SeekerOfTruth – June 30 came and went and the Illinois legislature did nothing. So the courts have stepped in now. Bloodbath coming. Fun to watch if any news outlets would report on the story. The bloodbath of decades of liberal policies and corruption.
“From Horrific To Catastrophic”: Court Ruling Sends Illinois Into Financial Abyss.
By the end of Friday – the last day of the fiscal year – Illinois legislators failed to enact a budget, and while negotiations continued amid some glimmers of hope and lawmakers planned to meet over the weekend, the failure marked a continuation of the historic impasse that’s left Illinois without a full-year budget since mid-2015, and which, recall, S&P warned one month ago will likely result in a humiliating and unprecedented downgrade of the 5th most populous US state to junk status.
Then came the begging.
According to Bloomberg, on Friday Illinois House Speaker Michael Madigan, a Democrat who controls much of the legislative agenda, pleaded with rating companies to “temporarily withhold judgment” as lawmakers negotiate. “Much work remains to be done,” the Democrat said on the floor of the House Friday, before the chamber adjourned for the day. “We’ll get the job done.”
… However, in a “shocking” development, just hours remaining before the midnight deadline to pass the Illinois budget, and Illinois’ imminent loss of its investment grade rating, federal judge Joan Lefkow in Chicago ordered Illinois to come up with hundreds of millions of dollars it owes in Medicaid payments that state officials say the government doesn’t have, the Chicago Tribune reported.
Judge Lefkow ordered the state to make $586 million in monthly payments (from the current $160 million) as well as another $2 billion toward a $3 billion backlog of payments – a $167 million increase in monthly outlays – the state owes to managed care organizations that process payments to providers.
Friday’s court ruling, which meant that the near-insolvent state must pay an additional $593 million per month, may have been the straw that finally broke the Illinois camel’s back.
“Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Comptroller Susana Mendoza, a Democrat, said in an emailed statement after the ruling.
As a result of the court decision, “payments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments — in some combination — will likely have to be cut.”
Also, without a budget that includes borrowing to pay down the bill backlog, Illinois by August will run out of money for key expenses for the first time since the stalemate began, according to Comptroller Mendoza. That means school funding, state payroll, and pension payments could be affected, she said. There won’t be enough money for these mandated or court-ordered payments.
she said that payments to bond holders won’t be interrupted (more below).
As noted above, Mendoza said that this won’t jeopardize debt-service payments, however she probably should have added “for now.” For now, Illinois hasn’t missed any bond payments and state law requires it to make monthly deposits to its debt-service funds.
===> Missed bond payments and the state goes into default. If bonds are moved to junk status many bond funds will have to sell the bonds because many mutual funds do not allow any or much junk rated bonds in the fund.
PS. This is the real number 1 news story in the country right now. And almost nobody even conservative sites are reporting on it. Muh Russia narrative needs to be replaced with Illinois policy and legislative failures as the number 1 story all over in the country. Illinois is the not so shiny example of the policies that the MSM so longs for and preaches as good every day.
Nothing will likely be done until this does become a national story and people see just how stupid Illinois people are. Right now they can save some face but not if this becomes headlines all over. This is no longer a kick the can further down the road situation. They only have until the end of summer until the can falls into the abyss. Then schools will not open and more importantly Teachers Union people will not be paid.
Bond payments missed and the state instantly goes into debt default and that activates financial legal processes. (link)