Illinois lawmakers preparing to return to Springfield on Jan. 12 are probably feeling a sense of dread because they will be confronted with a long-festering problem that refuses to go away: the grim finances of state government.

Indeed, the crisis grows only worse.

As of the end of December, the state's backlog of unpaid bills totaled $5.1 billion, the comptroller's office announced on Jan. 6. According to some estimates, Illinois' budget hole for the fiscal year beginning July 1 will be at least $12 billion or $13 billion, representing about half of the state's $26 billion budget.

"Words don't describe how bankrupt the state is," said Ralph Martire (right), executive director of the Chicago-based Center for Tax and Budget Accountability, a bipartisan think tank that describes itself as "committed to ensuring that tax, spending and economic policies are fair and just."

A longtime watcher of state government, Martire pegs the budget shortfall for the coming fiscal year at $13 billion -- and that's if the state merely holds steady on spending for health, education and social service programs.

"You just can't steal a little from this fund, steal a little from that fund, like they've been doing for years," he said. "You can't borrow your way out of a hole. Obviously, you have to pay the borrowings back. There's really no light at the end of the fiscal tunnel for Illinois this coming year."

Remedying the budget problem through tax hikes, deep spending cuts or a combination of the two will be difficult and painful, no matter what, political observers and policymakers said. But if lawmakers fail to agree on a long-term solution by the time they wrap up their spring legislative session in May or June, the pain will intensify.

"I think you'll start to see the dismantling of state government," said Charlie Wheeler (right), a University of Illinois Springfield professor and former newspaper journalist who started covering state government 40 years ago.

IS BOLD ACTION POSSIBLE?

Rep. Frank Mautino, D-Spring Valley, chairs a House appropriations committee. He said he hopes lawmakers manage to agree on a plan to raise taxes.

"It'll make (the state's fiscal situation) more realistic and stop the backsliding that we have," he said.

Martire, who thinks higher taxes are inevitable, sees just two ways for lawmakers to pull Illinois out of its fiscal quagmire. The first option involves passing "significant" income tax and sales tax increases during the 2010 spring legislative session. Those tax hikes would have to generate $5 billion to $7 billion in new revenue.

The second option would be for lawmakers to do "the incredibly dishonest and cowardly thing" by adopting a six-month budget, rather than a 12-month budget, Martire said. A half-year spending plan would run out of money soon after the November 2010 general election, setting the stage for newly re-elected lawmakers to approve tax increases during their fall legislative session -- commonly called the "veto session."

If the second scenario becomes a reality, state government probably wouldn't begin receiving the new revenue until January 2011, so spending in key areas would have to be slashed during the remainder of calendar 2010.

The main targets would include elementary and secondary education and higher education, especially community colleges, Martire said. State government's health and human services budgets also would be hit hard, he added.

"Vulnerable populations will just go unserved," he said.

Wheeler predicted that if lawmakers go home this spring without fixing the budget, there would be "wholesale closure" of the social service programs operated by not-for-profit groups. He also forecast a "wholesale release" of prison inmates because at some point the state would find itself unable to cover the costs of feeding and guarding them.

MISSED OPPORTUNITIES

The state's budget outlook wouldn't be so bleak if policymakers had acted earlier on numerous recommendations to cut costs and make reforms, said Kristina Rasmussen, executive vice president of the Illinois Policy Institute. IPI is a nonpartisan research group that describes itself as "dedicated to supporting free market principles and liberty-based public policy initiatives for a better Illinois."

"We've had a lot of good ideas thrown out there," she said. "But no real action has been advanced on those items."

In a December report, called "Fifteen Missed Opportunities: How 2009's Inaction Will Feed 2010's Budget Crisis," Rasmussen spotlighted some of those recommendations. For example, she wrote that state government should renegotiate its contracts with public employees.

Another smart move, she wrote, would be for the state to stop giving local governments a cut of state income tax receipts. As an alternative, the state could send less of that money to local governments.

"When we're in a budget crunch like we are now, every penny should be under review," she said in a phone interview. "It's all about priorities."

ONGOING PAIN

Senate Republican Leader Christine Radogno of Lemont said even though the Democratic majorities in the Senate and House of Representatives could muscle a tax hike through the legislature without GOP support, she doesn't think that will happen. It would be too politically risky, especially in an election year.

"I think the (budget-inflicted) pain will continue," Radogno said. "Payrolls could be missed."

The latest evidence of that possibility surfaced on Jan. 5, when the University of Illinois' interim president, Stanley Ikenberry (right), announced he was directing administrators, faculty and academic professional staff to take mandatory unpaid furlough days. The move will save $17 million by, in effect, cutting employees' pay. 

Ikenberry also declared "an absolute freeze on all hiring."

He defended the actions, saying he was left with little choice because state government has fallen more than $400 million behind in its payments to the university; it has received just 7 percent of its state appropriation for the current fiscal year, which started July 1, 2009.

"At some point we will be unable to meet payroll and complete the academic year unless there are significant payments from the state as promised," Ikenberry wrote in an e-mail to university employees. At Southern Illinois University, president Glenn Poshard has told employees there will be no furloughs for now.

Gov. Pat Quinn (right), who says the U of I eventually will get its money, has scheduled his State of the State speech for Jan. 13. But Wheeler doesn't expect the governor to use the occasion to delve much into government's financial troubles.

The State of the State will take place less than three weeks before Illinois' Feb. 2 partisan primary elections. In the Democratic primary for governor, Quinn -- who took over after the ouster of the impeached Rod Blagojevich -- will square off against Comptroller Dan Hynes. That timing likely will affect the content of Quinn's speech, Wheeler said.

"I think it'll basically be a campaign piece, and it'll be about how much better off we are now that he's governor, rather than Blagojevich," he said.