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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ChargingHandle's picture

The whole country is doomed. Obama took this a petite for spending to DC. The fats are clear as day. Obama has added more to national debt than the previous 43 presidents combined and it took him just 8 years versus over 200 years. There are consequences to this reckless spending and all of us will have to face this ugly monster face to face. 

VWAndy's picture

 Government paychecks might bounce? Yep I can understand why they would be a bit panicky. Seeing how most of um got no real market skills other then killin shit.

e_goldstein's picture

And to think, the situation could have been completely avoided if the Democrats had paid attention in math class.

..but that's racist.

ClickNLook's picture

Statistics are the most racist.

Al Gophilia's picture

You can't exonerate the other half of the free shit minded nation from the bankruptcy of State. Quit playing divisional politics. 

Vilfredo Pareto's picture

What is a master's in public policy to do without a gooberment job?  Lol.  Starbucks only needs so many barristas and they promised those jobs to the refugees.

IntTheLight's picture

The government is the number one employer of otherwise unhireable minorities.

ClickNLook's picture

I have a feeling if it would be two different parties, not DEMs and GOPs, they would find a solution.

As such as it is, this crisis is unsolvable. They rather let everything go to ruins (except their own lifestyles of course) than agree on anything.

Ink Pusher's picture

Very well put indeed,

Profit by Partisanship whilst stomping on Patriotism simultaneously.

Remember someone once saying "DON'T TREAD ON ME"?

My bet is we are going to hear it echoed across the land pretty soon....

man from glad's picture

There will always be some sucker to buy their junk bonds.

 

flyonmywall's picture

Fantasy accounting, political gridlock, and ignoring reality can only go on for so long. The consequences of ignoring reality often demand attention at incovenient times.

Coming soon to a government entity near you.

Vilfredo Pareto's picture

The consequences of ignoring reality often demand attention at inconvenient times.

 

I am stealing that

Cautiously Pessimistic's picture

Last man out of Illinois, please turn off the lights.

Thanks!

The Democrats of America

 

Anarchyteez's picture

No those fucking leftard Dems can't leave!!! You commies must go down with your shit, I mean ship. No shit.

effendi's picture

More likely there will be no lights long before the last man leaves. If the State is bankrupt then electricity suppliers, electricians, power pole repair men etc will stop supplying their goods/services due to unpaid bills. Then all those high rise government offices and housing projects will go dark (until rioters torch them).

Ban KKiller's picture

That is why President Obama lives eleswhere...

man from glad's picture

I found it curious that the actual documents for the 0bama Presidential Library at University of Chicago won't be there - only facsimiles. They will be in some vault somewhere a long way from Chicago. 

Handful of Dust's picture

There's no way he's retruning to the shit hole he and the wookie left behind.

RICKYBIRD's picture

Rumor is she's with Chewbacca now.

Lucky Leprachaun's picture

Under lock and key along with his college grades.

JustPastPeacefield's picture

Are you implying that his tawny hue had anything to do with His Majesty getting in to Harvard? You bastard racist! Just a bunch of white male racists here!

sheikurbootie's picture

The Obozo library will never be built.  Or at least not on the grand scale of those drawings.  No way. 

Hulk's picture

The state is near junk status and the bond yields have surged to 5 percent !!!

A whole 5 percent !!!

We are truly in upside down, inside out world !!!

Stuck on Zero's picture

The Fed can buy the bonds. Heck, look at all the money they'd make in interest.

Vilfredo Pareto's picture

The market expects a bailout or discounts a crisis.  Aren't bonds the smart money?  It means no bond delinquencies for the foreseeable future.  Everything else might grind to a halt though.  That is how the third world operates. They let everything collapse except bond p ayments lol.  "Shitcongo" may have been prescient.  We will know it is going third world when it starts stinking,  litter is not picked up, the water is not safe to drink, and electrical outages are more frequent.  No one rings a bell when you descend to third world status, especially not government, so you have to apply the duck test.  

Dickweed Wang's picture

Hey folks, this is just a preview of what we're going to see with the US Federal Government in the coming months (? Within a year?) . . . Certainly not longer than that . . . like the State of Illinois, the USA is bankrupt.

Lucky Leprachaun's picture

Yes but the US can magic up money out of thin air.

Dickweed Wang's picture

Yes but the US can magic up money out of thin air.

 

Yeah and just think what's going to happen when the 90% that don't know about that figure it out . . . they've run out of tricks and no-one believes their bullshit anymore.

TBT or not TBT's picture

Krugman's trillion dollar treasury coin deposits at the Fed will be a thing eventually. Extend it pretend it and fake it till you make it.

Cabreado's picture

Sorry, no... not for a while.

And that's part and parcel to the core issue.

Dapper Dan's picture

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."

frank further's picture

Years ago (70s-80s), when I lived in Wisconsin, I unfortunately had to go to ILL time to time to visit relatives, and when leaving Wis there was a billboard which proclaimed "Why Go Back?  Bring Your Business Here."

I wonder now how many FIBs now regret not paying attention.

 

HRH Feant2's picture

Please explicate the meaning of FIBs. TYVM.

Jacksons Ghost's picture

Fucking Illinois Bastards.  I lived in Madison for 4 years.  Nice city, nice people, SJW's ruin it though.  FIB's proves the guy lived in Wisconsin.

Anarchyteez's picture

You fucking liberals deserve to burn in the hells you've made.

Quarantine them!

frank further's picture

Maybe this website should change it's name from Zerohedge to AngryWhiteAdolescentMales

Settle down, bro.

Anarchyteez's picture

This is Fight Club you biotch racist.

Go tune into PMSNBC and watch your women shows.

takeaction's picture

That Rachel Maddow....

.

.

I like that guy...

Anarchyteez's picture

I believe he spells it Madcow.

Midas's picture

I'm jealous of his adam's apple.  Makes me look like a chick.

silverer's picture

Sorry, we're all niggas here, "bro".

Lorca's Novena's picture

Look evryone, he's triggered...

CultiVader's picture

Don't italicize me, bro!

(Just got my refund check from Calpers. It took the bastards 2 months and all kinds of other foot dragging. I still don't have a warrant for the deposit. It's in the mail.)