How Illinois became America’s failed state

Illinois has compiled $14.6 billion in unpaid bills. It’s running a deficit of $6 billion, and its pension liability has soared to $130 billion.

That’s not the worst of it. The state’s nearly two-year failure to pass a budget has sent its bond ratings careening toward junk level, downgraded a staggering eight notches below most other states.

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With university enrollments plummeting, large-scale social service agencies shuttering and the Chicago Public Schools forced to borrow just to stay open through the end of this school year, Illinois is beginning to devolve into something like a banana republic — and it’s about to have the most expensive election the state has ever seen.

Democrats have flooded the primary to challenge GOP Gov. Bruce Rauner, with billionaire J.B. Pritzker among them. Pritzker has already poured $14 million into his campaign for a general election that’s still 15 months away.

“Illinois is operating in a way 49 other states would never try to operate,” said Laurence Msall, president of the Civic Federation, a nonpartisan fiscal watchdog group. “There is permanent damage that is being done that will take decades to repair.”

The devastation of the state’s finances has taken its toll on Rauner politically, despite his investing heavily on TV, digital and robocall messaging — in 2016 alone, Rauner contributed more than $50 million to his upcoming campaign. In March, 58 percent of those polled reported having an unfavorable view of the Republican, according to a poll conducted by the Paul Simon Public Policy Institute, up from 32 percent in 2015.

One of just five blue-state Republican governors, Rauner is widely viewed as the most vulnerable incumbent in the nation.

To troll Rauner about the budget, Pritzker’s campaign created “Tick Tock the Budget Clock,” a character dressed as a clock, who follows Rauner at his public events carrying a sign that displays the number of days the state has gone without a budget.

As of Friday, it stood at 709 days, an unprecedented amount of time for a state to go without an operating budget.

“Illinois is a real outlier in the most striking way. The sheer size of the state’s unfunded pension liabilities … just looking at the state’s finances, its habit of deferring payments from one year to the next, has created a vicious circle,” said Ted Hampton, vice president with Moody’s Investment Services. “Illinois has had a very large negative balance both in absolute terms and relative to its budget for many years.”

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What does the crisis all boil down to? It began with an ego-laden brawl between two powerful men: Rauner and Democratic House Speaker Mike Madigan. Rauner was elected in 2014 as the first Republican governor in Illinois in more than a decade, vowing to “shake up Springfield” in a campaign that demonized Madigan — the longest serving House speaker in state history — and targeted “corrupt union bosses.”

Upon taking office, Rauner, a multimillionaire businessman, laid out a list of policy demands that initially included right to work elements as a condition of signing a budget into law. Rauner wanted changes to laws affecting workers’ compensation, collective bargaining and state property taxes, among others. Democrats considered the agenda an attack on unions, which the governor had vilified, saying they had too much power in Illinois politics. Rauner called the measures pro-business and necessary to address decades of financial mismanagement.

But Madigan, who has served as speaker under governors from both political parties, was loath to condition the passage of a budget on the governor’s political agenda. Each side dug in, with unions rushing behind Madigan and Republicans — tired of being shut out for years by Madigan and thrilled to have a generous donor to their campaigns in the governor’s office — lined up behind Rauner.

Today, Madigan’s Democratic-majority House and the Republican governor remain entrenched in the war to end all political wars. The exception is the Democratic-controlled Senate, which ultimately voted on a tax increase before May 31 adjournment.

Both Rauner and Madigan counted on the other to cave. Neither has. Meantime, the state is drowning in debt, deficit spending and multiple bond-rating downgrades.

It’s increasingly possible that Rauner — who promised that he carried negotiation credibility and the know-how to fix the state’s finances — could complete his four-year term in office without ever having passed a budget. At that point, economic forecasts indicate the state’s unpaid bill pile would soar beyond $20 billion. The bill backlog was at about $6 billion when Rauner first took office.

To put it into perspective, the Republican-dominated Kansas Legislature just overrode a veto by its governor from the same party that reversed the governor’s tax cuts and created $1.9 billion in revenue. Lawmakers there panicked after the state found itself $900 million in the hole — a drop in the bucket compared to Illinois.

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Few Illinois state pols seem to be panicking. That could be a reflection of voters who don’t seem rattled.

Instead of voting on full-fledged budgets, including possibly increasing revenue, the governor and the General Assembly have signed off on stopgap spending plans. That means they’re cherry picking certain areas to fund — keeping schools open and roads paved.

“This impasse has been sort of cleverly positioned to diminish the immediate, obvious impacts on your middle-class voters,” said Andrea Durbin, chief executive officer of Illinois Collaboration on Youth. “Those voters are being deceived, because every single one of us is going to pay more every single day that this goes on. Having the DMV open, state parks, highway construction and K-12 open, it allows your sort of average middle-class voter to be deceived about what is going on.”

Illinois was creative in how it pays its bills long before Rauner took office. It has for years taken the politically palatable option of avoiding tax hikes while borrowing from pension funds, allowing its pension backlog to balloon and failing to sock away money for emergencies. Illinois is just one of nine states to not have a rainy day fund, according to the National Association of State Budget Officers.

Last month, a group of protesters was so fed up with the stalemate that it took drastic measures to draw attention to the crisis. They walked 200 miles from Chicago to Springfield, stopping in towns along the way to talk about the budget. Once inside the capital, some demonstrators were dragged from the House chamber. In the evening, another group tied their wrists together, chanted traditional protest chants and sat in a circle outside the governor’s office before about three dozen were arrested.

The next day, the Illinois House adjourned without even calling a budget bill for a vote. A week later, the governor was touring the state — to talk about a property tax crisis. As for Madigan, he authorized public hearings, underway now, to continue discussions — on a budget.

“No one has tried to do what Illinois is doing. Every other state has relied on the pressure that comes to bear on the governor and state legislators,” said the Civic Federation’s Msall.

This year, Rauner balanced his budget proposal by relying on $4.5 billion in savings from a so-called Grand Bargain compromise in the Illinois Senate. That compromise was born out of Senate leaders in both parties revolting against Madigan and Rauner and putting together their own budget.

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But just as the Senate lawmakers neared a series of bipartisan votes, Rauner pulled the plug, saying the deal didn’t go far enough. Senate Democrats eventually passed their own budget, including voting on a huge tax hike as well as $3 billion in spending cuts to balance the budget before sending it to the House.

Rauner not only promised a veto, but the Republican Party — which he funds almost entirely himself — also began running robocalls in targeted House districts, attempting to shame Democrats from casting a vote for the measure.

With no solution in sight for the almost-two-year budget standoff, both Rauner and Madigan have sought to flood political campaign accounts with record amounts of cash aimed at broadening their grasp over the Democratic-controlled Legislature. But to pin the blame on Rauner and Madigan is to simplify the crisis, observers say.

“Every single member of the General Assembly has a vote. We’ve been asking for a long time, who do we blame? When we started, we went and visited over 40 legislators in both parties and said, please don’t do this. Exclusively, they’d say: ‘It’s their fault,’ and point to the other chamber. The other leader. I’m like: You are elected, you have a vote,” Durbin said. “So for us to boil it down to two individuals is a bit of a cop-out. Right now, the General Assembly and the governor — none of them are choosing to do what’s in the best interest of the state.”

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