First Maine, then Connecticut, and finally late on Friday, confirming the worst case outcome many had expected, Illinois entered its third straight fiscal year without a budget as Republican Governor Bruce Rauner and Democratic lawmakers failed to agree on how to compromise over the government’s chronic deficits, pushing it closer toward becoming the first junk-rated U.S. state.
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.
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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.”
Meanwhile, the state remains without a spending plan, its tax receipts and outlays mostly on “autopilot”, leaving it with a record $15 billion of unpaid bills as it spent over $6 billion more than it brought in over the past year, and with $800 million in interest on the unpaid bills alone. The impasse has devastated social-service providers, shuttering services for the homeless, disabled and poor. The lack of state aid has wrecked havoc on universities, putting their accreditation at risk.
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.
While it is no secret that as part of its collapse into the financial abyss, Illinois has accumulated $15 billion in unpaid bills, the state’s Medicaid recipients had had enough, and went to court asking a judge to order the state to speed up its payments. On Friday, the court ruled in their favor. The problem, of course, is that Illinois can no more afford to pay the outstanding Medicaid bills, than it can to pay any of its $14,711,351,943.90 in overdue bills as of June 30.
The backlog of unpaid claims the state owes to managed-care companies directly, as well as to the doctors, hospitals, clinics and other organizations “is crippling these providers and thereby dramatically reducing the Medicaid recipients’ access to health care,” Lefkow said in her ruling (attached below).
* * *
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.”
“As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Mendoza said in a statement. “A comprehensive budget plan must be passed immediately.” Realizing where all this is headed, she said that payments to bond holders won’t be interrupted (more below).
Illinois Comptroller Susana Mendoza
Friday night’s legal decision followed a previously discussed ruling, when on June 7, Judge Lefkow ordered lawyers for the state to negotiate with Medicaid recipients to come up with more money, but she stopped short of dictating how much more the state should pay each month, or when. That decision sent Illinois General Obligation bond soaring.
Earlier this week, the parties again went before the judge to say they were at an impasse, with lawyers for Medicaid recipients asking for more than $1 billion a month to cover past and ongoing costs.
Lawyers for Illinois countered that they could only come up with approximately $75 million more a month, which would translate to $150 million with federal matching dollars. Although the state is way behind, state officials said in court filings that they have been making more than $1 billion in Medicaid related payments each month in 2017, “including payments to safety net hospitals, MCOs, and other providers.”
While the state was livid over the decision, plaintiffs were delighted. Tom Yates, one of the lawyers who represented the Medicaid recipients. said the judge’s ruling is a “fair result” that will help them have access to care. “Medicaid is an incredibly important program for 25 percent of the state’s population,” Yates said. It remains unclear, however, where Illinois would find the required funds.
In her ruling, Lefkow said the state must pay the $2 billion toward its past obligations beginning July 1 and ending June 30, 2018. She ordered the state to file monthly reports showing that it’s making the payments consistent with the ruling. The Judge said she considered submissions by managed care organizations, including The Meridian MCO and Aetna Better Health Inc., in reaching her decision. Meridian is owed $540 million and Aetna is owed $700 million, the judge said. In addition, she considered submissions from doctors and clinics.
Adding insult to crippling financial injury, the judge also ordered the state to file monthly reports showing that they are making the payments consistent with the ruling.
* * *
Meanwhile, despite the recent fireworks, things in Illinois remain on autopilot as the state needs a new budget to change financial direction.
Without a budget, Bloomberg writes, the state has continued to spend more than it brings in. That’s forced it to cover “core priority” payments first, including payroll, debt service and pensions that total about $1.85 billion a month. While those bills include some Medicaid-covered payments like health services for children and adults, the state has said there aren’t enough funds to include general payments to managed-care organizations as a top priority.
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.
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.
For now, despite the Illinois deadline coming and going, the political standoff shows no signs of ending.
And now the market is set to react: investors have already punished Illinois for its fiscal woes. Yields on the state’s 10-year bonds have soared to 4.8%, 2.8% points higher than benchmark debt. That’s the highest yield of all 22 states that Bloomberg tracks.
Summarizing best the chaos in Illinois was John Humphrey, the head of credit research for Gurtin Municipal Bond Management, which oversees about $10.1 billion of state and local debt who said that “recognizing that they’re continuing to work through the weekend, it doesn’t look good to adjourn halfway through your last day.”
* * *
The case is Memisovski v. Wright, 92-cv-01982, U.S. District Court, Northern District of Illinois. Full court ruling below:
The taxpayer is an unending source of money to feed the beast. This will be interesting how Illinois goes down – will the legislature attack the real problems with new laws for effective change or will they go after the taxpayer.
So it’s looking like the first State to actually go belly up will be led there by a Republican.
FWIW, a Republican from Illinois also started the Civil War.
Are you unaware of Madigan and how long he has led the House?
Madigan isn’t Governor, Rauner is.
I pulled this off the Wal Mart freaks thread.
Huge amounts of that medicaid money Illinois owes goes to treat people like this because they have managed to get themselves on disability.
How disabled does she look?
Remember this the next time someone says we aren’t doing enough for the poor and disabled.
And btw,I could just as easily put this on the thread that deals w/the IT protesters in front of the White House-what employer in his right mind wants to hire an american who might go on disability?
You are making an assumption that she was disabled.
Maybe she wasn’t disabled and got that ‘vehicle’ in order to retrieve something on the top shelf. And if so, her stupidity isn’t the subject of your comment.
“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.” ” – Good. Maybe now these asshats will get to eat some of their own cooking for a change. Maybe this judge had enough, and decided that if these assholes were going to pull their usual game of making all of the little people suffer (homeless, old people etc.) to force the productive people to just accept another tax increase, then they should feel some of their own pain.
The bottom line is that there is no more money left, and they have run to the end of a fully predictable math problem. It is good to see that now the pain is coming around to the people that caused it. I would go further and not only cut these peoples pay, I would say CUT THEM OFF COMPLETELY. Sorry, no more pay….go home.
Shut it all down, and throw those bums all out – without a dime of pay. At some point, someone is going to grow a brain, and figure out, through necessity that you cannot keep tapping the taxpayer for a continuing stream of revenue without providing some value and liberty. Gee, taxation with representation – what a novel concept.
“Medicaid is an incredibly important program for 25 percent of the state’s population,”
25% of the population? There’s your problem you dumbfucks!
“Burn baby burn…..It’s a disco inferno”………..overdue IMO.
Stooopid fucks. I wonder how many illiterate niggers are in Illinois state government.
When the public employee’s pensions cannot be paid tptb will have to decide if they are going to make welfare payments to prevent riots or pay the enforcers to suppress the riots.
This is the stage before they can pay neither and tptb run and hide in their bunkers.
@Roy
You hit the nail right on the head. It really will be interesting to see which direction they go as the bow of the ship sinks below the waves. My guess is that they will first cut payments to anyone too sick or disabled to riot. Next, they’ll cut funds to the retirees. Following that, they will try to cut from both the rioters and the enforcers but that will backfire horribly. They WILL have the riots but will not be able to muster any kind of response short of using federal troops.
Go long popcorn.
If Medicade is for those so poor they are without funds how can they afford high powered attorneys to go into court for them? My bet is the last to be cut will be the able bodied disabled whose health is up to rioting. The enforcers will see pay cuts, freezes, unpaid leave, overtime hours without overtime pay and other slight of hand before one cent is deducted from the EBT card or other welfare payments. Of course Cops and their families vote but not in the strategic numbers and locations that the oppressed are able to muster. Rahm “Godfather” for Governor today, President with Kamala Harris in 2020.
Don’t tell me they’ve run out of other people’s money?
Crap, the FSA maggots killed their liberal host and will want to come back to Dixie! Sorry bitches, we already have the “Black Belt” (used to be the Bible Belt) and more FSA pigs than tits so pick some other liberal “Blue” states to infest and destroy! The last time Yankees invaded us we fought but we weren’t nasty enough (ref Sherman).
Oh gee, who would have thought that the diverse stealing jobs and making less would compound the losses of jobs sent overseas to create Total Economic Collapse? Me. I could have told you years ago. Some say the Federal Reserve can just print money and send it to these goobermint fools. Wrong. They did three printing runs of Quantitative Easing and the Economy is STILL DEAD.
Perot was right you know. That crapola about “service economy” and information age was just smoke and mirrors. You cannot have a society like ours without production. The Bush League at the Lincoln Log Cabin hastened the collapse by opening the borders. The failed states have all dumped their trash here.
There is no RESET. There can be no recovery. Race is not a social construct. Society is a Racial Construct. Its all race. Always has been. Those diseased mudholes didn’t get that way from bad policies. Water seeks its own level. Western Civilization only comes in White. Don’t point to the Orient for deflection. Except Japan, the whole area was a massive case of arrested development. Japan left the stagnant period due to American Gunboats with Admiral Perry. China was way behind until we shipped factories and jobs from here.
White Nationalism is America. Without it, you cannot have America or Make It Great Again. The Lincoln Log Cabin have tried this bullshit melting pot, but all they have is pissed off voters that have had enough.
That’s a whole lot of fact packed in a short, simple post, Dr Doom. Well done
Sort of off-topic but related.
I had to move my mother into assisted living back in February. That was quite an eyeopener as I called about 40 facilities beginning 12-29-16. The first question out of all of them was “Is she a medicaid patient?”. When I responded yes they said they had no beds……every one of them said that. I was aware of these kinds of things from reading TBP and other sources. When I was nearly at my wits end I finally met a woman who told me about the unwritten rules and that made things much easier.
Basically at rates currently being paid by medicaid (in Idaho at least), medicaid providers lose money. The don’t make a little money or even break even, they lose money. Add to that the situation in IL and not only do they lose money but the state delays payment so these medicaid providers end up financing or subsidizing the care they are providing for months.
For my mother I had to strike a deal with the facility to pay the difference between what he bills and what medicaid pays. I was lucky too because most places willing to make a deal wanted TWO YEARS worth of payments up front and in cash. The guy I made a deal with lets me pay monthly.
In addition to this the Idaho Dept. of Health & Welfare (IDHW) decided that upon my fathers death my mother automatically inherited ALL of his assets. This wasn’t true because they established a Living Trust and my father’s Pour Over Will established a Testamentary Special Needs Trust upon his death which is a Federally approved Trust that protects assets from govt seizure while keeping people legally qualified for govt welfare services. Think about that for a minute. The govt passed a provision that prevents seizure of outside assets while keeping people eligible for welfare.
There are some decent reasons for this but a reasonable law should state that once the the recipient of the benefits dies, the assets in the Trust should go to the state but no. They wrote the law so that once the FSA member dies, any remaining assets (in our case) filter down to the surviving children or whoever the Will names.
At the moment I’m locked in a legal proceeding where IDHW is trying to deny my mother medicaid benefits based on the assets my father left behind. Their lame “he died so she automatically inherits” argument was slapped down by the Idaho Attorney General and they were ordered to restore her benefits but have not done so. In my dealings with IDHW one woman there seems to have taken a personal interest in denying my mother benefits on any grounds she can dream up.
I’ve been told that Idaho is one of the most aggressive states in going after assets. I’m told this Testamentary Special Needs Trust is relatively new and Idaho has never challenged one. Our case may end up being a test case.
My point in all of this is that EVERYONE should establish a Living Trust that has a Special Needs Trust provision as this will give maximum protection to any assets involved in addition to about fifty other very handy things like Powers of Attorney and avoidance of probate which will save you two or three times what you paid to establish the Trust in the first place. I can’t tell you how thankful I am that I finally talked dad into setting up a Trust and he did it in the nick of time.
My other point is that if you have a relative that may need Medicaid paid benefits such as assisted living or skilled nursing, getting them in now as opposed to some time in the future is probably a good idea. I expect more and more providers to deny medicaid patients entirely as the govt grinds down into insolvency. The end of welfare services is underway and only going to get worse. I don’t even want to think about how hard it might be to find a medicaid bed in the Land of Lincoln right now.
Am sending you my best wishes as you navigate the end of life estate issues with your mother. It is a game no one wins thanks to government involvement and man’s inhumanity to man when money is on the table.
Thanks Maggie. As pointed out above though, thanks to the Special Needs Trust my brothers and I will receive any assets left behind after my mothers dies. That’s ludicrous in my book but no more ludicrous than a welfare agency paying millions in benefits to a person who never worked enough hours in her life to qualify for social security. To top it off she gets a social security check each month too!
Take full advantage of laws to protect all possible assets by setting up a Trust. My father paid $2100 to establish the Trust and the probate fees alone to settle his estate without the Trust would have been much more than that. Without the Trust the state would already have their claws in half a million in assets but those are now protected. The Trust puts all kinds of tools on my side that make managing their affairs so much easier than it would be without it. It also gives those who establish Trusts much more control over assets during their life and after. Trusts are how the other half lives. If you can’t beat ’em, join ’em!
Sorry about your troubles IS especially in light of losing your dad.
Agree 100% about the trust issue. We set up a Nevada Family Limited Partnership. It is a nice vehicle to control everything yet own nothing. Hope you can get the bureaucRAT to relent and find someone else to hassle
Thanks NF. The troubles aren’t bad. I’m more irritated at how it’s disrupted my intentionally simple life. I like to take care of things pronto and nothing with the govt or lawyers ever happens in a timely manner so it feels like I have a dozen issues out there twisting in the wind.
Our attorney and the Idaho Attorney General are currently slapping the bureaucRAT around which brings a smile to my face. I’m not getting too smug or happy about it yet. Once my mother has been out of her home for six months with no intention to return, IDHW sicks their Asset Recovery Team on us. That will begin on 8-21-17.
The most amazing thing is that the Trust attorney fights these battles as part of his optional, ongoing Trust maintenance fee of about $500/yr plus actual court fees.
To be honest it’s been a bigger pain in the ass getting the mountain of VALIC paperwork done to move assets from my father’s state into the Special Needs Trust. My advice is to never, ever do business with VALIC due to the mind boggling amounts of paperwork involved. I started working on this on 12-29-17 and just received the “final” documents to review and sign yesterday.
All states, in their Constitutions, have as a condition of statehood a REQUIREMENT to have balanced budgets. How and Who F’ed this up so badly?
An interesting short article about that.
http://www.ncsl.org/research/fiscal-policy/state-balanced-budget-requirements.aspx
And one that addresses how it is overlooked in practice.
http://www.governing.com/columns/smart-mgmt/do-states-really-balance-their-budgets.html
My “question” was rhetorical. I understand who and how F’ed it up. However, the intent and meaning at Founding is fully apparent … STATES WEREN’T ALLOWED TO BORROW MONEY.
should the congress suspend or rescind their statehood?
is that legal?
is the political will present for them to do it?
imho,they have to hang tough to make the other weak states clean up their act,what do you think?
Yes, for sure. AND, in this instance, it would be appropriate as a matter of Constitutional Law for the Fed Gov to enforce balanced budgets on the states in violation. This will never happen I understand, just saying.
Instead of issues of import like this, the Fed Gov is worried about whether bakers can refuse to bake cakes for gay weddings.
In the second article, it leaves the appearance that problem is a shortfall in revenues. I don’t think that’s the main explanation … as they are operating at this time, states are somewhat close to a balanced budget (at least within ‘argument’ range) for their month-to-month operating costs. Where they all are off-the-rails is with borrowing for capital expenses, buildings, infrastructure, etc. These have been given excepted status, but there is no provision for this shenanigans in a strict reading of the statehood requirements.
$800 million is over $100 per tax payer. Just in interest! Who the fuck is gonna pay that? It’s an absolute outrage. The goddam liberals should be jailed for fraud.
Hopefully Illinois can be carved up between MI,WI MO,IO,ID and any others that border it. You could ring fence Chicago and dump all the blm, antifa, and all rabid leftys. They should not be allowed to immigrate to any red state as they will destroy it as well. They are like a plague of locust, They have almost ruined Colorado and Nevada, Arizona is not far behind.
It constantly amazes me when people come here and want to make it just like the failed state they fled from.
dunt theys gotsa cred caud?
Illinois Taxoholics Wear Down Rauner: Massive Tax Hikes In The Works
Authored by Mike Shedlock via MishTalk.com,
Total capitulation by Governor Bruce Rauner is in the works. The taxoholics wore him down.
In the emergency session, Rauner has agreed to hike the personal income tax rate to 4.95% from the current 3.75%. The corporate income tax rate will rise to 7% from the current 5.25% rate.
For what? Nothing. Reforms are non-existent.
Another Deadline Come and Gone
Illinois failed to approve a budget today and thus heads into its third fiscal year without one.
A vote has been scheduled for Sunday.
I do not expect your opinion will matter, but in the slim chance I am wrong, Please Email Your Representative voicing displeasure of the tax hike.
The preceding link will find your rep based on your address.
Rule of Nothing
A zombified Rauner has capitulated in every way but the final signing.
Tax hikes have been agreed to with no reforms in return.
The Rule of Nothing is clearly in play.
Rule of Nothing
In any given political situation, the best outcome one can reasonably expect generally happens when politicians do nothing.
Implied corollary#1: When politicians attempt to fix any problem, they are highly likely to make matters worse.
Corollary #2: Politicians almost never do nothing. It’s why we have a messed up healthcare system, education system, public pension system, etc..
Taxoholics Win Again
Chicago schools will not get fixed. The hikes will not shore up pension plans.
Within one month of tax hikes, public unions will ask for more money. And people will leave the state. So will corporations.
Rauner pledged 44 reforms. He is 0-44 on his pledges.
The property tax freeze currently under debate has so many holes it is as useful as a bucket with no bottom.
Trading tax hikes for nothing is a horrible deal. Nonetheless, the taxohalics won again.
More business flight and human capital flight is the guaranteed outcome. Doing nothing at all would have been a far better outcome.
I think Mish put that out early Friday, so it already dated by events.