Two weeks ago, Illinois Comptroller Leslie Geissler Munger announced that the state would skip [6] a $560 million pension payment in November thanks to the budget battle in Springfield. The news marked the latest embarrassment in a string of setbacks tied to an increasingly serious financial crisis that was thrust into the national spotlight in May when the State Supreme Court's decision to strike down a pension reform bid prompted Moody’s to downgrade Chicago to junk.
As we documented back in August, the state is in fact so broke that it’s begun paying lottery winners [7] in IOUs.
The practice of handing out Rauner bucks instead of Federal Reserve notes was initially limited to those who won more than $25,000, but in the wake of Geissler Munger’s announcement, the upper limit on cash payouts was reduced [8] to just $600. That followed directly on the heels of our prediction that “anyone who wins more than a few thousand in the Illinois lottery can go ahead and figure on getting a pieces of paper with Bruce Rauner's picture rather than Ben Franklin's for the foreseeable future.”
Now that Illinois isn’t paying out lottery winners, Illinoisans are simply driving to other states to play. Here’s The Chicago Tribune [9]:
With Illinois delaying payouts of more than $600 because of its budget mess, neighboring states are salivating at the chance to boost their own lottery sales. Businesses near borders, particularly in Indiana, Kentucky and Iowa, say they've already noticed a difference.
Many gas stations, smoke shops and convenience stores in states bordering Illinois say they first noticed an increase in August, when the state said payouts over $25,000 would have to wait because there wasn't authority to cut checks that big. Now those businesses are reporting a bigger flurry since Oct. 14, when the Illinois Lottery announced it had lowered that threshold to payouts over $600.
Idalia Vasquez, who manages a GoLo gas station in Hammond, said irked Illinois residents have been streaming in to buy lottery tickets. She estimates ticket sales are up as much as 80 percent since Illinois' second delay announcement.
"We have long lines, but they're patient with it because Illinois is not paying," Vasquez said of the store roughly 20 miles from Chicago. "They're all coming here and saying, 'I'm from Illinois, how do you play it here?'"
The Hoosier Lottery even issued a statement welcoming Illinoisans.
In Kentucky's McCracken County, along Illinois' southern border, there was a 13 percent jump in scratch-offs from July 1 through Oct. 9, compared with a 9 percent jump statewide.
One retailer with higher sales is Paducah's Kentucky Tobacco Outlet, where most of the customers are already from Illinois. According to manager Michael Coomer, those customers are now buying more and say trust in Illinois is gone.
"It's definitely known and very vocal," he said of Illinois' problems. "It's definitely going to be better for us."
Yes, "definitely better" for neighboring states and definitely worse for Illinois. Note that this will only make the budget situation worse. That is, by not paying out lottery winners, Springfield has essentially sent all of the potential revenue from ticket sales across the state's borders meaning the move to limit payouts is actually now set to exacerbate the conditions which forced the state to pay in IOUs in the first place.
Illinois likely won't get much sympathy though because as State Rep. Jack Franks put it earlier this year:
"...our government is committing a fraud on the taxpayers, because we're holding ourselves out as selling a good, and we're not — we're not selling anything. The lottery is a contract: I pay my money, and if I win, you're obligated to pay me and you have to pay me timely. It doesn't say if you have money or when you have money."
