“payments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments — in some combination — will likely have to be cut.”
The problem is, of course, that aside from payrolls, some of these other entities may also sue, and in the case of pensions, the Courts have already ruled that CONSTITUTIONALLY, the State of IL cannot muck with existing pensions. Schools and such are already "screaming" -- ok, granted that this is from people who can't manage efficiently in the first place -- if this results in loss of accreditation(s) then the downward spiral accelerates.
Taxes are likely to jump big-time, but of course THAT will also accelerate the toilet flush:
I have friends in IL who have beautiful homes in good neighborhoods, and good lives / livelihoods: Most figure on closing out their businesses (etc.), retiring early, and finding a nice little lakeside lot in TN, MO, or AR... Their big problem may be in selling what they have now -- who will buy at a "sellers" price?
To avoid that death spiral you write of, what if the comptroller simply ignores court orders and does her best to pay the outstanding bills in the most prudent manner possible? Will the feds lock her up? And since this lawsuit worked for the medicare providers you know others will sue for monies owed. I am simply saying that the Comptroller can avoid an unwinnable situation by ignoring the court order. You can’t get what isn’t there. The long term solution may already be lost. I am not sure if Illinois can pull itself out. I think the State will need to amend their constitution to allow for bankruptcies and give the assorted pensions a haircut. I am not sure the political will exist to do what is needed in the time allowed before ppl start to abandon the state. I live in Illinois and already you hear talk of people retiring to other states to avoid the high cost of living here.