|
 State workers were also instructed to turn down office thermostats
and turn off lights to save money when their offices are not in use,
according to a wide-ranging executive order from the Republican
first-time officeholder and former private equity investor.
In his inaugural address, Rauner said Illinois' history of bad
fiscal management was hurting the state's ability to compete.
"Our government has spent more than we could afford; borrowed money
and called it revenue," he said. "Rather than responsibly budgeting
the money we had, we implemented programs we couldn’t afford."
The Land of Lincoln is buckling under a chronic structural budget
deficit and the lowest credit ratings and worst-funded pension
system among the 50 states. The fiscal crisis is the worst the state
has seen for decades and could be the nation's biggest. The crisis
is also weighing on its largest city Chicago, which is struggling
with a big pension funding burden of its own.
 Rauner ordered agencies to produce lists of contracts that could be
terminated and to put a hold on new state contracts and grants until
July 1 with certain exceptions. He also ordered a halt on planning
for highway projects pending reviews, put limits on state worker
travel and said the state should sell equipment it does not need.
On Friday, his transition team said an effective plan would include
spending cuts and tax reform.
Rauner also said the fifth-largest state is facing moral and ethical
crises and that he will sign an order on Tuesday to improve ethics
and accountability in the executive branch of state government.
To make progress, Rauner will need to find a way to work with a
legislature dominated by longtime Democrat power broker Mike
Madigan, speaker of the Illinois House."You have a Democratic
legislature and a Republican governor, so they're going to have to
figure out some way to work together," said David Merriman, an
Illinois budget expert at the University of Illinois.
Rauner pledged "to work on a bipartisan basis to drive results and
get things done." A Madigan spokesman said the speaker will "work
with the governor in a professional and cooperative manner."
Pension payments are projected to jump to nearly $7.6 billion in
fiscal 2016 from $6.8 billion this fiscal year as the state defends
cost-saving reforms in court. Outgoing Democratic Governor Pat
Quinn's budget office recently estimated Illinois' unpaid bills will
climb to $9.8 billion at the end of fiscal 2016, from $4 billion
this year. The state's projected general fund deficit is expected to
balloon to nearly $5.8 billion, from $180 million this fiscal year.
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"In the modern era... the state has never been in this poor of a
financial condition," said Laurence Msall, president of
Chicago-based government finance watchdog group Civic Federation.
In a pre-inaugural tour on Saturday, Rauner told local media outlets
that his team discovered unpaid bills stashed in drawers. Rauner's
spokespeople did not respond to requests to confirm the reports.
Robert Amodeo, a portfolio manager at asset manager Western Asset,
put Illinois in the same class with the most troubled municipal bond
issuers in the nation. "We will continue to monitor developments in
Puerto Rico, New Jersey and especially Illinois, all of which face
challenging fiscal conditions," Amodeo said.
To sell its debt, Illinois has had to offer hefty yields. Illinois
bonds due in 10 years yield about 140 basis points more than stellar
AAA-rated debt, according to Municipal Market Data. California,
which is bouncing back from its fiscal morass, has a so-called
credit spread of only 24 basis points.
Illinois' credit ratings, at A-minus and A3, are the lowest among
the states, and rating agencies have warned of further downgrades.
An immediate concern is the Jan. 1 partial expiration of 2011
temporary tax hikes that dropped the personal income tax rate to
3.75 percent from 5 percent, and the corporate rate to 5.25 percent
from 7 percent.
Rauner said the tax hike hurt Illinois' economy and put more stress
on the state's social safety net. "As a result, today Illinois is
not as competitive as we need to be and cannot be as compassionate
as we want to be," he said.
(Reporting by Karen Pierog; Editing by David Greising, Eric Walsh,
Megan Davies, Dan Grebler and Ken Wills)
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