Illinois is now into the third month without a state budget, and spending decisions are being made increasingly by the courts.
A slew of lawsuits have been filed by state employees, municipalities — even lottery winners — all of whom are waiting for cash and benefits the state would normally be paying out. But with no sign of the budget impasse being breached, the state now runs the risk of running even larger deficits because the spending authorized by the courts is based on revenue from 2015 — the last year of a tax increase that brought in an extra $6 billion. That increase has since been repealed, leaving the state in an even more perilous fiscal state.
In the weeks since fiscal 2016 began on July 1, U.S. and state judges have ordered Illinois to pay its workers and adhere to federal consent decrees mandating certain healthcare and social service programs.
That has put $14 billion of state spending under judicial control, according to Illinois Budget Director Tim Nuding. It has also placed the state on a path to spend more than its estimated fiscal 2016 revenue of $32 billion. The courts have ordered spending at levels in place in fiscal 2015 when revenue totaled about $36.6 billion due mainly to higher income tax rates that expired on Jan. 1.
“The courts in many ways are running our government because the legislature has failed to pass a balanced budget,” Nuding told a state Senate hearing last week.
Governor Bruce Rauner sent a memo to lawmakers on Thursday, warning that the longer it takes to resolve the budget impasse with Democrats, “the cuts we will have to make become deeper and what we ask of taxpayers will be steeper.”
Illinois and Pennsylvania are the only two states still fighting over a budget past their July 1 deadline, according to the National Conference of State Legislatures. Arturo Perez, an NCSL analyst, said the fact that neither state was able to put temporary spending measures in place has opened the door to court intervention.
RISK OF MORE JUDICIAL INTERVENTION
Lottery players in Illinois who have won prizes of $25,000 or more and who have not been paid since July 1 due to the lack of a budget filed a class action in federal court. The winners are seeking $288.4 million plus interest and a suspension of certain lottery ticket sales.
Several labor unions including Illinois’ biggest, the American Federation of State, County and Municipal Employees Council 31, this week asked a St. Clair County Court to force the state to fund healthcare coverage after it stopped paying claims, according to AFSCME spokesman Anders Lindall.
“There is a substantial possibility that state employees will forego needed medical care, either because they will not be able to afford to pay for the care up front at the time of service, or because they fear that medical care providers will demand such payments up front,” the unions’ complaint states.
In a notice on Friday, Illinois said it will resume payments for its self-insured plans once a budget is approved.
Only about 11% of the Illinois budget cannot be released by the courts. But with the expiration of the tax increase, judges are spending based on a higher baseline. This will lead to about a $5 billion hole that lawmakers will have to fill, thanks to the state’s balanced budget law.
There hasn’t been a meeting between Rauner and Democrats since May. And the governor, who was elected with a clear mandate to change the fiscal fortunes of state government — partly by reining in union power — refuses to budge. Democrats have been content to offer a budget that was $5 billion in the hole and then sit back and watch as Rauner is blamed for the impasse.
Eventually, Rauner is going to have to start laying off state workers, even though he explicitly promised he wouldn’t. If that happens, Rauner will be forced to cave in to Democrats and sign the kind of budget they want.
Dark days ahead for Bruce Rauner and his reform ideas.