Financial Warning… There will be more of these…
The fifth most populous state in the U.S. is out of money, unable to pay its bills and essentially close to bankruptcy. Things are so bad that Illinois governor Bruce Rauner called the state a “banana republic” and the state comptroller sent state officials a letter warning that bills are going unpaid.
“My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly,” a letter from State Comptroller Susana A. Mendoza to other state officials reads.
As the state’s chief financial officer, Mendoza makes decisions each day that affect millions.
“We are effectively hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year,” the letter read.
Mendoza was even more direct in an interview with the Associated Press.
“I don’t know what part of ‘We are in massive crisis mode’ the General Assembly and the governor don’t understand,” Mendoza told AP. “This is not a false alarm. The magic tricks run out after a while, and that’s where we’re at.”
In the coming weeks, Mendoza said, Illinois “will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.”
Things are so bad that her office “will soon be facing the prospect of deciding which court order or statutory mandate” regarding payments the state can accommodate.”
No Money For School Buses
Within days, the state no longer will have enough money to pay for school buses, domestic violence shelters and some ambulance services.
Illinois is so broke that the state lottery might be unable pay prizes after June 30, Fox News reported. The lottery will stop selling Powerball and Mega Millions tickets.
“It is disappointing that the legislature’s inability to pass a budget has led to this development and will result in Illinois lottery players being denied the opportunity to play these popular games,” said Illinois Lottery Acting Director Greg Smith.
The state owes $2.8 billion to the Managed Care Organizations (MCOs) that run the Medicaid health plans. Advocates for the MCOs have sued the state.
Two top ratings firms — S&P (Standard & Poor’s) Global Ratings and Moody’s — have lowered the status of Illinois’s state bonds to junk, The Chicago Tribune reported.
“We’re like a banana republic,” Rauner said. “We can’t manage our money.”
States are forbidden by law from declaring bankruptcy, although Illinois — if it were a business — likely would have gone that route.
Hopefully, Illinois’s crisis is not America’s future.