabilities.

Local governments receive anywhere from $60 million to $175 million in priority payments each month from the state. This is their share of the state’s income tax revenue.

Everyone else who provides some service or product to the state has to get in line for payment from the 10 percent of state revenue remaining.

John_Coltrane's picture

O.K. Its pretty obvious THE RUSSIANS have "hacked" the previously flawless Illinois budget and tax system. So, get off your asses Senate Dimmwitts and drop that loser Meuller and get Moose and Squirrel on the job to root out the evil Russian agents Boris and Natasha. Then, you can really distract us from the Seth Rich murder by using the old,

"look squirrel" while pointing at special prosecuter Rocky the squirrel.

A possible problem with this scenario? Conservatives, unlike libtards, don't have ADHD and we still remember and are seeking revenge for the Clinton ordered murder of Randy Weaver's wife at Ruby Ridge. Oh, and that Branch Davidian human immolation the Clintons ordered. Not to forget, Levoy Finnacum, you bastards!

az_patriot's picture

It's exactly this kind of stupid shit that liberalism leads to:  financial insolvency.  Yup.  This is what happens when you run out of other people's money. 

LoveTruth's picture

White population in Illinois 67% and keep going down. If they keep celebrating the growing numbers of the minorities and the dwindling numbers of the whites, one day they'll find out what it is to be living in a "Haiti" like state. 

VWAndy's picture

 I wonder how much rope it would take to fix this?

artichoke's picture

Rope can't fix this.  Too much debt, too many problems, too few reasons for productive people to choose Chicago over other nicer cities now that taxes aren't rock bottom any more.

LoveTruth's picture

I  wonder why they have not put the blame on Russia yet for this financial mess.

Publicus's picture

Atlas Shrugged.

pc_babe's picture

Thought of the Day...

"Politicians are like diapers. They both need to be changed regularly and for the same reasons," said Kurt Epps, a retired English teacher from Perth Amboy

Pvt Joker's picture

Her predecessor , a Republican , said the same thing.   No one would listen.  I guess the only time shit gets real is when a Hispanic woman who is quickly working her way up to a size 22  says "We are running out of money , Papi.  How will we buy chooos for the ninos?  "   Guess what , we could save money if we eleiminated her useless 'chob'  which now seems to be to tell us shit we already know.

artichoke's picture

As a hispanic she may think she has the right to demand higher taxes on white people.

Dg4884's picture

Considering our nation's Capital operates in the same exact manner as Chicago, we got much bigger problems ahead. I didn't think I could dislike liberals and neocons any more, but as I write this, I have found a new level.

Happy Father's Day to you fellow Dads.

LeftandRightareWrong's picture

Once people lose benies because a "state" simply can't pay for them, programs such as ACA will finally be understood by the masses on both sides of the aisle. Political promises that can't be kept.  Losing Illinois might be just the event that saves the nation.

LeftandRightareWrong's picture

"The salary and benefits package of a high ranking Alameda County official is turning some heads. County Administrator [name is not important] gets over $420,000 in pay and benefits, and she'll continue to receive that for the rest of her life."

artichoke's picture

This is an example of why default is necessary.  It's important to stop her from receiving this money at taxpayer expense, even if she can claim she was promised it.

LeftandRightareWrong's picture

Lots of ordinary people though hold Cali muni bonds.

artichoke's picture

If  you buy securities you take the risk.  Others should not get bailed in, and the ordinary cleansing processes of capitalism should not be blocked for your sake.

zke007's picture

Years ago somebody on TV stated a State can't file bankruptcy as a State has the right raise taxes to cover all legal obligation.

Bankruptcy won't go anywhere, only lawyer will make money off all this

artichoke's picture

But the taxes are already too high to keep productive people there.  If all they end up with is the deadbeats, what good will tax rates do?  I think there's no solution, the place is deep in debt and lacks compelling reasons for people to live there any more, and crummy weather.

Md4's picture

I can already hear the cry for federal help.

And they'll cite New York of back when, as an example.

Probably even throw in GM and Chrysler to justify too.

Risk of civil unrest will be claimed high without help.

It's either that, or severe cuts.

And it's not just Ellen Whaa either...

artichoke's picture

No bailout.  Let the pensions be unpaid.  Let their public employees taste what the rest of the country has had for decades.

Md4's picture

Fully agree.

Heads finally in the vise.

Crank it.

VWAndy's picture

 Talk about hitchin your horse to the wrong wagon.

pliny the longer's picture

wait no wait you're kidding; u mean the land that gave us community organizers and gun control has its head up its ass?  

i'm shocked.  i feel sorry for the good men and women of the land of fleecing who cannot get out of that place. but otherwise, F u illinois.  u deserve it.

 

Disgruntled Goat's picture

There is a very simple answer:

REDUCE THE SIZE OF THE FUCKING GOVERNMENT AND THE BULLSHIT MAKE-WORK "SERVICES" THAT IT PROVIDES.

And there you have it.

Cephisus's picture

Quit paying the bills at the capital first.  When the politicians don't get paid and are sitting in the dark, they may get serious.

Cephisus's picture

Is the government to big to fail?

VWAndy's picture

 Its the government. They made fail into an art.

aloha_snakbar's picture

Import some more wetbacks and dindu's, Illinois... everything will work out...

LoveTruth's picture

Wanna find a failed country, city or a county? Just follow the black majority places. 

LeftandRightareWrong's picture

The judges will be ruling on their own pension plans.  What do you think they will say?

Pvt Joker's picture

Here is the real fucking irony about Illinois.  It's a blue state right?  Democrats love taxes don't  they ?   The Democrats had control of the legislature and governors office for 4 fucking years before Rauner came along .  Now they just have contol of the legislature.   Do they propose a tax increase sufficient to pay the bills or at least limp along until the next crisis?  Hell no!   When the subect of tax increases  suddenly they go all Tea Party.   And since pensions are part of the problem , do you think they might propose taxing retirment income?  Hell no.   That's a third rail for them. 

Ban KKiller's picture

It's the system, stupid. Stop infighting and get to problem solving.

The One...'s picture

I have a solution. Legalize cannabis immediately and sell it by the bale right out of the statehouse. Open sales with unlimited amounts to all comers including out of state people. Should solve the short term debt and open possible long term solutions... Either that or just exterminate all non-productive citizens and feed their bodies to the hogs. That should free up a few dollars. ;-)

YourAverageJoe's picture

Gonna be a race riot.

Cephisus's picture

They need to blame someone.  Quick, issue a parade permit to the Nazis in Skokie Illinois.