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Illinois Will Collapse in 3…2….1…..

Illinois Will Collapse in 3…2….1…..

Judge rules Illinois must start paying $293 million toward Medicaid bills.

https://www.youtube.com/watch?v=LEDGozKBZEA

I’ve been blogging about the mess that is my home state of Illinois and just as I thought…it managed to find a way to make things worse.

Illinois legislators cannot agree on a budget. It closed the “fiscal year $6 billion in the red.” The state also has “unpaid bills to state contractors and vendors that’s reached about $14.5 billion and roughly $130 billion in unfunded pension liabilities.” S&P downgraded the state’s credit rating to a step above junk. Then the state’s GOP leader resigned on Friday.

A judge has ordered Illinois to pay $293 million towards Medicaid bills just as the state entered its THIRD FISCAL YEAR without a budget.

Before I continue, I have to get this off my chest. Illinois can start off by slashing the budget…by A LOT. That would help its situation.

via GIPHY

Medicaid

U.S. District Judge Joan Lefkow announced on Friday that Illinois must “start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year.”

The Chicago Tribune reported:

U.S. District Judge Joan Lefkow’s ruling came after lawyers representing Medicaid patients and attorneys for the state were unable to agree on a plan to deal with bills and pay down a $3 billion backlog owed to health care providers.

The ruling requires the state to start promptly paying all new Medicaid bills, which is estimated at about $586 million per month, and to pay down $2 billion of its bill backlog in payments spread out over the course of the coming fiscal year. The federal government pays half of those costs, so the bottom line for the state will be $293 million per month and $1 billion in backlogged bill payments over the next year.

Illinois Comptroller Susana Mendoza admitted this ruling will force her “to cut payments to the state’s pension funds, state payroll or payments to local governments.”

Remember, the state has $130 billion in unpaid bills towards pension liabilities. The patients’ attorney David Chizewer lashed out at Illinois:

“What they secretly want is for the parent to step in and stop the behavior,” Chizewer said. “I think the state is asking the court to step in.”

In early June, Lefkow stated that “it was reasonable for Medicaid providers to expect their bills to be paid, if not in full, then enough to maintain patients’ access to care.” When she made that ruling, the bills added up to $2 billion. By the end of the month? $3 billion.

Illinois lawyers acknowledged the backlog, but also insisted that “there wasn’t evidence to show that Medicaid patients had been denied care as a result.”

Um, okay. So we should wait until the providers don’t have the funds to treat patients? That makes sense! At that mention, Lefkow also demanded something else. The Tribune continued:

Lefkow said it was “obvious” the state was failing to comply with her court order to pay the Medicaid bills. But she wanted evidence of harm that’s been caused to Medicaid patients as a result. She ordered the lawyers for the patients to submit affidavits documenting the damage.

Lefkow also criticized Illinois’s priorities:

Lefkow said she was bothered that “other people who are not as needy as these people are getting 100 percent” payment of their bills. Lefkow said she wasn’t in favor of depriving workers of their salaries or skipping pension payments, but said the state “has a real problem explaining” how some people are being paid while others are not.

No Budget

As I mentioned above, Illinois has entered its third fiscal year without a budget on Friday.

Democrat House Speaker Michael Madigan promised to hold a vote “on a revenue package that is modeled on the bill supported by the governor, and House and Senate Republicans.” However, House Republican Leader James Durkin stated that “he had made no deals.” From NBC Chicago:

“There is no agreement on a comprehensive budget package that includes reforms and revenue,” Durkin said in a statement. “This impasse can only be resolved in a negotiated manner. It is our hope that Democrats will remain at the negotiating table.”

But if the House passes this bill, nothing will happen because the senate “adjourned Saturday afternoon” and will not return until Monday.

Of course fingers have pointed to Republican Governor Bruce Rauner, who has said he does not want tax hikes and wants a “budget on a series of his policy changes that he viewed as pro-business.” Democrats want more revenue and said that Rauner’s vision is “anti-union and anti-middle class.”

Or maybe the Democrats should listen to the voters, who voted for Rauner. He ran on these promises so it’s not shocking that Rauner wants to slash the budget and not raise taxes. But I digress.

The legislatures have said they’re “optimistic,” but in reality they are about $1.5 billion apart. Politico reported that “$800 million in recommended cuts by Republicans.”

Ratings Collapse

Even before this year Illinois held an awful credit rating. On June 1, S&P downgraded the state “to triple-B minus from triple-B.” Yes, that is literally one step above JUNK. From The Financial Times:

S&P and Moody’s, the two biggest rating agencies, relegated the state’s $25bn of “general obligation” debt to the lowest possible investment grade at the start of June. They warned that they would push it into non-investment grade territory — popularly called “junk” — if the legislature failed to pass a budget for a third year running.

“The rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations,” Gabriel Petek, an S&P analyst, said in a statement at the time. “The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.”

If Illinois reaches junk status, it could affect the states around it:

“Even if Illinois legislators manage to agree on a new budget and stave off the threat of a credit rating downgrade in the near-term, adverse demographics mean that the public finances in Illinois and many other rust-belt states will come under increasing pressure over the next decade,” Paul Ashworth of Capital Economics wrote in a report last week.

Knowing the severity of the situation, Madigan has fired off numerous “letters to bond houses asking them for extra time before downgrading the state’s bond rating.”

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Comments

Can they issue “IOU’s” as California did some years back?

Wondering if a Constitutional Amendment that called for the reversion to “territory” status for any state that filed bankruptcy until debts were paid off would get any traction?

Medicaid already pays health care providers substantially less than the going rates and more often than not makes them wait a year or more for payment. In some areas it is so bad that Medicaid recipients can’t access care except by going to an ER.

That Illinois would be leaving care providers unpaid is unconscionable.

    What you can expect to happen is that non-emergency medical care providers in Illinois will stop accepting Medicaid recipients.

    Emergency providers will continue to accept such patients because by law they are required to accept everyone regardless of their ability to pay, so you can also expect hospitals to start charging more for ER services, to cover the costs of patients who can’t pay (or for whom the state won’t pay). And like you said, Medicaid recipients, lacking other options, will also start using ERs as their primary source of medical care, which will cause hospitals to increase ER rates even more.

    This will trickle down to people covered by private health insurance, even good plans; the insurance providers will cover fewer and shorter ER visits — or substantially raise co-pays on ER visits — due to the increased cost-per-visit.

    And this doesn’t even say anything about the massive influx of non-emergency patients causing a reduction in the quality of ER care, as staffers have to rush to meet demand and get patients in and out as quickly as possible.

    It’s going to get ugly very quickly.

great unknown | July 2, 2017 at 5:20 pm

“Adverse demographics”. What a pithy and precise label for the welfare havens in the relatively large blue cities, the selling out to the unions, and the productive elements of society leaving for greener pastures.

It’s a good thing Illinois had such a large head start. Otherwise Connecticut might have beaten it to junk-bond status.

    Milwaukee in reply to great unknown. | July 2, 2017 at 10:18 pm

    I’m sure Illinois, like most states, had a senate based on geographic boundaries, not population. The Warren Court destroyed that. Although how that could be unconstitutional, when that is how the United States Constitution is, is beyond me. Making the senate population based gives too much power to Chicago. Candidates have won statewide election by carrying 6 counties, and lose the rest, and carry the state. When they go back to being a territory, perhaps it could be diced up. Make a new state of Chicago and several of those counties. Then the rest of the state has to deal with Rockford and East St. Louis, but not at the same scale.

      Milhouse in reply to Milwaukee. | July 3, 2017 at 4:46 am

      I’m sure Illinois, like most states, had a senate based on geographic boundaries, not population. The Warren Court destroyed that. Although how that could be unconstitutional, when that is how the United States Constitution is, is beyond me.

      If it’s really beyond you then you’re an idiot. More likely you understand it perfectly, and are lying about it being beyond you.

      The United States is a federation of sovereign states. It is a creation of the people of those states, and when those people agreed to create it they were entitled to agree on whichever terms appealed to them. The deal was based on equal representation for the people in one chamber, and equal representation for the states in the other. That deal was explicitly written into the constitution, therefore by definition it is constitutional.

      States, however, are not federations of districts. The state draws its districts however it likes, and having them with unequal populations is outright theft of the right of those in the more populated districts to equal representation. More than that, it violates the Republican Form of Government clause, and the Equal Protection clause. There is no way to justify it. Acres don’t vote; people do.

        PersonFromPorlock in reply to Milhouse. | July 3, 2017 at 8:39 am

        If you don’t ‘let the acres vote’, the people who live on those acres are effectively disenfranchised.

progs in charge.

They can certainly run healthcare.

Into the ground.

There will be no budget. This is a deliberate—and, evidently, successful—tactic to protect wild expenditures.

If there’s no budget, it’s impossible to cut anything out of it. Problem solved!

The Blue Governing Model meets reality.

A big part of the problem is having to pay for all the corrupt former governors still in prison.

The ones who helped put Illinois where it’s at now.

Where’s barrack to step in & save the day?

… anyway, soon it’ll be (physically) under water with global warming….

Illinois trying to out spend California? Not going to happen. First of all, Illinois does not have people enough to remotely to collect the amount of taxes California does. Too many politicians pocketing tax dollars they are not entitled to, but think they are. Like California, the state has a severe illegal immigration problem and is overwhelmed by gangs, especially in the Cook County area.

First stop all salary and pension payments to all current and retired legislators and top state executives.

Ah! The People’s Republic of Illinois!

This episode is why I fled the state of my birth many decades ago and do my utmost to avoid returning — ever.

I think it important to point out this is not that Illinois is or was moving towards the same fiscal cliff as California.

This is more of a version of what happened in Wisconsin. The defacto governor is and has been speaker of the house Michael Madigan. Bruce Rauner was elected to change that. Other Dems have tried to get along with Rauner, but Madigan is holding out.

The trouble will continue until either Rauner or Madigan is broken ( Rauner being voted out, or the Dems just kicking Madigan out ). At that point I think things will start to get better quickly.

Perhaps Illinois will heed a lesson from the past and offer free land and no taxes to those willing to settle in their state.

4th armored div | July 2, 2017 at 7:32 pm

can they sell off properties and resources as well as reduce retirement pensions ?

    Milwaukee in reply to 4th armored div. | July 2, 2017 at 9:52 pm

    Good luck touching the pensions.
    Illinois made it a constitutional amendment that pensions go up at compounded interest, and the courts wouldn’t let them go back and change it.
    Normal interest: Pension starts at $1000, 2% increase is $20, so now pension is $1020. Next increase 3%, or $30, so now pension $1020 + 30 or $1050.
    Compounded: Pension starts at $1000, 2% increase, now $1020. Next increase of 3% is 3% of $1020, or $30.60. Pension is now $1050.60. That compounding can make a significant difference over the lifetime of the pensioner.

4th armored div | July 2, 2017 at 7:37 pm

those people who can, will move out of state due to not wanting responsibility to pay impossibly high taxes and not being able to afford health care.

Subotai Bahadur | July 2, 2017 at 8:30 pm

It would be supported by those states that are part of America. Blue states, no way.

Illinois became America’s first junk state the exact moment it exported obama/jarrett to the rest of us.

Let go back to territory status, in bankruptcy, and pensioners can take their chances in court like other creditors. Those public employees had their chance at the trough when they were working. The day when public employees accepted lower wages for job security left with unionization. Most have been paid more in wages and benefits and job security than the private sector for decades.

Now watch the standard commie left Illinois Democrats follow the book of Marx and raise taxes with no reforms in sight. https://www.usnews.com/news/best-states/illinois/articles/2017-07-02/illinois-house-to-take-up-likely-5-billion-income-tax-bill

The day I watched Illinois recede in the rear view mirror for the last time was one of the better days in my life.

An incentive to overturn Obamacare and address progressive costs in the medical sector. Also education reform including classes in biology and health, and less sexual education and Planned Parenthood.

The question is: In what order is the State of Illinois legally required to pay their bills?

When income is $90 and expenses are $100, you can only write $90 worth of checks, so somebody’s getting the shaft.

The Feds go through this every time we have a budget showdown, so it seems to be fairly routine now, provided the treasurer follows the law. First, the bondholders get paid. Then… well, I’m a little fuzzy on what the law is there. Anybody?

srroelker1946 | July 3, 2017 at 8:04 am

Everyone with a brain knows it is one person who is holding the state hostage. All the high powered brains in this state can not figure a way around/through/over/legal Mr. M. They all can’t democrats! Whoever wrote/rewrote the state’s constitution was lacking the forethought of what to do with a deadlocked government. Illinois is a minnie version of the former Soviet Union…..To hell with the “little people” as long as us government officials/bureaucrats get our paychecks. This is a real life version of “Animal Farm”, “some of us are MORE EQUAL than others”, so say the pigs.

    Everyone with a brain knows it is one person who is holding the state hostage.

    If you have a functioning brain, you know it’s Michael Madigan.

    But if you are a Leftist — meaning you buy into The Narrative [TM] — you “know” it’s Bruce Rauner.

@Alaskabob Illinois comptroller has issued IOU’s for years to Medicaid providers. Most hospital payments are 6 months behind for normal payment cycle. We actually had a judgement that the state can’t push payments across fiscal years.

Henry Hawkins | July 3, 2017 at 8:53 am

The primary problem is decades of Illinois lawmakers catering to union pension demands. The solution is to let Wisconsin take over Illinois while Scott Walker is still governor.

Expect a fed bailout of Illinois. ‘For the children’ will likely be the selling lie.

Greece –

According to paul krugman – the way out of the deficit is spend even more money

Funny how funding for lavish public employee defined benefit pensions, a never-ending slew of entitlement programs and an oppressive tax environment for individuals and businesses predictably wreak havoc on state coffers. The Dumb-o-crats will never learn how to properly manage the public fisc — tax and spend profligacy is in their blood.

Illinois will collapse in 3… 2… 1…

Meh, you’re giving the Illinois GOP too much credit, I think.

I expect Republicans to cave at the last second and vote for a Democrat-written budget and/or tax increase, in the name of “saving the state from bankruptcy” (but in fact merely delaying the inevitable).

Gov. Rauner will either cave with them and sign the bill, or he’ll stand firm and be thrown under the bus by his own party; the collapse — and credit downgrade — will be “all HIS fault”.

But maybe (hopefully?) I’m being too cynical.

    OldNuc in reply to Archer. | July 4, 2017 at 11:22 am

    Based on history and experience extreme cynicism is required. There is still blood in the turnip to be squeezed out.

Albigensian | July 6, 2017 at 10:44 am

“When income is $90 and expenses are $100, you can only write $90 worth of checks” Except, courts have ordered legislatures to raise taxes before, and may do so again.

Although we’re not yet found out what recourse a court would have if a legislature refused to do so (would it jail legislators for contempt?)

As for cutting public-employee pensions, Section 5 of Article XIII of the Illinois Constitution states that state pensions “shall not be diminished or impaired,” and state courts seem to have interpreted this to mean that changing these for existing employees, even for work not yet performed, violates this provision.

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