CHICAGO - Illinois Gov. Bruce Rauner and legislative leaders are shifting away from efforts to reach a two-year budget deal to focus instead on a six-month "stopgap" spending plan.
Rauner had five public stops scheduled for Wednesday to discuss a "fully funded stopgap budget and clean education bill."
The shift comes after lawmakers ended their spring session without passing a balanced budget, amid intensifying political divisions in a state that has already gone 11 months without a budget.
Rauner, a Republican, has been at odds with the Democratic leadership in the General Assembly since taking office in 2015, but the political discord widened Tuesday to encompass internal Democratic ranks after the House and Senate could not agree on a budget or education package.
Last year, the two chambers passed a budget although Rauner vetoed all but the appropriation for K-12 education.
"Today, we end the spring session of the General Assembly in stunning failure -- stunning failure by the super majority Democrats who control our Legislature," Rauner said Tuesday.
Rauner previously had rejected a suggestion from Senate President John Cullerton, D-Chicago, to temporarily put aside grand bargain negotiations in favor of a stopgap budget that would get lawmakers through the November election.
This week, Rauner dropped that opposition and his finance team put forth a six-month plan due to concerns that state agencies are struggling to pay bills and schools need state funding to open doors. Universities too are cash-starved, while some social service agencies have warned they may fold.
About 90% of state government continues to be funded under consent agreements, court orders, and continuing appropriations that cover state debt and pension payments, but the remaining 10% has gone largely unfunded since fiscal 2016 began last July 1 without a budget in place.
The interim budget the Rauner administration proposed would appropriate the remaining non-general revenue fund line items for the current fiscal year and use the state's rainy day fund to pay outstanding bills at various state agencies. It funds utilities, food and medical services at state prisons, and other facilities, dipping into a human services fund for $458 million.
For fiscal 2017, it would fund early childhood and K-12 education, appropriate the fiscal 2017 road construction program paid for with motor fuel tax and vehicle registration fees and appropriate all federal funds.
It would appropriate non-general revenue funds for capital projects that were halted in mid-construction due to the lack of a budget and cover emergency repairs at state facilities.
It would also provide the appropriations needed to free up the tourism-related tax revenue that covers debt service payments for the Metropolitan Pier and Exposition Authority bonds and appropriations needs for the state's Civic Center bonds and Illinois Sports Facilities Authority bonds.
The MPEA suffered a steep credit downgrade last year when its monthly payments into a debt payment fund were tied up due to the lack of an appropriation, even though funds were available and couldn't be used for anything else.
The interim package would provide $600 million from the Education Assistance Fund for Higher Education and appropriate $180 million from a human services fund to cover payments to human services providers not covered by court orders or consent decrees in fiscal 2017.
"This proposal is not designed as a full-year budget. It is designed as a bridge plan that allows schools to open, keeps the lights on, protects public safety and prevents a government shutdown," budget director Tim Nuding said in a memorandum outlining the stopgap plan.
Ahead of the Tuesday evening session, House Speaker Michael Madigan, D-Chicago, said he was open to the stopgap budget but it would not be called for a vote that night. Instead he sent it to bipartisan legislative budget working groups for review.
"For them to suggest it can't be done today is laughable," said House Republican Leader Jim Durkin, R-Western Springs.
The last hours of the session Tuesday were rushed. The Senate rejected the House's budget plan and the House rejected a Senate-approved education package that provided a big infusion of funding for Chicago Public Schools.
A general fund spending plan had cleared the House in a 63-to-53 party line vote last week. While the state expects about $32 billion in general fund revenue in fiscal 2017, the plan would have brought state spending up to $40 billion, leaving a $7.5 billion hole to plug, the Rauner administration warned.
Cullerton called the bill late Tuesday and it failed on a 17- 31 vote, with 10 voting present. Although Cullerton earlier in the day said he had a hand in crafting the plan, he blamed its failure on the perception that the House forced the plan on to the Senate.
As the session was winding down, Cullerton took reporters' questions, saying "work begins" Wednesday on an interim budget that "would get us past the election and into Jan. 1 when it will be easier for us to come together on a grand bargain."
All 118 House seats are up in November and 40 of the 59 Senate seats are up.
The Senate's $16 billion education funding bill would have provided $760 million more for districts, especially high-poverty districts including Chicago Public Schools, which is grappling with a $1.1 billion deficit. In addition to nearly $300 million in new aid, the package would have provided $200 million to cover CPS teacher pension contributions, which the state covers for other districts.
After the Senate shot down the House-approved budget, the House then rejected the Senate version of the education funding overhaul. Its own plan was similar but provided $100 million less for CPS pension payments.
Any final "grand bargain" likely will include some level of borrowing to pay down the state's mounting unpaid bill backlog. Nuding said the administration considers it a practical move and Cullerton said it might be needed "at some point."
The backlog is expected to hit $10 billion at the close of fiscal 2016 June 30, exceeding a past high of $9 billion.
Illinois, already the lowest rated state, has suffered credit erosion over the last year and faces more unless it makes strides in tackling its budget and more than $100 billion of unfunded pension obligations.
When asked about how the continued impasse might impact the ratings, Rauner on Tuesday: "I don't want to speculate about bond ratings," Rauner said Tuesday. "Bond ratings will follow good results."
The state does face some limited liquidity and bank risks in its $26 billion debt portfolio tied to $600 million of floating-rate paper from a 2003 issue. The paper is supported by six direct-pay letters of credit that expire on Nov. 26.
The $600 million is synthetically swapped to a fixed rate of 3.89% through five interest rate agreements that are negatively valued at $143 million. Termination events are triggered if a rating is withdrawn or suspended or Standard & Poor's drops the state below BBB or Moody's Investors Service drops it below Baa2.
S&P rates Illinois A-minus with a negative outlook and Moody's rates it Baa1 with a negative outlook. Fitch Ratings rates the state BBB-plus and assigns a stable outlook.
The state's 10-year GO paper has been trading at a 180 basis point spread to the Municipal Market Data's top-rated benchmark.
Any action taken now by the General Assembly that is to take effect immediately requires a three-fifths majority. Senate Democrats hold 39 seats, three more than the supermajority, while Democrats in the House hold exactly the supermajority number of 71, though Madigan has had trouble keeping all 71 in line for supermajority votes.
Democrats want a mix of cuts and tax hikes as part of a long term budget solution while Rauner won't consider tax hikes unless Democrats relax their opposition to his governance and policy reforms.
During Rauner's five stops Wednesday to promote the stopgap and education bills, he amplified his attack on Democrats for the ongoing gridlock, accusing them of a "dereliction of duty" for failing to pass a balanced budget, his reform proposals, or pension changes.
"The tragic fact is" under Madigan for the last 30 years the state's debt, deficit, and pensions have risen, Rauner said. He did not note that for much of that time a Republican held the governor's office. His attacks extended to Cullerton and rank-and-file Democrats, accusing them of holding education funding and the budget "hostage" so they can push through a tax hike after the election. "Don't let them hold our schools and government operations hostage," Rauner said.
Democrats have used similar language, accusing Rauner of holding the budget "hostage" to his turnaround agenda items.