July 10, 2015 / 8:24 PM / 2 years ago

Illinois budget impasse seen lasting for weeks

CHICAGO (Reuters) - The standoff in Illinois between newcomer Republican Governor Bruce Rauner and long-time Democratic House Speaker Michael Madigan showed no sign of abating as the state approached a second full week without a budget for the fiscal year that started July 1.

“This could go on for weeks. Or a few months? It’s all uncharted waters at this point,” Christopher Mooney, director of the Institute of Government and Public Affairs at the University of Illinois, said on Friday.

He said pressure to pass a budget eased with Rauner’s signing last month of a funding bill ensuring schools will open on time in September. The pressure could ease further if state courts ultimately allow state workers to be paid without a budget.

While Rauner and Madigan exchanged barbs this week, Illinois continued to have the worst funded pension system and the lowest credit ratings among the 50 states.

The budget battle has not triggered any rating action that could push Illinois into the low-investment grade level of triple-B rarely assigned a state. That could change.

Moody’s Investors Service analyst Ted Hampton said the longer the impasse continues, the harder it will become for Illinois to balance its budget.

“At a certain point, the impasse, the gridlock does matter,” he said. “The question is who’s going to blink first.”

Standard & Poor’s warned this week it could take “rating action within the next two months, even in the absence of an adopted budget if, in our view, there is limited progress in budget deliberations or if credit fundamentals weaken.”

On Wednesday, Rauner dared Madigan to use his Democratic House majority to pass a tax hike, a move the speaker later said was “not realistic.” The governor also reintroduced a package of controversial reforms, including a property tax freeze and legislative term limits, that he wants before he considers new revenue.

Madigan shot back, releasing a list of seven House hearings that Rauner’s Administration failed to attend to answer questions despite the governor’s campaign pledge for an open and transparent government.

“We have considered the issuance of subpoenas but we haven’t done it because we want to be reasonable,” Madigan told reporters on Thursday.

Overtime legislative sessions have given lawmakers a stage to vent frustration at the impasse and each other.

During a Thursday House debate on a one-month budget, Republican State Representative Chad Hays suggested that lawmakers be locked in the capitol.

“This is ridiculous. Day after day after day we’re no closer to a budget,” he said.

Reporting By Karen Pierog; Editing by David Gregorio

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