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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Horse Pizzle's picture

Illinois' failure to plan ahead does not constitute an emergency on my part.

OKUSA's picture

Get ready for a mass exodus. People just leaving their homes vacant because they can't sell like in the crash.

montresor's picture

Couldn't have happened to better leadership

BeepBeepRichie's picture

Good.  I got two speeding tickets in 40 miles from each other for going 5 over in southern Illinois. Enjoy your non pensions fuckers

muldoon55's picture

Burn you devils burn hahaha

Shpedly's picture

Meredith Whitney was practically crucified after her 60 minutes segment. Me thinks she will be proven right.

1.21 jigawatts's picture

Put a wall up around Chicago.  Gaza style. 

The whole city should be imprisoned.

The Binary Man's picture

Has anyone heard about Binary Option? well, I guess we all have. I know most of us are tired of investing simply because we keep loosing. I have good news. Do you want to make $350-$400 per hour by using binary option. Call me Jerry, I am a trader. I will work with you and teach you my exact strategy. My winning rate is 95%(I could say 100% but allow me sound human lol).. Contact me on jerrylei2562@gmail.com

Horse Pizzle's picture

If slavery were legal Chicago would have a steady supply of niglets to balance their budget.

Cordeezy's picture

Kick the can down the road till it falls of the cliff!

 

 

www.escapeamazon.com/read-this

 

Dumpster Elite's picture

"Democrats have balked at the full list,"
Let me fix that for you..."STATE UNIONS have balked at the full list,"

all-priced-in's picture

he said in a video announcing the session that his office posted on Facebook.

 

I think I see the problem - am I the only one?

 

 

BeepBeepRichie's picture

I feel  bad for the common Illinois citizen. They are as dumb as a pile of rocks and are easily manipulated 

HK21E's picture

Manipulate my dick, mother fucker. Illinois is made up of a lot more than Shitcago. 

Spitball's picture

Funny how these fucksticks think we all voted for this shit, or don't think about the fact that many of us have land worth millions that we simply can't walk away from.

Shitcago is a blue city in a red state. Most counties outside the city are conservative, and live within our means, but idiots outside Illinois think we all voted this garbage in. 

We don't want anything to do with the parasites in the northeast part of the state.

Fuck them and all the other pieces of shit who think we're on board with this failed state.

Let the fucking state go broke for all I care. 

The day I leave can't come soon enough.

HK21E's picture

95 fucking counties went for Trump - but the entire state is run by Shitcago. We are truly fucked.

I have a few more years until we can retire, and then we are outta here as well. 

TheAnswerIs42's picture

Now you made me go look up the total number of counties in Illinois.

102.

You're right, you are fucked.

 

MarsInScorpio's picture

Count yourselves lucky, fellow ZHers - tonight you will see the birth of how states are going to bail themselves out of their financial mess . . . stay with me.

 

Never One Roach:

How did you miss the multitude of statements telling you that STATES CANNOT DECLARE BANKRUPTCY.

Since speaking to you in lower case flies right past you, perhaps screaming it at you in all caps will make it sink in.

Do tell us the truth - what country are you in - or from - that you haven't caught on to that fact yet?

Regardless, when you owe bills and you don't have the funds to pay them when they are due, it doesn't really matter whether you are bankrupt de jure, because you are already bankrupt de facto.

However, it would be interesting to see what would happen if the state began printing State Financial Notes (SFN) which are honored in the state to pay bills to whomever the bills are owed - including payroll.

The state would have to pass legislation declaring the SFN is "Legal tender for all debts, public and private."

And of course, the state will pass state banking legislation requiring banks to set up a separate SFN account for each bank customer to deposit and withdraw in terms of notes, or checks.

VOILA! Illinois is now in the money printing business.

People will use them because so much money is handed out by the state to individuals - EBT, Medicaid, pensions, purchases, payroll, et al.

There is no violation of the US Constitution because these are debt obligations issued by the state which the state permits to be freely exchanged "for all debts," exactly the same thing the FED does with its FRN. Remember, it's the same scam as the FED uses - these aren't currency, they are debt obligations.

Just like the FRN, the SFNs will work because people will use them to make purchases of goods and services and pay bills for same because they are most certainly better than not having anything in your account to make purchases or pay bills to stay in business, or stay alive.

So, because SFNs will be mandated by law to "pay all debts," people will accept them - just as we accept FRNs.

All of which demonstrates, for those who haven't caught the train yet, the difference between money, and currency.

I keep reading members of Idiots Galore write, "Federal Reserve Notes are worthless."

Really? OK, Windbag, give me yours.

Funny how they always sulk off grumbling some foolishness that it's me that doesn't get it . . . I got it: if you can exchange it for goods and services, it is worth whatever number of FRNs it takes to get those goods and services. SFNs will carry the same system of value, because the legislature will mandate by law that SFNs are one-for-one interchangable with FRNs at the check-out counter, or the payment window, or where ever else.

And if some international company says the won't accept them in the state where they are issued, they will be prohibited from doing business in that state.

How? You take away their sales tax collection license - and mandate that Internet companies have to collect and pay sales tax in SFNs to the state for purchases made in the state.

So again, I'll call your "worthless FRNs" bluff: Give me your "worthless FRNs." When you spout that poop, all you're doing is talking smack.

Anyway, back to Illinois: Time to issue State Financial Notes that are "Legal tender for all debts, public or private" which banks operating in the state are required to set up in separate accounts from a customer's FRNs - which can be used to write checks, debit carded, handed out as printed notes, and everything else a non-currency FRN can do.

And if you really want to make it fun, set up cross-state agreements to honor each others SFNs in the respective states making this cross-recognition agreement. If NY agrees to participate, then I can use my Illinois SFNs in NY, and I can use NY SFNs in Illinois.

Think about what that does to FRNs if SFNs sweep the nation!

Goodbye Janet - E S & D!

Count yourselves lucky, fellow ZHers - tonight you just saw the birth of how states are going to bail themselves out of their financial mess.

(OK, someone pass this on to the state comptroller . . . desperate people do desperate things.)

whatswhat1@yahoo.com's picture

State Financial Notes (SFN)...I like it!  Like crypto currency (Bitcoin, ect.), why not get in on the latest trend.  In addition, why let financial instutions make bank on bonds.  The issuing state should pay 5%, more or less, interest based on the face date of the notes.  The SFN's would be guaranteed by the states assests, land, roads, buildings, equipment.  If necessary, assets would be liquidated via auction to pay for redeemed notes. 

Bigly's picture

Western Mass. has Berkshire Bucks already....

Vilfredo Pareto's picture

Reminds me of Asignats.   That worked out well, didn't it?

MarsInScorpio's picture

whatswhat1:

Thanks for your input. I'm adding it to the other suggestions I've received about this idea.

whatswhat1@yahoo.com's picture

I'm all about innovative concepts for problem solving.  There are tactical and strategic approaches to every issue.  Most humans are stuck like an old dog trying to learn new tricks.  Unfortunately, the humans who are creative rarely get heard above the noise of the daily meat grinder.  

Mr T's picture

Excuse me, could you point me to place in the constitution that describes your great remedy? 

Ill be back

MarsInScorpio's picture

Mr. T:

OK, wise guy; point me to the place in the Constitution that describes the Federal Reserve System . . .

And if I'm relly lucky, you'll never be back because you lack the intellect to have the faintest idea what is being propsed and discussed.

Mr. T: E S & D

Mr T's picture

You ducking douche bag. No shit. You were the fucking little prick who wrote this was all constitutional. I just asked where in the constitution. You thing are a shit-e-it

Idiot dont know shit

Non-Corporate Entity's picture

He's a copy and paster, and either thinks very highly of himself, or very lowly of the rest of us. Even if the Constitution were a "legal" document, still cannot find legal tender mentioned.

runnymede's picture

Actually very plausible possibility. We haven't seen even the beginning of the extreme ridiculousness coming schemes when the ponzi frays to the point of breaking and the mass man becomes indocile. It will be mind-bending, whatever form it takes. 

Xena fobe's picture

I have heard it suggested states start their own banks but this is even better.  But in a few years they will again go bankrupt because they overspend. 

Non-Corporate Entity's picture

Which Constitution are you referencing, the legitimate one of 1789 or the illegitimate corporate one of 1867? You know, the one written by lawyers for the newly formed UNITED STATES Corporation (the "government" de facto).

Anyone listening to you knows nothing about American history. STFU!

runnymede's picture

Would you like to enlighten us as to how the colonial period rule and royal granted colonial charters led up to the revolution and the 'legitimate' constitution, and how the bankers/industrialists/federalists got their centralizing blueprint document over the interests of the states' rights advocates and agriculturalists?  Feel free--

muldoon55's picture

Cut 80 % of state police since all they do is strut around with their chests puffed out waiting to bully law abiding citizens around.
Give the other 20% slingshots and let em patrol on 10 speed bikes

whatswhat1@yahoo.com's picture

...yet the Illinois lawmakers get paid right on time and naturally they have never missed giving themselves a nice pay raise. 

Gab Timov's picture

"They" could always start paying people per internet search and for commenting and liking stuff. Whoever they are. Millions and millions of hours per day are spent by people on the internet each day and the workers aren't getting paid and their potential earnings are not getting taxed.

I earned 0.5 cents for this comment.

Try new Hell brand hairpieces for men. There's gonna be Hell Toupee.

Horse Pizzle's picture

Block all the roads out of Illinois and charge an exit fee.

Wahooo's picture

Nope. Hand everyone an AR and box of ammo and send them back in.

Rentier88's picture

LMAO@THEM, you own it you deserve it liberal cesspool!

VWAndy's picture

 I cant wait to see the looks on the government workers faces when they find out about the real economy.

bugs_'s picture

M.C.M. confirmed

you should have set up your bailout under the previous president

Xena fobe's picture

Trump will bail them out.  He bailed out CA when it had the dam issue

Thisfuckenlife's picture

The people never cared so long as they got their socialism. Couldn't have happened to a worse bunch of people.

Well, maybe NJ & California.

AKKadian's picture

WOW! Just think if they cut-off the sanctuary city money, this summer is going to get hot. Illinois is going to be quarantined.!!!

danl62's picture

Illinois doesn't have to be quarantined. Just Chicago, Rockford, Peoria, Springfield and East St. Louis. The rest of the state is pretty sane.

williambanzai7's picture

The audacity of dope. Luckily, Illinois has a contract to relocate all its people to Yellowstone.