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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IntTheLight's picture

92% of kids in CPS are nonwhite. It is unsafe to send a white kid to a public school so most attend private schools. No one cares.

urhotdogs's picture

They've been fleeced by Chicago voters and policies.  Very large cities dictate what happens in the rest of the state.

Full Court Lugenpresse's picture

Even thought it's hard to overstate how dysfunctional, corrupt, and bankrupt this state is (and I say that as a resident of Chicago), I have a sinking feeling that they'll slap together some kind of 11th-hour quasi-compromise that basically keeps the lights on without actually solving any of the crushing imbalances that so desperately need major reform. IOW, just like Greece.

divingengineer's picture

Of course they will.
Collapse is unacceptable, rehabilitation is beyond the state's financial means.
They will punt.

HRClinton's picture

They were just easy Marks for fiat Ponzi-nomics.

In a fiat money system, ALL debt is equal to its private Cartel creatures, no matter what it's used for. Socialusm, militarism... it's just opposite end of the same fiat pendulum.

Most are too dumb or ignorant to know that. Even here. Or they would not get fixated only with one end of the Deficit Pendulum.

If you want to fix things, change the monetary system and get the mooches off the government teat at both ends of the economic spectrum. 

Secret Weapon's picture

The state has been run by criminal sociopaths for over 60 years.  R or D, it doesn't matter.  The entire government enterprise has existed solely as a mechanism for extracting wealth from the stupid taxpayers.  If something positive actually got accomplished it was purely by accident. Illinois looks to be the first state to kill the taxpayer host and it willnot be the last.  Prepare accordingly gents.  We are about to experience extreme turbulence.

chubbar's picture

It's a crisis because the fucking leadership refuses to make hard choices. There is a difference between a "need" and a "want", something ordinary families have to decide on every week. Also, just because there is a "need" it doesn't mean it gets met, just ask some homeless folks. These people are failures and should be removed from power.

This state is finally going to have to face the failure to rein in spending and making hard choices. Continually raising taxes to meet obligations you never should have made is frickin insane. When I read about 400K pensions, I lose any compassion I had towards these fools.

Justin Case's picture

All empires die the same way. The cost of military exceeds the taxes collected from the debt serfs so the Gov't borrows to keep the MIC functioning and conquering, interfering, coups, assassinating, pillaging resources etc. Eventually debt goes exponential and doubles quicker and quicker until faith is lost in the currency as it floods the banks/investors around the world. Gov't then resorts to direct monetization of debt instruments, printing even moar money that nobody wants moar of.

Currency fails and is rejected as a settlement of accounts in trade. Hyperinflationary collapse begins. It's never any different.

Justin Case's picture

As you'll notice, the prices of "need" items continue to rise, but the "want" items are not inflating. Disposable funds are getting eaten up in the "need" catagory and the want catagory is in a depression. Retail is going down as disposable incomes continue to decline.

Justin Case's picture

I recall when Detroit was going down the porcelain thrown, I read an article where someone was reviewing city statistics and predicted that Chicago will be the next city that goes broke. The stats were on how consumption of electricity, water, property taxes and the amount of waste collected in the city was declining. There were other articles he included in his stats but I can't recall. Guess he was right on the money that Chicago was the next corpse of a city.

I was reading about the fentanyl crisis in Baltimore. Video starts with a drone flying over a new cementary with a bunch of tomb stones. This drug is killing alot of youth. Like the cocaine problem the CIA/military caused in California in the 80's.

TBT or not TBT's picture

A state that goes bankrupt should revert to a US territory and have its senators and representatives and congressional staffers fired without a say of pay.

Anarchyteez's picture

Absolutely brilliant.


Spray them with votes be gone.

nmewn's picture

Surely the largest city in the state could loan them a few bucks just till they get back on their feet!

Hold me closer Tiny Daaainnn-cer ;-)

Hulk's picture

Its a big debt after all, its a big debt after all

Its a big debt after all, its a big, big debt !!!

nmewn's picture

I wonder if past & present public employees could find it their heart of heartz to do with less...ya nooowah...for the good of all? That might solve it!

Somehow I feel especially kumbaya-ish with other peoples money tonight ;-)

Beam Me Up Scotty's picture

Ya right.  Those public employees WORKED HARD for what they got.  They aren't gonna give it up.  Its those private people that need to pay more.  MORE I TELL YOU!!  Its damn HARD work to sit at a desk all day and count TURDS I tell ya.  Why should my public employees union pension suffer because the state is too scared to tell its private sector people they need to pay MOAR taxes??

nmewn's picture

Point well taken.

These are public servantz! Everything they've worked & sacrificed for was done for the benefit of the private citizenz of that fair state! Now they are being expozed as an ungrateful public, unwilling to shoulder their fair share of the burden!

They should be taxed until they scream & bleed from their eyeball socketz, then taxed some moar.

That will teach them who the real boss is ;-)

Billy the Poet's picture

Over the past year, the number of government retirees in Illinois drawing a yearly pension of $100,000 or higher has ballooned by more than 18 percent, putting added pressure on the state’s underfunded pension systems, a new analysis shows.

The number of government retirees getting six-figure retirement payouts grew to 14,320 – up from 12,056 the year before.

Those getting six-figure pensions include retired cops, lawmakers, judges, teachers — and an oral surgeon from the University of Illinois at Chicago believed to be the state’s only half-million-dollar-a-year government pensioner. Leslie Heffez, 59, a former UIC professor now in private practice in Highland Park and Chicago, is believed to have the highest public-employee pension in the state — $547,862.

laser's picture

Teachers and cops retiring as multi millionairs. Think how much is needed to return a guaranteed $100K per year. I remember reading it's forcast to include 20K teachers with pensions over $100K by 2020.

Omen IV's picture

tprovide  $10k income requires $3 million in assets for 30-40 years at accruals of 3% since it probably will be less yield


the pensions will not be paid at more than 30% of the number they think they deserve - its over in Illinois but 10 other states to follow

83_vf_1100_c's picture

  Let the haircuts begin.

murpheus's picture

Please can we end the insanity. End the pension system, anybody with a brain knows this is a Ponzi scheme of epic proportions. Put all government employees on standard 401k plans like the rest of us plebes. It's so damn simple, what makes this so hard.

Hulk's picture

I think  it ain't going to matter.  I will quite relish it when they discover that their hard worked for pensions no longer exist !!!

Feeling kumbaya-ish tonight eh ? I thought Flo ree da was a dry state owing to all the spiders, snakes and gators !!!

red before yellow, you are a dead fellow !!!

/please note that "hard worked for" was most definitely the ultimate in sarcasm...

Shinebama's picture

Ewww, do you really want that little fucker to hold you. From what I've read, he and Obama used to hold each other pretty close at Man's Country bath house.

nmewn's picture

Naw, it was only a joke...just a little "cultural misappropriation" of Elton John

I'm secure enough in my non-PCgenderfluidity to point out the cynical hypocrisy of the central planning elite class, which promotes the proposition that some are destined to be wards of the state by birth for life, their dull existence consumed with begging for scraps occasionally dropped from the table of others instead of, turning the table over.

I believe they would if they only they knew the people sitting at that table are really just prissy little ballerinas wholly unworthy of their station in life.

Now see?!

Long explanations kinda take away from the short punchlines of a joke ;-)

Eyes Opened's picture

nmewn, with that singing voice, u will go far... hopefully as far away as possible...  lol

liverdiefree's picture

That might make sense if it was possible, which it is not absent a major change in bankruptcy law.

TBT or not TBT's picture

I thought it wasn't clear at al, under federal law, what is supposed to happen to a state that is beyond paying its bills.  

JLee2027's picture

A state that goes bankrupt should revert to a US territory and have its senators and representatives and congressional staffers fired without a say of pay.

We'd end up the United Terroritories of America because every state is busted to one extent or another.

Justin Case's picture

USA Inc. wouldn't allow the corporation to sell off divisions. They would still own the assets (people) though. Unless people go sovereign. They would also have to reword the Constitution back to it's original title to make it applicable and enforceable.

Al Gophilia's picture

What a conundrum!! Do they pay their private contractors or do they keep paying their State employees? Someone's going to be cornhohed.

lenz3099's picture

"if you like your doctor, you can keep your doctor!"


JLee2027's picture

You fire the state employees because all many of them do is hire private contractors to do their job, then blame the contractors for anything that goes wrong. Although you would have unsupervised contractors, you would save a lot of money and not lose any service.


What a conundrum!! Do they pay their private contractors or do they keep paying their State employees? Someone's going to be cornhohed.

Vilfredo Pareto's picture

We can assume the cornholing will commence with the taxpayers. 



Keyser's picture

Not really. Not before 1983 and definitely not now.

What part of democrat controlled House of Representatives does you stupid ass not understand? Never mind, Dims never take responsibility for their actions as it's always the other guy's fault... 

ClickNLook's picture

Obama was just a passer-by, a yes-man. That's why he was elected. Calling it Obama land is kind of a stretch. You may as well call it: Al Capone land or a land of Four Jewish Stars (Chicago flag).

TBT or not TBT's picture

Indeed, he famously voted "present" all the time in his short stent in the IL senate.

wanderer9641's picture

If it was Al Capone land there would be none of these problems - Al would fix those who did not coioperate in his endeavors.

Bay of Pigs's picture

Oh really? Rahm Emmanuel ring a bell?

takeaction's picture

Oh...another crisis bailout put on the taxpayers....We can't have the leaches go hungry...

BAILOUT in 3.....2......1......

Crush the cube's picture

I don't think it's a coincidence the state is going under so quickly now that his band of thugs is out.  Look at how much they funneled directly to the state, Illinois high speed rail ring any bells, how about O'Hare renovations?  Multi billion dollar pet projects, nothing really visible to show, not one foot of track laid.

Billy the Poet's picture

Don't forget the $50,000 pizza deliveries.

TBT or not TBT's picture

Plenty of pipe got laid though.

Vilfredo Pareto's picture

Reminds me of how Mark Twain responded when asked how he went bankrupt.


"First very slowly.  Then very rapidly."

mike_king's picture

Every penny of every debt must be paid, by either the borrower or the lender. I hope this is the beginning of the Greater Depression. Americans should starve in the gutter.

grasha87's picture

Jim Rickards has blamed the problems in the U.S. on free trade and comparative advantage in his new book, The Road to Ruin. Here's why he is wrong: