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| Illinois Gov. Bruce Rauner |
For Illinois, a midnight deadline, of Wednesday, the chance to pass a budget has come and gone; giving partisanship a ringing endorsement, along with political stalemate, as the nation’s fifth most populous state, faces a financial crisis that if prolonged, can no longer function in the black. Awash in red ink, it faces a backlog of unpaid bills, currently at $14.5 billion.
The best that can be hoped for is another last minute stop gap bill that, as the Chicago Sun-TImes editorialized, “will not include sufficient revenues, meaning the state’s debt will grow.”
Bruce Rauner, the first Republican governor since 2003, has butted heads with the the powerful Democratic Speaker of the House, Mike Madigan, amidst an onslaught of name calling and accusations. The former says that the Democrats are “completely derelict of duty,” while the latter claims that the process has been “held hostage by the Governor’s agenda.”
The situation has now deteriorated to the point that state bond ratings were lowered just above junk status, on Thursday, by S&P Global Ratings, from BBB to BBB-, reported Greg Hinz of Crain’s Chicago Business, who, quoting from the reports, said, "In our view, the unrelenting political brinkmanship now poses a threat to the timely payment of the state's core priority payments."
To add to the impending gloom, they also said that Illinois, "is now at risk of entering a negative credit spiral, where downgraded credit ratings would trigger contingent demands on state liquidity, further exacerbating its fiscal distress."
Causing even further damages are $800 million in interest fees on the overdue bills that must be paid by the end of June. The only silver lining is that there have been no missed bond payments.
Bloomberg Politics reported that Illinois is the “first state since 1970 to lose investment grade status.”
Before the downgrade, 10 year bonds, yielding 4.4%, were “only 2.5 points more than those on on top-rated debt. That gap -- a measure of the perceived risk -- is the most since at least January 2013 and more than any of the other 19 states tracked by Bloomberg.”
While there is the month of June, remaining, to hammer out a budget agreement, there is still cautious hesitation since less than two weeks ago the State Senate Dems voted on a $36.5 billion budget, but lacking Republican support, is unlikely to see passage.
According to the Chicago Tribune, “Senators failed to approve technical legislation that would make the budget work. And they didn’t vote on tax increases meant to pay for their spending plan - an issue at the heart of the ongoing divide between Democrats who control the General Assembly and Republicans loyal to Gov. Bruce Rauner.”
They also speculated that the Democrats may need the political cover of a June decision to allow them to share the blame, equally, with the Republicans, for any tax increases.
Meanwhile Rauner has stuck like glue to the Republican playbook that demands changes in union negotiations, workmens comp, and now property tax freezes that would further hinder schools statewide, that are already $1.1 billion in debt. Illinois has been a true blue state for generations, and the likelihood that this would play, as some observers have noted, is pure fantasy.
The budget bill was refused support by the GOP, “even though it contained some of the ideas they backed,” because it lacked a deal on key tax issues, with the Dems turning down “the technical bill that would implement the budget, which contained various spending cuts pushed by Republicans.”
With this type of logger jam, the absence of a vote is not surprising, despite the old adage which claims that “hope springs eternal.” To see a chance in the House, 71 votes are needed, but since there are only 67 Democrats, reaching across the aisle to get the remaining votes will be mandatory.
The spectre of unfunded liabilities --- more than $129 billion remains, but also is another factor that affects ratings by the bond rating agencies. Balancing that with an operating deficit of $6 billion, requires more than both the State Assembly, and the governor, may be able to do.
“Republicans have insisted a 32 percent increase in the personal income tax rate, from 3.75 percent to 4.95 percent, be a part of taxpayer parity with the adoption of a local property tax freeze. Both chambers have approved workers' comp changes,” reported ABC7 Chicago.
The damage, the Dems say, from a property freeze, would be immeasurable because it would harm local school districts that rely on the revenue. Yet, on Tuesday, the Senate Democrats “did lock most local real estate levies in place for two years, but Rauner said they didn’t go far enough.”
Adding to the chorus of Democratic critics is Eleni Demertzis, a Rauner spokesperson, who said, that vote was “a phony two-year freeze riddled with holes.”
State Rep. Greg Harris (D-Chicago) told ABC7, "It is very hard to get people to take tough votes when the governor's saying I'm going to attack you on every vote you take and every vote you don't take, and anything you send me I'm going to veto.”
The fallout for social service agencies and colleges has been devastating, and, one in particular, Lutherbrook, a 150 year old organization, which treats abused children will be hard hit. “There are currently 30 kids who live and are being treated at Lutherbrook, but when summer ends those children will be forced to relocate back to their homes or into foster care” and "Knowing the kids what won't get help, knowing-knowing personally the staff that are affected by this, it's incredibly difficult," said Mike Bertrand, Lutheran Child and Family Services.
“LCFS will close eight other outreach programs and that means layoffs for employees. LCFS said it will cut 100 jobs: 25 percent of its staff, the biggest cut the organization has ever made”, said the television affiliate.
Widely reported has been the effect of local colleges and universities, who have faced a severe deficit, as they are treated as vendors, by the state. And, widely credited with giving students a quality college education, at affordable prices, is Northeastern Illinois University, on the city’s North Side, but on Tuesday Interim President Richard J. Helldobler held a press conference, where it was announced that the school will be eliminating 180 positions, in the coming weeks.
Helldobler noted, in his remarks, “This 700-day old budget crisis has been traumatic to our faculty and staff, but most of all our students, many of whom are minorities, first in their families to go to college, and come from the bottom socio-economic quartile. Let me remind those who hold the state's purse strings that public universities — especially Northeastern Illinois University — are the economic engines of the state. Our current students and graduates contribute to our communities, play important roles in the workforce, and they also contribute to the tax base. And, they vote.”
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