Illinois Comptroller: "The State Can No Longer Function"

Tyler Durden's picture

With just 10 days to go until Illinois enters its third year without a budget, resulting in the state's imminent downgrade to junk status and potentially culminating in a default for the state whose unpaid bills now surpass $15 billion, Democratic Illinois Comptroller Susana Mendoza issued a warning to Illinois Gov. Rauner and other elected officials on Tuesday, saying in a letter that her office has "very serious concerns" it may no longer be able to guarantee "timely and predictable payments" for some core services.

In the letter posted on her website, Mendoza who over the weekend warned that Illinois is "in massive crisis mode" and that "this is not a false alarm" said the state is "effectively hemorrhaging money" due to various court orders and laws that have left government spending roughly $600 million more a month than it's taking in. Mendoza said her office will continue to make debt payments as required, but indicated that services most likely to be affected include long-term care, hospice and supportive living centers for seniors. She added that managed care organizations that serve Medicaid recipients are owed more than $2.8 billion in overdue bills as of June 15.

"The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state's most in-need citizens," Mendoza wrote. "We must put our fiscal house in order. It is already too late. Action is needed now."

Unveiling the most dire langage yet, in her letter Mendoza said "we are now reaching a new phase of crisis" perhaps in an attempt to prompt the Democrats and Republicans to sit down and come up with a comrpomise:

As Illinois’ Chief Fiscal and Accountability Officer, my Office is responsible for managing the state’s financial accounts as well as providing the public and the state’s elected leadership with objective and timely data concerning the state’s difficult fiscal condition. As you are quite aware, I have been very vocal regarding these issues and the budgetary impasse since assuming office six months ago; however we are now reaching a new phase of crisis.

She then addresses "the full extent of [Illinois'[ dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities":

Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year.  My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.

The cause for alarm in America's most bananish state is well-known: living far beyond one's means, resulting in soaring deficits and the critical need for constant debt funding.

My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state’s Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state’s financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.

There was one silver lining: a default is not imminent, at least not in Mendoza's view, as the comptroller explained that "debt service payments will not be delayed or diminished going forward and I will use every statutory avenue or available resource to meet that commitment."

It is a necessary pledge in order to attempt to avoid further damage to our already stressed credit ratings and to make possible the additional debt financing that we all know will be required to achieve some measure of stability going forward.

And when "every available resource" runs out, that's when things get really bad.

* * *

Meanwhile, as the state's budget director warns of fire and brimstone, in a last ditch attempt to reach an agreement with the legislature, Illinois' Republican Gov. Bruce Rauner will deliver a brief address Tuesday night calling for unity as lawmakers prepare to return to Springfield for a special session, a move Democrats quickly dismissed as a political stunt.

The speech, which is closed to the press but expected to air live on 6 p.m. television newscasts, comes just days after Rauner launched a TV advertising blitz attacking Democratic House Speaker Michael Madigan, whom the governor has spent years vilifying as the source of the state's deep financial woes according to the Chicago Tribune. Democrats have long argued that Rauner's frequent political attacks do little to bring about common ground. The governor says political gamesmanship is part of being in public service but should not impact what happens at the Capitol.

Rauner will give his remarks at the Old State Capitol, where Abraham Lincoln gave his "House Divided" speech and Barack Obama kicked off his first White House run in 2007.

The speech will fall short.

Democratic governor candidate J.B. Pritzker called Rauner's address a "sham," saying Rauner "either doesn't have the slightest clue what unity is or just doesn't care." House Democrats called it laughable, saying if Rauner wanted to negotiate he would do it behind closed doors not in front of television cameras. "I find it tragically comedic that a governor who has done more to divide this state than probably any other governor in history is going to give a unity address," said Rep. Christian Mitchell, D-Chicago.

It's not just the Democrats: Republican lawmakers said they would vote for that tax plan, but only if the hike were limited to four years starting in July, and were tied to a four-year property tax freeze. The Senate Democrats' plan makes the tax hikes permanent and applies them retroactively to the beginning of 2017.

While Rauner is expected to talk about the need for unity and compromise, House GOP leader Jim Durkin said last week that Republicans expect "substantial compliance" from Democrats, warning that he would reject "reform light or anything that is significantly diluted."

* * *

Finally, in a harbringer of what's to come for the entire state, Bloomberg reports that Chicago’s junk-rated school system just went "no bid", and is paying bond-market penalties similar to those seen during the financial crisis. The Chicago school district, slammed by the fallout from the Illinois budget gridlock, has been stuck paying punitive interest rates on $167.5 million of adjustable-rate bonds after PNC Capital Markets failed in March to resell the securities once previous owners sold them.

Remember the failure of Auction-Rate Securities just before all hell broke loose in 2008? Well, it's kinda like that.

The rate on the bonds, which are supposed to stay extremely low because investors can resell them to banks periodically, jumped to a maximum 9% on March 1 from 4.64% the week before and has stayed there ever since, according to data compiled by Bloomberg.

The spiraling interest bills are reminiscent of the chaos that erupted in the wake of the Lehman Brothers Holdings Inc.’s bankruptcy in 2008, when state and local governments were stung by soaring costs after investors sold the variable-rate securities en masse just as banks were scrambling to raise cash. In Chicago’s case, though, it reflects how skittish investors have become about holding the debt of the cash-strapped school system.

In another preview of what's coming once Illinois is junked, the school district agreed this week to pay a rate of 6.39% for a short-term $275 million loan from JPMorgan Chase & Co. to help make a pension payment and cover the cost of staying open through the end of the school year. As we reported last week, the schools didn’t receive $215 million more in state aid to make the retirement-fund contribution after a measure was vetoed by Governor Bruce Rauner. Illinois has failed to pass a budget for more than two years as the Republican governor and Democrat-led legislature battle over how to close the state’s chronic budget deficits.

"Chicago Public Schools has been unable to crate a fiscally responsible budget and it relies on outside sources that, as we see, sometimes comes through and sometimes don’t,” said Matt Dalton, chief executive officer of Rye Brook, New York-based Belle Haven Investments, which manages $6 billion of municipal bonds, including about $3 million of insured Chicago school debt.

“That’s unsettling investors."

Unfortunately, that's just the beginning, and once the state itself is junked, investors will be even more unsettled.

But the biggest insult and injury is to the near-insolvent state is that Illinois is facing a full-blown crisis just one day after chronic defaulter Argentina managed to pull off a 100 year bond offering, which was 3.5x oversubscribed.

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esum's picture

GRAB A GUN ...... ITS ON

 

Don Sunset's picture

IL should join the EU.

herbivore's picture

Nothing a little thermonuclear war with Russia couldn't fix

kiwimail's picture

Why don't they arganise a house to house search of all the politicians closets for shoe boxes of cash?  They should beable to find enough to pay all the overdue bills.

Robert A. Heinlein's picture

I read the other day the state told the road repair Co., which is private, to stop repairing because they would not get paid.  LOL  Doesn't is suck when you run out of other peoples money?!  Roadwork already slowing down over state budget impasse  http://www.chicagotribune.com/news/columnists/ct-illinois-budget-roads-g...

 


HK21E's picture

Happens every year here in June. No one even bats an eye anymore. 

Robert A. Heinlein's picture

Thanks for bringing us up to speed.  Hell of a way to run a state.  Good luck to you. 

HK21E's picture

We are totally and completely fucked. Right now, we are hoping for this shitshow to collapse and take as many of the progressives that have been raping us for 30 years as it can down. 

Blankfuck's picture

Just get the FED RESERVE FUCKERS TO PRINT SOME MORE YUM YUM PAPER! Chicagoland can take all that FED FUCKER PAPER and place in in tech stocks. THIS IS WHERE ALL PRINTED ONEY GOES! Right into the CEOS pocketbooks. Just sit back and watch those TECH FUCKERS  PARTY ON THE YACHTS YOU GIFTED THEM!

Blankfuck's picture

Just get the FED RESERVE FUCKERS TO PRINT SOME MORE YUM YUM PAPER! Chicagoland can take all that FED FUCKER PAPER and place in in tech stocks. THIS IS WHERE ALL PRINTED ONEY GOES! Right into the CEOS pocketbooks. Just sit back and watch those TECH FUCKERS  PARTY ON THE YACHTS YOU GIFTED THEM!

knotjammin2's picture

If I get close enough to see them it won't be to watch.  Just get me within 800-1000 m

Herdee's picture

Should have done the same as Colorado years ago and made Cannabis legal. Too many right wing idiots I guess. Serves them right for letting Hussein Obama and his transvestite wife Michael bankrupt them. I know that in southern states you'll even do a lot more prison time for marijuana, the child sex perverts do less- go figure. That's how much they hate peaceful people. But then again Colorado is making hundreds of millions and you have incompetent gr 2. morons as politicians in Illinois.

HK21E's picture

Put down the bong, dickwit. There isn't any such thing as a right winger in Illinois government. There are moderates and Communist fucks. You pot smoking dumbfucks ought to let the haze clear once in a while. 

BeepBeepRichie's picture

You read like a right wing hodgkinson. Probably equally as pathetic 

danl62's picture

There are a lot of conservatives in illinois. Just many more left leaning Democrats in Chicago and the bigger cities. You dumb fuck. Post somethin that you are schooled in if there is such a subject.

johand inmywallet's picture

Oooohhhhh Susanna, I hope you getting OT, cause there ain't no one that's gonna give a shit about your cup of tea!

Bryan's picture

Maybe you could, I dunno, cut back on some entitlement programs?

ThrowAwayYourTV's picture
Illinois Comptroller: "The State Can No Longer Function"

{{{Breaking Newz}}} Illinois Comptroller to be fired by end of week. New "Sucker" eh, Comptroller to start at beginning of next week.

IENTJ's picture

SHOCKING ... IL needs MOON BONDS!

coast1's picture

the word "dominos" comes to mind... Here in Oregon, seeing many california license plates, among other states..also, the word "locusts" come to mind.  And jus read an article in our local news that Oregon is fucked up too...And also notice everyone using credit cards...Also, reminds me of the flintstones "charge it".... 

CultiVader's picture

I'm a Californian leaving for Oregon in 2 weeks. Bought a modest home an acreage. My guns have been there for a while. Don't worry. I'm not bringing any liberals with me. I'm a farmer, not a parasite.

arby63's picture

This is what happens when one crazy ultra-leftist city controls the entire state. 

NickPeeMe's picture

Ultra leftest you make me laugh. Manual Transmission? A leftist or an opertunist?

Sam Spayed's picture

Don't worry Illinois, I'll lend you some money. ......... Just kidding. What do you think I am, f'n retarded?

yellowsub's picture

What's ironic is that gov't couldn't function even when they're paid well...

Pasadena Phil's picture

They couldn't even manage a lottery to be cashflow positive. They see cash from anywhere and just steal it. Why not just return control to the Mafia? At least their rackets were profitable!

Hyjinx's picture

When exactly did Illinois "function?"

markar's picture

A 1/2 cent tax on every CME transaction would fix this--for now. The problem is they will just pick up the exchange and move, greedy fuckers.

NickPeeMe's picture

Turns out Illinois govenor is a trumptard Republican this explains everything. Nothing to do with Rahm Emanual. Sorry trumptards nice try but I am just laughing.

Jethro's picture

Imbeciles often laugh.  It's their thing.  Thanks for self-identifying.

VWAndy's picture

 How about a one pension only policy? If its like out here in cali a buncha folks are double and tripple dipping. Like Moonbeam?

 

Barney08's picture

A bunch of guys will get in a room for a few hours talk about a bunch of stuff and nothing will happen. I mean nothing will happen. Zip, zilch, nada,nothing, zero, less than zero,

There will be no consequences to pay. This will be just another day. This will not be a big deal. This will not shake the core of the USA, FLATLINE.....

Repeat this is not the big one. Nobody will care, the needle will NOT move.

Herodotus's picture

Cut the state payroll by 1/3 by either salary cuts or layoffs.  You could balance the budget with no tax increases.

Moros-is-Here's picture

Kick ILLAnnoy out of the Union!

John_Coltrane's picture

Maybe the people's republic of Kalifornia can float them a loan? After, all they are part of the same "climate coalition" aren't they? Just finance it with "carbon credits" or a surtax on Tesla "profits". Can you say, "NO BID"? No, I didn't think you could!

Ha, Ha; (as Nelson (the Simpsons)) would say.

aloha_snakbar's picture
The State Can No Longer Function

He seems to be implying that it actually ever DID function...

SJEqualizer's picture

Hahahaaaaaaaaa!!!!

Tough shit bitches.  You made your bed, now 'sleep' in it.

 

 

CultiVader's picture

California's time will come. If tech ever takes a dump it's game over.

youngman's picture

I have a friend who is in the Tech crowd..lives in San Fran...he says all the new stuff is coming out of the east...not silicon valley anymore

Korprit_Phlunkie's picture

Steve Jobs died and ther went all the ideas.

youngman's picture

You know there are thousands of businesses and people making moving plans as we speak...

TheWrench's picture

Need moar Me_hicans.......

Robert Trip's picture

Get the niggers off of welfare and put them to work.

No more free ride.

Problem solved.

Horse Pizzle's picture

Attention niggers.  Medicaid is not a viable scam.

flyonmywall's picture

The collapse of Illinois is a foreshadowing of things to come.

First it was cities, then it will be counties and states. The holes in the dam are multiplying. The writing is on the wall.

Prepare accordingly.