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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LickItUp's picture

Doesn't Obama have a couple sons living there?

aloha_snakbar's picture
This Is Not A False Alarm

Kinda what we were hoping...

Vilfredo Pareto's picture

Lol.  We have been waiting a long time.   I was about to give up hope too.

KFBR392's picture

they sure put up a lot of gosh darn purdy skyscrapers for a city going down the tubes. here in arizona we dont build anything taller than 15 stories these days and yet no fiscal woes. connection???? too many tax breaks for magic mile developers???? hmmm?

artichoke's picture

Chicago lost its core trading floor business due to electronic trading, it was never a preferred location for much of anything else because whatever Chicago has, NY has better with better weather.  So then taxes had to go up, and business that were there for the low 3% tax rate left.  South Side Chicago got bigger and worse too.  Basically the place is just going down the tube.

Let it go bankrupt, then some healthy businesses can come back in and inherit all that square footage.  Gotta cleans it by letting it go bust.  I've lived there several times in my life, and I say it's got to have a catharsis.

Déjà view's picture

"Fiscal Woes"...do as Arizona...

1. OKs plan to sell state Capitol buildings
http://archive.azcentral.com/arizonarepublic/news/articles/2009/09/04/20...

2. AZ also has DOUBLE state personal and corp business tax rate as lllinois...
https://taxfoundation.org/state-corporate-income-tax-rates-and-brackets-...

Yep...RED pill abusers et al feed at trough as BLUE pill abusers...

ANY WONDER RED TEAM IS COMPLICIT TO $20T 'FERAL' DEBT...

KFBR392's picture

u must be high dude. arizona consistently ranks in the top 5 five for corporate friendliness and i know we have a much lower personal tax burden. i realize u love da bears and da cubs and da bulls but come on youre not fooling anyone. arizona is a shithole in some ways but not fiscally. illinois is dragged down by too many n###ers doing nuthin in chicago except driving ems and law and order cost thru roof. so fuck off.

Panafrican Funktron Robot's picture

Arizona is a strong net beneficiary of social spending largesse in the form of unsustainable pension deals, where those pensioners migrate to AZ, CA, and FL and spend Illinois et al pension money. Would be an interesting policy change to distribute pension EBT cards that are only good in the state of origin. Their budget issues would immediately improve via increased property and sales tax revs.

DrtyNeedlz77's picture

Expel Madigan & his cronies, things would improve overnight. 

give me liberty or....'s picture

To Illinois state workers: parasites you are all soon to be living under a bridge beam dumpster diving for your next meal. Go to hell all of you. 

HK21E's picture

It's fuckheads like you that cause most of the problems in this state in the first place. Piece of shit politicans screw the pooch and you, just like them, shit on the state employees - most of which are just trying to do a job. 

Go fuck yourself. 

Sam Spayed's picture

Remember, in a leftist state, when determining who gets paid, the loafers always come first.  The people who work and produce always come last.

lolmao500's picture

Good thing that obama aint president anymore or they would receive a bailout

Lost in translation's picture

This news makes me sad.

Sad, because I wish CA would get the financial blowtorch, FIRST.

Déjà view's picture

MexiCali's are jumping from frying pan into fire...Tejas...
'Loan' Star State...has 2nd highest per capita combined state and local debt...$15,000...

Life is good..until it isn't...

navy62802's picture

Obviously hacked by Russia. It's Putin's fault!

Too-Big-to-Bail's picture

He's in a Puerto Rico state of mind

Herdee's picture

Thank-You, Hussein Obama and Michael.

Reaper's picture

Let the Fed print money for the Illinois bailout, as it did in Europe. https://www.cato.org/publications/commentary/federal-reserves-covert-bai...

That'll wake up the sheeple when other States demand cash too and the Fed printing our money for the EU is better known. End the Fed and seize its $4 trillion in assets, all of which was obtained by printing our money. Go after the "missing" $9 trillion dollars at the Fed. Use the cash recovered from the Fed to reduce the debt. Presently, the Fed prints money to buy Treasury issued debt. Without the Fed, the Treasury can print the same cash without generating more debt. http://www.youtube.com/watch?v=GYNVNhB-m0o

GeezerGeek's picture

I think that the owners of the Fed should be put on the hook for every cent of debt incurred during the Fed's existence. Too bad TPTB don't feel the same way, since they caused the problems in the first place.

Robert A. Heinlein's picture

Just this last week I talked about Chicago and the pension probem.  Real probem is there is no law that allows for BK in IL.  Until they get that done, and don't hold your breath, the debt bomb will only get bigger. And more people will leave. It's a catch 22.  Pensioner's what their money, their is none.  They keep raising taxes to cover them, and more people leave, more pensioner's come on line raising the cost, so they raise taxes.  LOL  The left lib Dems of IL want your money. Mo of it.  

FoggyWorld's picture

New Jersey is close to the same situation and yes, the taxes on everything under the sun keep rising and as soon as possible people just up and leave.

GeezerGeek's picture

Trump should build a wall around each and every bankrupt progressive utopia. Keep the idiots who voted for these unsustainable finances there and make them suffer along with all the others who are too poor to move. And hang all the politicians and judges. Trials can be held later to verify their guilt.

Vilfredo Pareto's picture

This is why dense urban areas are so open border.    Imagine how quickly they would depopulate without immigration both legal and illegal?

artichoke's picture

No federal bailout!  Let the govt employees share the pain thru their pensions.  Why are government workers supposed to be protected from bad things happening to them?  Everyone else isn't that's for sure.

New_Meat's picture

teeth, thanks, whew, I was worried there.

Kinda' like the news show, I think it was 60 Minutes, that was worried about the Spaghetti Trees' crops failing in  the drought.

- Ned

Rothbardian in Cleveland's picture

Wait? Can't they just raise taxes? /sarc

gatorengineer's picture

Actually you would be shocked at how low cook county taxes are.... Dont believe me Zillow it.  About half of here in Pennsy tucky

artichoke's picture

IL state income tax used to be 3%.  That's why businesses located there, esp. Chicago.  Now it goes up and they leave.

What's you PA state income tax rate?

gatorengineer's picture

This might be what George Soros was waiting for?  Holding the pavement apes in standby?  Lets say we have massive riots in Chicongo, over the 4th because sequanda aint getting her check and its Mr Trumps fault afterall that they arent....

I can see it from here, the only question is it real?  Would love for it to be.....  let the bitch burn....  

 

Horse Pizzle's picture

They only burn the quickmart and the liquor stores.  The 4th Infantry Division will lay razor wire around the action.  They'll set up a free fire zone and wait.  After three days plenty will volunteer to pick cantaloup in California.

GracchusBrothers's picture

 

Speaking of California...I'll bet they're paying close attention to how this "Illinois illness" will be cured.

Horse Pizzle's picture

Time for the niggers to get out of the wagon and push.

Megaton Jim's picture

Don't you know, they are a protected, special class and exempt from manual labor because they had to pick cotton 10 generations ago!

MilwaukeeMark's picture

Sooner or later kicked cans hit brick walls. it appears that's where they are.

Herdee's picture

When she all goes down along with the pensions, maybe they'll finally understand that they need gold and silver (species) to protect their rights against the Fed and its' Washington minions.

youarelost's picture

Socialism/Communism fails every time.

 

Let Obozo and his moocher send them some cash.

TGDavis's picture

Notice that he and Michelle didn't move back there.

Non-Corporate Entity's picture

The rot started in Chicago and spread like mold. They kept voting for Communists scum who took federal government funds to line their pockets and grow their state and local governments, to the point where people receiving government pensions outnumbered people who actually work in the private sector. Illinois is becoming exactly what Rahm, Valerie, and Barry want it to be, another Cuba. The millionaires fleeing in mass were the canaries in the coal mine.

pparalegal's picture

Contracted vendor business get paid or state workers and retirees get paid. Take your pick. You can't have both. Residents should go long freeze dried food, wood matches, candles and ammo before all their cash is taxed away from them.

lasvegaspersona's picture

Why did no one tell them before now?

JLee2027's picture

Judges have no budget authority or control of taxpayer funds and how they are spent. I mean it's stark raving mad what power people think Judges have.

Savyindallas's picture

simple solution  -lay off one third of all government employees  -especially the high paid administrators  -cut the rest of salaries by 25% - and drastically curtail social services and welfare. 

Then file bakruptcy to cut pensions in half and then completely eliminate the corrupt pension system. Also  -fire Goldman Sachs and the banksters -sue them for the money they have already swindled and stolen. 

Bopper09's picture

I was just thinking that while reading it. 

How about this option?  Severly reduce the size of government.

Never seems to be one of their options.

HK21E's picture

Not possible in Illinois, since the pensions are codified into the Illinois Constitution, and they are only allowed to attempt to write changes into it every 10 years. 

Not My Real Name's picture

You can't get blood from a turnip. But you keep telling yourself the taxpayers -- most of whom have no pensions of their own -- will tolerate paying for the gold-plated six-figure pensions of their government masters while they have no pensions of their own. 

chubbar's picture

Look what happened in Detroit when they stopped services, people left in droves. If that happens in Chicago then the tax base falls precipitously and guess what, pensions don't get paid. It doesn't matter what the fucking state constitution says. When there is no money, there is NO MONEY!