Illinois Blows Budget Deadline as Threat of Downgrade Looms

By Natasha Korecki, Politco

02 July 17

Lawmakers remain deadlocked with the state hurtling toward a 'junk' rating.

linois lawmakers blew their deadline for a budget agreement and instead entered their third fiscal year without a spending plan on Saturday, despite worries about the state facing an unprecedented downgrade to junk status.

A crisis that has already sullied the state's reputation nationwide, and drawn the intervention of a federal judge, threatened to exact a deeper political toll on lawmakers still squabbling over key details.

Democratic House Speaker Michael Madigan called for a tax vote on Sunday -- the most contentious of issues under negotiation -- but Republicans said they weren’t yet on board.

“There is no agreement on a comprehensive budget package that includes reforms and revenue," said House Republican Leader Jim Durkin. "This impasse can only be resolved in a negotiated manner. It is our hope that Democrats will remain at the negotiating table.”

A Republican source with knowledge of the negotiations said the two sides remained $1.5 billion apart, with the GOP asking for more cuts and Democrats wanting more revenue.

State Rep. Greg Harris, a top Democratic negotiator, said Saturday he believed negotiations were on track and that sticking points were not major.

Democrats conceded to $800 million in recommended cuts by Republicans, Harris said, but his party won’t agree to cut mental health services, opioid treatment, Medicaid or services for seniors.

“There’s ups and there’s downs every day,” Harris said. “I think we were negotiating in very good faith.”

Lawmakers from both parties remained optimistic but another top Republican negotiator said the two sides were still not close enough on reforms the governor has demanded. The two sides have been locked in an unprecedented stalemate since Republican Gov. Bruce Rauner took office in 2015 and conditioned the signing of a budget on a series of his policy changes that he viewed as pro-business and Democrats view as anti-union and anti-middle class. The state faces a $15 billion bill backlog and is deficit spending to the tune of $6 billion this year. It has the worst pension liability in the nation at $130 billion.

The days wear on even as Illinois received blistering coverage nationwide for its failure to end an impasse that is wreaking permanent damage to the state’s social service infrastructure, higher education institutions and now threatening K-12 schools from opening in the fall. Multi-state lottery games have kicked out Illinois and road construction projects are threatening to halt. Political ramifications could be in store for Rauner if he is unable to usher through a budget deal soon. On Thursday, the Senate Republican Leader announced her resignation, amid frustrations over the impasse.

The latest delay is particularly perilous given a federal judge’s ruling on Friday ordering Illinois to begin to more significantly pay down the estimated $3 billion it owes to Medicaid at a rate of more than $500 million per month. That judge, U.S. District Judge Joan Lefkow, noted that Illinois was paying 100 percent of what it owed in some cases -- including to state workers and more recently to lawmakers -- but failing to adequately fund organizations that provide health care for the poor.

On Friday, Madigan sent rating agencies a letter asking that they hold off on a downgrade as work continues. Major rating agencies would not comment on whether that request would have any impact on the junk rating expected if Illinois didn’t come up with a budget by Friday night.

The state has already experienced a staggering eight downgrades since a political war between Rauner and Democrats has ensued.

Key outstanding issues include a measure affecting how injured workers are compensated, as well as a major revamp to how education is funded in Illinois.

Discussion grew rancorous on the House floor on Saturday after Madigan announced there were no bills to be called until at least Monday. Durkin stood up and said he wanted to end the stalemate immediately.

“I still contend that these matters can be resolved very quickly. I want this done today,” he said to thunderous applause and shouts by members. “We can do this! Continue working!”

Madigan countered that Durkin knew there were no compromise budget bills that could yet be called for a vote.

Later in the day, Madigan announced he would indeed call a tax increase vote on Sunday -- one that Republicans had not signed onto.

“I am encouraged by the progress we continue to make with Leader Durkin and the other leaders,” Madigan said in a statement. “Building on this progress and Friday’s overwhelmingly bipartisan budget vote, the House will be voting Sunday on a revenue package that is modeled on the bill supported by the governor, and House and Senate Republicans in their recent announcement of their budget blueprint, and ensures a balanced budget for our state.”