CHICAGO – Illinois Gov. Bruce Rauner is calling lawmakers back for a 10-day special session in an 11th-hour attempt to resolve the state’s budget stalemate before it enters a third fiscal year on July 1.
“We have tough, urgent choices to make, and the legislature must be present to make them,” Rauner said.
“If no action is taken by the General Assembly to pass the compromise balanced budget plan by June 30th, the ramifications for our state will be devastating and long-lasting,” Rauner said in a statement announcing the special session for June 21 through June 30.
The announcement came one day after House and Senate GOP leaders unveiled a fiscal 2018 budget and reforms proposals they labeled a “compromise” package aimed at bridging the divide.
The Republican governor and fellow GOP lawmakers traded barbs with the majority Democrats over blame for for the crisis before and after the regular spring session ended on May 31 without a resolution of the budget mess. The next day, S&P Global Ratings and Moody’s Investors Service dropped the state to the lowest investment grade level of BBB-minus/Baa3.
Democrats might take issue with some of Rauner’s assertions over their unwillingness to compromise and whether the GOP proposals outlined on Wednesday truly represent a “compromise,” but the state does face significant consequences if it doesn’t act soon after almost two years without a budget.
S&P Global Ratings will likely drop Illinois’ $26 billion of general obligation bonds to junk – a historic occurrence for a sovereign state. Fitch Ratings will also then act on the state’s rating, now at BBB.
In the absence of a budget or a special appropriation, state construction will come to a halt and some school districts might not open. A six-month stopgap budget approved last June funded both those areas for a full year.
Public universities, social service agencies, and others will be forced to continue to make do without state payments. Social services providers lost a court effort Thursday to get the state to make good on overdue bills despite the lack of an appropriation.
More university and local government downgrades could come, further driving up their borrowing costs.
With the state’s delinquent bills at near $15 billion, even with an appropriation long waits will continue unless a budget plan that includes borrowing to help pay down the backlog is approved.
Rauner has said he’s opposed to another stopgap and even if approved, such a short-term fix is unlikely to stave off further rating hits.
Democratic leaders reacted skeptically.
“I will remind everyone that the Illinois Senate has been in session the last six months and produced a balanced budget plan that was approved and sent to the Illinois House,” said John Patterson, a spokesman for Senate President John Cullerton, D-Chicago. “I’m not sure where Gov. Rauner was during the first half of the year, but the Senate did his work and balanced his spending plan using the numbers and tax rate he wanted.”
Senate Democrats negotiated a $37 billion budget with the GOP through Minority Leader Christine Radogno, R-Lemont, pitching a multi-bill package with reforms aimed at meeting Rauner’s demands in exchange for his support of $5 billion in tax hikes. Republicans pulled back after the two sides could not agree on the term of a local property tax freeze. Democrats will support a two-year freeze, but Rauner is demanding at least four years.
The GOP proposal introduced this week ties a four-year freeze to a four-year sunset on an income tax hike.
“Now that he’s decided to engage, it would be helpful if he could use his influence to marshal the House Republicans to join the bipartisan collation and support his tax increase and spending plan and get a balanced budget approved in the House,” Cullerton said.
The House did not take up the Senate’s budget and has been holding public hearings over the last week on budget issues. Speaker Michael Madigan, D-Chicago, issued a statement digging in on his opposition to some of Rauner’s pro-business proposals.
“We have stated unequivocally that a resolution to the governor’s budget crisis—which has resulted in eight credit downgrades and tripled the state’s debt—must be our top priority,” Madigan said. “House Democrats will continue our work on the budget from Springfield, but as Governor Rauner has met each of our attempts to date with refusal, it’s clear that the onus is on the governor to show that he is finally serious about working in good faith to end the crisis he has manufactured.”
Radogno also stressed the July 1 deadline and that a resolution is within reach. “The alternative to not finding compromise will be devastating to Illinois,” Radogno said.
The state has begun preparing for the worst. The Illinois Department of Transportation began notifying contractors that work could grind to a halt without an appropriation to pay vendors on July 1.
Capitol Fax, a blog covering state politics, posted a confidential memorandum from the Rauner administration to state agencies in which the budget office seeks information “on priority ‘red flag’ issues that may face your agency in event of a scenario where no fiscal year 2018 appropriations have been enacted from any fund when the fiscal year begins.”
The state also has been notified that it will be dropped from participation in the multi-state Powerball and Mega Millions lottery games due to state fiscal conditions if the budget crisis isn't resolved by July 1.