One week ago, Illinois state comptroller, Susana Mendoza, gave a detailed explanation in her letter to Gov. Rauner and members of the state legislature – two parties that have been locked in a nearly three year long confrontation, preventing them from agreeing on a state budget – explaining why Illinois was on the verge of total collapse.
“The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state’s most in-need citizens,” Mendoza wrote. “We must put our fiscal house in order. It is already too late. Action is needed now.” And unveiling the most dire language yet, in her letter Mendoza said “we are now reaching a new phase of crisis” perhaps in an attempt to prompt the Democrats and Republicans to sit down and come up with a compromise
Since then, despite all parties’ “best efforts” (actually, there have been no real efforts whatsoever) to reach a compromise after two years of failures, nothing has really changed, with the only difference that Illinois is now just three days away from financial armageddon, because come July 1 and the state has no budget for its third fiscal year, a downgrade of the state to junk – for the first time in US history – is assured, unleashing interest rate hell for future debt issues, and ultimately, bankruptcy.
Those are not our words, but those of Ted Dabrowski, vice president of policy at the Illinois Policy Institute, who said that the Illinois budget crisis has become so dire that the state is in danger of entering a financial “death spiral,” as a result of the imminent downgrade to “junk” status. Doing so would increase the cost of borrowing, worsening the deficit and making it even harder for taxpayers to dig out of the hole.
“We’re in a death spiral—Illinois has the worst pension crisis in the nation and needs the boldest reforms,” Ted Dabrowski, Illinois Policy Institute’s vice president of policy, told Fox News. “There is no doubt that junk bond rating is on its way.”…..more here