Illinois’ finances are in dire straights.
Some fear the state is a hair’s breath from (gasp!) bankruptcy.
"We would like all the stakeholders of Illinois to recognize how close the state is to bankruptcy or insolvency," Laurence Msall, president of the Civic Federation, a fiscal watchdog in Chicago told Crain’s Chicago Business.
Bankruptcy is defined as an inability to pay debts out of current assets, and it’s no secret that Illinois can’t pay its bills. The latest count puts Illinois’ unpaid bills at around $5 billion – a contentious fact among the state’s gubernatorial hopefuls.
The question is: what can Illinois do about its near-bankrupt status?
Answer: not much.
Federal bankruptcy protection doesn’t apply to states, so there's no way for Illinois to hide from its creditors. And none of Illinois politicians are willing to make the tough choices needed to close the budget gap, like raising taxes or cutting spending, Crain’s notes.
Many foresee a governmental collapse in which vendors will stop bidding on contracts, investors will stop buying bonds and employees will be paid with IOUs, similar to what California has done.
"I don't see any light at the end of the tunnel," Dan Strick, CEO of SouthStar Services, a Chicago Heights non-profit that helps people with developmental disabilities told Crain's. "It seems to be getting worse and worse, and the delays longer and longer."
Indeed, Illinois is not taking in cash, its liquid assets have dipped below $1 million at times, Comptroller Dan Hynes said, and the state is supposed to pay $5.4 billion into its pension fund next year and $10 billion the year after that. And that's just the beginning.
"The crisis will come when you see state institutions shutting down because they can't pay their employees," David Merriman, head of the economics department at the University of Illinois at Chicago told the publication.
No-one wants to see a budget crisis.