Illinois Governor Confronts Budget Woes Even as states across the country struggle with budget shortfalls, few are as stretched as Illinois. The state is in the midst of a cash-flow crisis, with $5 billion in unpaid bills, and a deficit that is expected to top $11 billion this year. Gov. Pat Quinn is expected to outline the problems, and he may offer a few solutions in his State of the State address today. The governor, who was sworn in after Rod Blagojevich was impeached and thrown out of office a year ago, wants to raise the state's income tax. But first he must survive a primary election that is just three weeks away.

Illinois Governor Confronts Budget Woes

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Many states began the New Year with record budget problems, but few are as bad off as Illinois. It's facing a deficit estimated near $12 billion. With a primary election less than three weeks away, the state's Democratic governor, Pat Quinn, is trying to put the best possible spin on it. But it's clear there's no way to sugarcoat a problem that big.

Here's Quinn today in his State of the State address.

Governor PAT QUINN (Democrat, Illinois): It's the worst financial calamity that Illinois has ever had and we've been a state since 1818.

SIEGEL: NPR's David Schaper reports on how the calamity began.

DAVID SCHAPER: Everybody waits to get paid from time to time and a lot of us get behind in our bills every now and then. But the State of Illinois is taking that to the extreme. It is six months or more behind on paying many of its bills. And those overdue bills top $5 billion.

Ms. DIANA MARTINEZ: My name is Diana Martinez(ph). And I've been fighting addiction for the past 18 years of my life.

SCHAPER: Martinez says she is recovering from drug addiction and thriving today because of a state-funded 28-day treatment program run by LSSI - Lutheran Social Services of Illinois.

Ms. MARTINEZ: I am alive today because of that program.

SCHAPER: But LSSI isn't doing too well. Illinois is more than seven months behind in paying this and other substance abuse treatment providers to the tune of $43 million. And now, some treatment centers are cutting their staff and closing their doors.

Ms. MARTINEZ: It's scary. It's scary to hear that places like this are closing down.

SCHAPER: It's not just social service providers getting IOUs from the state, but schools, doctors, hospitals, municipalities, and vendors of all kinds. And the amounts are staggering. The state owes Chicago's public schools nearly $200 million. It owes the University of Illinois more than $400 million. Cities and towns around the state are owed half a billion dollars and the list goes on and on.

Mr. LAWRENCE MSALL (President, Civic Federation of Chicago): The State of Illinois stands on the brink of financial disaster. It's a financial disaster of its own making.

SCHAPER: Lawrence Msall is president of the Civic Federation of Chicago, a nonpartisan research group. He says Illinois' budget woes have very little to do with the recession.

Mr. MSALL: It entered the economic downturn with a history of spending more than it was taking in, in terms of available revenues, ignoring its pension obligations, borrowing or taking pension holidays, instead of fully funding its pensions.

SCHAPER: And Msall says because Illinois' politicians haven't significantly raised revenue or cut spending in years, the state is now borrowing even more to pay operating expenses. By some measures, only California is in worse fiscal shape than Illinois. Illinois Comptroller Dan Hynes is the state official waiting for enough money to pay the state's bills. He's also a Democratic primary challenger to Governor Pat Quinn. Hynes charges that Quinn's budget is eerily similar to those of his reckless predecessor Rod Blagojevich.

Mr. DAN HYNES (Comptroller, State of Illinois): These are the same types of gimmicks that got us into the crisis we're in right now. And they're just being repeated.

SCHAPER: Quinn acknowledges his budget is far from perfect. But in his State of the State address this afternoon, he said he's made the tough decisions.

Governor PAT QUINN (Illinois): Now, I do believe we need more revenue. I think after cutting all the costs, after using strategic borrowing, after getting as much money as we can get from the federal government, we're still short.

SCHAPER: Quinn is calling for not only an income tax increase, but for an overhaul of Illinois' tax system. Experts say it's much more than just taxation that needs reforming in Illinois and that means paying for just about every constituency, not exactly a winning formula in an election year.

David Schaper, NPR News, Chicago.

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