CHICAGO - Most payments by the Illinois state government will halt if Gov. Bruce Rauner and the General Assembly's Democratic majority can't break a logjam over a new budget.
That was the message Comptroller Leslie Geissler Munger sent at a news conference Wednesday outlining what will happen to state bill and voucher payments if a budget is not in place by the start of the fiscal year July 1.
The state can continue cutting checks to cover debt service payments, pension contributions, and to pay retiree benefits under ongoing appropriation authority or other legal provisions related to those obligations. The comptroller's office also can continue to make most local government distributive aid payments, Munger said.
That's not the case for most other vouchers that cover payments to non-profits, social service providers, Medicaid providers, and small businesses.
"If the General Assembly is unable to work with the governor to enact a balanced budget for fiscal 2016 by the end of this month nearly all payments coming from my office will stop," warned Munger, who Rauner appointed early this year to the constitutional officer's post. She filled a vacancy left by the sudden death of predecessor Judy Baar Topinka.
"I am here as the state's chief fiscal officer to urge the General Assembly to avoid causing this unnecessary hardship and work with the governor to pass a balanced budget," Munger said. "I am here to remind all involved that this isn't a game to be won or lost - their rhetoric, posturing and decisions have grave implications on people and communities across the state."
Illinois over the last five to six years has been behind on payments to the tune of between $4 billion and $9 billion and has been on pace to close out the current fiscal year with a $5 billion backlog. The state can continue getting caught up on fiscal 2015 appropriations into the new fiscal year but new payments that were to be appropriated in fiscal 2016 won't be made.
The bill backlog weighs heavily on the state's credit profile as it provides a clear view of the state's liquidity woes. That backlog, in combination with its structural budget deficit and $111 billion of unfunded pension obligations, has driven its bond ratings to the lowest among states at the A-minus level.
State employees could miss their paychecks on July 15 and the first school aid payments of the fiscal year due August 10 could be delayed. In previous budget showdowns, unions have gone to court to get paid. On other occasions, agreements on temporary budgets continuing the previous year's appropriations have been struck while negotiations continued.
Rauner proposed deep cuts and new pension reforms to eliminate a $6 billion deficit in his proposed $32 billion budget for fiscal 2016.
Democrats wanted a mix of spending cuts and higher taxes to offset the need for cuts driven by the partial expiration on Jan. 1 of a 2011 income tax hike. They adopted a $36 billion budget that is between $3 billion and $4 billion short of needed revenue.
Rauner has indicated that he won't agree to new taxes to help offset the cuts unless Democrats in the legislature approve pieces of his turnaround agenda, including worker's compensation reforms, a property tax freeze that also frees local governments from some collective bargaining and contract rules, tort reform, and constitutional amendments on term limits and redistricting changes.
Democrats have labeled many of the proposals as too favorable to business at the expense of the middle class and unions while Rauner has said they will improve the state's economy and create jobs.
Rauner told his cabinet last week to prepare for a potential cash flow crisis if a stalemate isn't resolved and announced $400 million in cuts.
The comptroller's office pays the state's bills and serves a repository of state and local government fiscal information. Its past leaders have taken both lawmakers and governors to task on fiscal management issues to varying degrees even if those criticisms involved members of their own party.
Topinka, a Republican like Munger, had urged Democrats and Republicans alike to at least temporarily extend the 2011 income tax hike due to the dire impact losing billions in annual revenue could have on state finances.
Munger made her position clear Thursday in siding with Rauner.
She said it is the legislature's responsibility to send the governor a balanced budget and blamed their long practice of adopting imbalanced budgets for putting the state in what she called a "disastrous" situation.
Munger said Rauner's reforms are key to improving the state's economy and tax base. "So far, lawmakers have failed to do their jobs. And their failure prevents me from doing mine. It's time for all parties to find common ground before the situation grows dire," she said.
A recent Illinois Supreme Court overturning 2013 pension reforms has escalated pressure on officials to resolve the budget mess if the state is to stave off any further credit deterioration.
Standard & Poor's put the state's rating on CreditWatch negative after the court's ruling last month, saying that how the state resolves its fiscal 2016 budget will drive its near-term credit action.
The budget gridlock showed no signs of easing this week. After rejecting Rauner's proposed worker's compensation reforms last week in favor of their own watered-down version, the House on Tuesday rejected a property tax freeze.
On Tuesday, the Senate held a committee-of-the-whole hearing on a property tax freeze that included warnings from local governments and schools.
Rauner responded to the chambers' debate with attacks on Democratic leaders from Chicago - House Speaker Michael Madigan and Senate President John Cullerton — painting them as favoring their own interests over the public good.
He charged that some lawmakers, including Madigan and Cullerton, have a conflict of interest through their private legal businesses that Rauner said benefit from property tax-related work. "It's the political class against the middle class," he said. "That's the battle that is occurring right now."
Madigan countered during his own news conference that Rauner's proposals were being aired and he continued to argue that the budget should be tackled alone with Rauner's turnaround agenda addressed separately.
"We're being reasonable. We feel he is functioning in the extreme as he advances these issues," Madigan said, adding on the conflict of interest allegations are baseless and won't help the "legislative process."
