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Why Illinois may be the most messed up state in the U.S.

Illinois budget crisis
Illinois budget crisis 07:40

CHICAGO -- Illinois is hours away from entering its third fiscal year without a state budget, territory that could mean some universities won't be able to offer federal financial aid, road construction and Powerball ticket sales will halt, and the state's credit rating will be downgraded to "junk."

Lawmakers are meeting Friday to try to end an impasse between Republican Gov. Bruce Rauner and Democrats who control the legislature that started when the first-term governor took office in 2015 promising change.

But a deal appears unlikely before the Saturday start of the next fiscal year. Comptroller Susana Mendoza, who controls the state's checkbook, said: "Derailment is imminent."

Rauner has said he'll keep legislators at work in Springfield until they can reach an agreement, continuing a special session that is costing taxpayers up to $48,000 per day.

Here's a look at the situation:


No other state has come close to the mess that Illinois is in.

Some states have gone months without a budget -- Pennsylvania had a nine-month impasse that ended last year. But Illinois' stalemate has been unprecedented since it reached a full year.

Illinois already has the lowest credit rating of any U.S. state, and it owes more than $15 billion in late payments to vendors, including doctors who provide health care to state employees and social service agencies that care for disabled people.

Some homeless and domestic violence shelters have been forced to close or reduce services, and some medical offices are no longer seeing patients on state insurance unless they pay cash up front. Universities have laid off thousands of employees. Illinois also owes school districts millions of dollars for transportation, special education and other expenses.


If there's no budget by Saturday, S&P Global Ratings has said it will likely downgrade Illinois' credit rating to below investment grade. That would make Illinois the first U.S. state to be assigned "junk" status, and increase the cost to taxpayers when the state borrows money.

The Illinois Department of Transportation has said nearly 700 roadwork projects would stop, putting an estimated 25,000 people out of work, because the state can't spend money collected through the gas tax without the Legislature approving an appropriation.

The Higher Learning Commission, which accredits schools in the Midwest, has warned the ongoing lack of funding could cause some universities to lose their accreditation. Southern Illinois University President Randy Dunn said that would mean the colleges wouldn't be able to offer federal loans and grants to students, causing more to choose colleges in other states.

"We're going into very dangerous territory," Dunn said.


Rauner, a former private equity investor, won election in 2014 on an anti-tax, pro-business agenda. He promised to shake things up, once even suggesting it might require a government shutdown.

As he was inaugurated, a temporary, four-year Democratic income tax increase that had provided up to $7 billion extra a year was allowed to expire, and the tax rate rolled back. Revenues fell far short of spending and red ink piled up.

Rauner has demanded cost-cutting changes to workers' compensation laws, which he says are needed to lure businesses to Illinois. He also wants a freeze on local property taxes, which are among the highest in the nation.

Democrats, who have large majorities in the Legislature, argue that Rauner's demands are an attack on the middle class. They say a property tax freeze would hurt school districts, which rely heavily on property tax.


Even without a budget, Illinois has been spending billions of dollars more than the state is taking in each year because of state laws, court orders and agreements, and because legislators haven't passed a budget that takes into account the rollback of the temporary income tax increase.

Schools have stayed open because in 2015, Rauner vetoed everything in the budget Democrats sent him except a K-12 education bill. Last year, lawmakers approved a temporary "stop-gap" plan allowing schools to open on time.

Courts ruled that roughly 63,000 employees should continue to get state paychecks, and consent decrees and other orders require Medicaid and other payments, though many of those payments have been delayed.

But the days of being able to eke by are about to end.

Mendoza, the state comptroller, warned this week that without a budget, the state by August will have $185 million more in state-mandated and court-ordered payments than it will have revenue to pay them. She said that would make "the unthinkable" - such as delaying pension payments or not paying state workers - very likely.

"Illinoisans must brace for maximum impact," she said.

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