Illinois Gov. Rod Blagojevich last week sent a letter to his department heads, the state’s comptroller and treasurer, social service agencies, and university managers warning them of looming cuts if he cannot reach an agreement with the General Assembly on how to eliminate a $2 billion deficit in the fiscal 2009 budget passed by lawmakers.

The governor’s letter warned that officials should be prepared for massive cuts, the elimination of programs, hiring freezes, and spending freezes for all but essential and priority spending by the state if no agreement is reached soon. The new fiscal year begins July 1. The letter was widely reported late last week.

Lawmakers approved the nearly $60 billion budget with little input from the governor. The final plan lacked proposals floated by Blagojevich that included a $16 billion general obligation pension borrowing that would trim about $500 million from the budget, and a sweep of non-general fund accounts for another $500 million.

Lawmakers also left a $34 billion capital budget on the table. The governor supports a partial lease of the lottery, expanding gaming, and borrowing to support the state’s share of the cost.He has held several meetings with leaders of the General Assembly but they have failed to make much headway on either the operating budget deficit or the capital program.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.