Illinois Is in a $6 Billion Budget Hole and Flirting With Junk

Two years ago, Illinois’s budget impasse meant that the state’s lottery winners had to wait for months to get their winnings. Now, with $15 billion in unpaid bills, Illinois is on the brink of being unable to even sell Powerball tickets. For the third year in a row, the state is poised to begin its fiscal year on July 1 with no state budget and billions of dollars in the red. If that happens, S&P Global Ratings says Illinois will probably lose its ­investment-grade status and become the first U.S. state on record to have its general obligation debt rated as junk. Illinois is already the worst-rated state at BBB-, S&P’s lowest investment-grade rating. The state owes at least $800 million in interest and late fees on its unpaid bills. Any further downgrade will make it more expensive the next time the state needs to sell bonds.

Unlike Detroit or, say, Lehman Brothers, states can’t file for bankruptcy, so Illinois has no choice but to dig its way out of a $6 billion budget hole. This is not a new problem. While many states are required by their constitutions to have balanced budgets, Illinois has been running deficits since 2002. Things have gotten worse since 2015, when tax hikes expired. That year, Republican Bruce Rauner became governor and began battling with Democrats, who control the Illinois legislature.