Illinois to Halt Most Payments Without Budget, Comptroller Says

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Illinois will stiff its workers, stop paying Medicaid and end school aid if lawmakers don’t pass a budget in the next three weeks, Comptroller Leslie Geissler Munger said.

The lack of a spending plan for the year starting July 1 is increasing pressure on Illinois’s already stressed finances, Munger said in a press conference in Chicago on Wednesday.

The Democrat-controlled legislature and Republican Governor Bruce Rauner failed to agree before the session ended May 31 on how to close a $6.2 billion budget gap for the coming fiscal year. A solution now requires a three-fifths vote rather than a simple majority. The standoff has intensified the financial crisis and heightened the risk of credit downgrades.

“There will be very real consequences for taxpayers and organizations throughout our state,” said Munger, a Republican who was appointed by Rauner after Comptroller Judy Baar Topinka died in December.

Employees would miss paychecks starting July 15 and schools won’t receive aid set for distribution Aug. 10, Munger said. Some payments would continue, including debt, pension, retiree benefits and welfare, she said.

Illinois, with a backlog of about $5 billion of unpaid bills, is graded A3 by Moody’s Investors Service, four steps above junk, and an equivalent A- by Standard & Poor’s, the lowest among U.S. states.

The state also lacks a solution for its $111 billion pension shortfall. The nation’s worst-funded state retirement plan is in even more dire shape after the Illinois Supreme Court overturned a 2013 overhaul in May.

Investors demand an extra 1.9 percentage points to buy 10-year Illinois bonds instead of benchmark munis, the most since 2013, according to data compiled by Bloomberg.

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