Illinois Takes Steps Toward a Budget But Warns It Will Miss Deadline

Illinois officials took promising steps toward resolving a two-year standoff over a budget, but alerted rating firms that they will likely miss a deadline of midnight Friday that could trigger a downgrade to junk status.

The state's House of Representatives voted Friday in support of a Democratic spending plan, introduced by Rep. Greg Harris, that is largely viewed as a compromise measure.

Mr. Harris is an ally of Democratic House Speaker Michael Madigan, whose stalemate with Republican Gov. Bruce Rauner over spending has left the state without a budget for two years, causing widespread economic stress at schools, hospitals and other entities that rely on state spending.

"Today is the make-or-break day," Mr. Harris said. "No one wants to hear any excuses. They've heard it over and over. Today people want to see action."

Republican Rep. David Harris was one of several GOP members who rallied his colleagues in support of the plan. "I don't like everything that's in this plan," he said. "[But] now is the time to bring this nightmare to an end."

Following the vote, Mr. Madigan confirmed the House would convene again Saturday, the first day of the new fiscal year. He also said he was writing to rating firms urging them to postpone judgment on the state's bond rating until lawmakers and the governor broker a balanced budget.

Illinois has a $14.6 billion backlog of unpaid bills, and S&P Global Inc. has threatened to downgrade the state's bond rating to junk status if lawmakers don't reach a deal by July 1.

"While we've made significant progress toward solving the governor's budget crisis, more work remains," Mr. Madigan wrote to the rating firms. "We will continue working to put a compromise on the governor's desk and end this impasse through the next week, and I ask you to allow these negotiations to move forward."

A spokesman for Moody's Investors Service confirmed the ratings firm had received Madigan's letter but said it had no comment. A spokeswoman for S&P said the firm doesn't comment on specific interactions with the governments it rates.

Mr. Madigan also said he would meet Friday with Senate President John Cullerton, a Democrat, and both chambers' Republican minority leaders to hash out further negotiations.

"Much work remains to be done," Mr. Madigan said following the vote on Mr. Harris's spending measure. "Let's keep up the good work and get the job done."

House members merely voted to adopt Mr. Harris' plan as an amendment to another bill, so it will need another vote of approval from the full chamber before heading to the Senate. Still, lawmakers from both sides of the aisle struck a largely self-congratulatory tone during deliberation on the measure.

"I come here today with joy because I know we're going to do the right thing," said Republican Rep. Steven Andersson, drawing a standing ovation from both sides of the chamber. "We are going to save our state, and we are going to save our state together."

"This is not a perfect plan, but it's the best plan that was developed in a bipartisan way," said Democratic Rep. Emanuel Chris Welch. "Stand firm, Democrats. Stand firm, Republicans. You've done great work."

Earlier Friday morning, the governor reiterated his threat from Wednesday to extend the legislative session until the General Assembly produces a budget he can sign.

"This is it. If lawmakers can't get a plan to my desk today, I'll have no choice but to keep them here in Springfield until the job is done," Mr. Rauner tweeted.

Also on Friday, the state Senate's GOP caucus announced Sen. Bill Brady of Bloomington as their new leader. Mr. Brady, who was previously the assistant Republican leader and has launched three unsuccessful bids for governor, succeeds Rep. Christine Radogno, who announced her resignation Thursday.

"The issues facing Illinois are daunting, but our caucus remains committed to working together to face those challenges," Mr. Brady said in a statement.

In a Facebook video posted Wednesday evening, Democratic Illinois Comptroller Susana Mendoza sounded the alarm bells, warning of the dire consequences if a budget solution isn't reached by Friday.

"Derailment is imminent," she said. "There will be no money, not a penny available, for hardship cases such as social service agencies, domestic violence shelters, mental health facilities and senior and hospice care facilities."

Ms. Mendoza added that once "unthinkable" effects like delayed pension payments and missed payroll for employees are now a possibility. Schools across the state, too, might not be able to open on time, she added.

"This is not a false alarm," she said.

The video was watched two million times by Friday afternoon and shared over 40,000 times on Facebook.

--Shibani Mahtani and Heather Gillers contributed to this article.

(END) Dow Jones Newswires

June 30, 2017 15:18 ET (19:18 GMT)