Credit-rating drops the latest carnage of Illinois budget impasse

SPRINGFIELD — With Illinois approaching a third straight year without a state budget, there were fresh signs Thursday that the effects of the unprecedented stalemate will worsen for residents statewide.

State government’s credit ratings took two major hits from Wall Street institutions just hours after lawmakers adjourned their regular session for the third year without a budget deal for the fiscal year beginning July 1. Those hits mean taxpayers likely will incur higher interest costs whenever the cash-strapped state might borrow more money.

The Illinois comptroller, who controls the state’s checkbook, declared the crisis “unconscionable.” Social service agencies — who’ve estimate over 1 million people including seniors and domestic abuse victims have felt the pain — took stock.

Here’s a look at some of the fallout of the ongoing budget fight between Republican Gov. Bruce Rauner and Democrats controlling the Legislature:

FINANCIAL SNAPSHOT

Illinois closes out the current fiscal year nearly $6 billion in the red, a deficit that continues to grow. Spending mandated by court orders and state statute continues at levels set by the last budget lawmakers approved in 2014, when revenues were higher. A 2011 temporary income tax increase has since rolled back.

Adding to the mess is a ballooning backlog of unpaid bills to state contractors and vendors that’s reached about $14.5 billion and roughly $130 billion in unfunded pension liabilities.

Illinois, which already has the worst credit rating of any U.S. state, was downgraded another step Thursday by S&P Global Ratings to one notch above “junk” status. The rating agency noted a “severe deterioration” of Illinois’ fiscal condition and “unrelenting political brinkmanship.”

Shortly thereafter, Moody’s investor’s service followed suit, lowering its rating for Illinois’ debt to one notch above “junk.”

EDUCATION

Universities and colleges say the standoff threatens enrollment with numerous cutbacks and credit downgrades. This week, Northeastern Illinois University, which has already instituted temporary shutdowns and furloughed employees, announced it’d eliminate 180 full-time jobs.

State-funded grants that help some 130,000 low-income students pay tuition are also in limbo. A stopgap budget covered some grants until January. Some schools have been able to front the money in hopes that they’ll be reimbursed, but others can’t.

Elementary and high schools have also made reductions, offering fewer special education services and cancelling some buses. Chicago Public Schools announced in early May that it’ll have to borrow $389 million to get through the rest of the year. The nation’s second-largest district had banked on $215 million in pension relief from Springfield, which Rauner vetoed late last year.

SOCIAL SERVICES

Organizations that provide state social services are waiting six months or more to get paid. Many have drastically scaled back programs or let employees go.

In the stopgap budget, funding for domestic violence shelters was left out completely and weren’t even told until December, forcing several to cut staff and create waiting lists. The Women’s Center, a shelter offering services to domestic violence and sexual assault victims in eight southern Illinois counties, has said that without an infusion of state funds in the coming months they’ll have to close their doors.

Dozens of other organizations have stepped up their legal battle to force the state to honor contracts during the stalemate. In early May, attorneys for the Pay Now Illinois coalition presented arguments before the Illinois Appellate Court, saying there’s been a “breakdown of constitutional government.”

SMALL BUSINESS

Centers aimed at helping small businesses thrive in Illinois have also had a difficult time, with closures during the impasse.

Illinois Small Business Development Centers give free one-on-one business advice and help small companies with financing, marketing plans and specialized technology services, among other things. Partially funded by federal money, they’re often set up at universities. Proponents credit them with helping create jobs.

The number of centers has been in flux due, partly due budgetary pressures. Last year the number dipped from 35 to 20 last year, the Department of Commerce and Economic Opportunity said Thursday. This year, the state is helping fund 27, which includes new centers to replace ones that previously closed.

Contributing: Associated Press writer John O’Connor