How did Illinois get to a four-month state budget impasse?

State lawmakers came to Springfield on Tuesday for the fall veto session. They saw. They did little. They went home.

They will not meet again for another two and a half weeks.

When lawmakers next convene Nov. 10, Illinois will have gone more than four months without a budget in place since the July 1 start of the state fiscal year. Republican Gov. Bruce Rauner and the Democratic-controlled General Assembly remain deadlocked.

While much of state government still is operating because of court orders and consent decrees, social service agencies that help the state’s most needy people aren’t getting paid. And while most of the state’s bills are being paid, the lack of a state budget means the fix when a budget finally is approved could hurt state residents more, to say nothing of what the crisis will do to state government’s already dismal financial position.

Last week, both Fitch Ratings and Moody’s Investors Service again downgraded Illinois’ bond rating. The state’s rating now hovers several notches above junk-bond status.

A compromise between Rauner and House Speaker Michael Madigan and Senate President John Cullerton appears nowhere in sight. The following explains how we got here, why it matters and how the hurt that will come with approving a budget will get worse as time continues to pass.

Q: How did we get here?

A: House and Senate Democrats in May approved a 2016 budget that spent about $4 billion more than the $33 billion in revenue the state was expected to collect. Rauner vetoed the budget on constitutional grounds, citing the state Constitution’s balanced budget requirement that state lawmakers have long ignored. He approved only the education budget to ensure funding for public schools.

He also rejected attempts at temporary stopgap budgets until a full-year deal is reached, alleging that one-month budgets still will put the state on the path to deficit spending.

Rauner developed his own budget plan, which imploded because it relied on savings from pension reform the Illinois Supreme Court ruled was unconstitutional.

Q: Why is this happening?

A: The main reason is the conflict between Rauner and Democratic leaders who control both houses with three-fifths supermajorities.

Democratic leaders want to raise taxes to balance the budget and talk changes later. Rauner, elected last year on a campaign to revitalize Illinois’ economy and fix its deep fiscal woes, has said he will only entertain a tax increase if it is coupled with significant reforms.

Q: What does Rauner want?

A: Rauner’s changes take aim at the economy, the state’s taxpayer and business climate, and reforming the state’s infamous political reputation.

He wants lawmakers to put constitutional amendments on the 2016 ballot that would impose term limits on state lawmakers, and take the task of drawing legislative boundaries after every U.S. Census away from them. Rauner also wants a two-year freeze imposed on property taxes statewide, and reform to workers compensation and tort laws.

He has, for now, set aside other proposed changes Democratic lawmakers find more odious, such as encouraging local governments to opt out of collective bargaining with public employee unions by allowing them via voter referendum to set up “right-to-work” zones.

Q: Why are payments still going out despite the lack of a budget?

A: Court rulings and consent decrees have mandated Illinois continue to fund a number of services, such as Medicaid and the Department of Children and Family Services, and have mandated the state must continue to pay its employees. On top of this, several expenses such as servicing the state’s debts and paying tax refunds automatically continue, with or without a budget in place.

Comptroller Leslie Munger said earlier this month that about 90 percent of the state’s bills still are being paid, although the state still is struggling as it has over many years with a growing backlog of unpaid bills.

Q: If we’re spending without a budget, we’re digging the hole even deeper, right?

A: Correct. But it’s worse than it sounds. Not only is the state disbursing money it does not have without a budget, it also is doing so at last fiscal year’s spending levels when the state income tax for individuals was 5 percent. The temporary and unpopular 67 percent tax hike decreased significantly to 3.75 percent on Jan. 1.

An estimate commissioned by Senate Democrats pegs the ultimate deficit at an extra $5 billion for 2016. And the deeper that hole gets, the harder the final fix will be in the form of tax increases and service cuts.

Q: What is this stalemate doing to that bill backlog?

A: Increasing it. The backlog, just less than $7 billion now, is expected to grow to $8.5 billion by the end of 2015 if a budget is not approved.

Q: Who isn’t getting paid?

A: Social service agencies already strained to the limit over the years by the state’s long delays in paying its bills are hurting even more. The United Way of Illinois released a survey concluding more than 75 percent of social service agencies have cut services, and almost one in three anticipate running out of money within a month.

Local government budgets are feeling a pinch because the state cannot disburse local shares of gambling and motor fuel tax revenue. Lottery winners are suing because the state is not paying out winnings of more that $600. A number of vendors are stopping doing business with state government, and Secretary of State Jesse White has warned services could end up getting shut off completely – including power to the Capitol – if the state cannot keep up with its payments.

Citing the protracted impasse, Rauner has used an obscure rule-making procedure to save money by cutting spending and setting up stricter rules for eligibility for a number of services for low-income children, the elderly and the disabled. He also closed the Illinois State Museum and four satellite facilities until further notice.

Q: Couldn’t the Democratic legislature just override Rauner and pass a budget if it has veto-proof majorities?

A: It’s not that simple. While the more liberal Senate could most likely get the three-fifths supermajority needed, Madigan controls an exact 71-seat supermajority with no votes to spare. Several Democrats, most notably local state Rep. Jack Franks of Marengo, will not vote for increasing the state income tax, and the odds of Madigan lining up any Republicans to vote with him are slim to none.

A recent example played out earlier when the House could not muster the 71 votes needed to restore the social service cuts enacted by Rauner.

Q: Why is Rauner playing hardball? Is Illinois’ financial picture that bad?

A: Yes.

Illinois had the worst credit rating of all 50 states long before its most recent downgrade last week. It also has the worst unfunded public pension liability at $111 billion, not counting insurance and health care costs for retirees in the five state-run retirement systems.

The state over the past several years has ranked at or near the top for outmigration to other states.