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(Bloomberg) — Illinois Governor Bruce Rauner vetoed $4 billion from next year’s budget, calling the Democratic legislature’s spending plan “unbalanced and therefore unconstitutional.”
The Republican governor’s action Thursday raises the stakes in a budget stalemate less than a week before the July 1 start of the fiscal year.

“For too long, the state of Illinois has made spending promises that exceed available revenues,” Rauner said in his veto message. “Because of past fiscal mismanagement, Illinois is experiencing the worst fiscal crisis in America.”

The General Assembly concluded its budget session last month by approving a spending plan that members acknowledged was $4 billion short. Democrats want Rauner to agree to tax increases, while the governor has said cost savings come first.

While lawmakers are scheduled to return to Springfield on Tuesday, there are no indications that Democratic leaders and the Republican governor are close to a budget deal.
“The Governor would rather move the state toward a shutdown rather than reasonable compromises that protect the middle class with a balanced approach to budgeting.,” Rikeesha Phelon, a spokeswoman for Senate President John Cullerton, said in an e-mailed statement.
State employees would miss paychecks starting July 15 if there’s no budget, according to Comptroller Leslie Geissler Munger. Some payments would continue, including debt, pension, retiree benefits and welfare.

Rauner said in an opinion piece in the Chicago Tribune Thursday that his administration wants to encourage more government employees into alternative retirement plans and implement slower pension payment schedules for municipalities, including Chicago. The third most-populous city has a $20 billion shortfall in its employee retirement system.

Illinois has the lowest credit rating of U.S. states. It is graded A3 by Moody’s Investors Service and an equivalent A- by S&P. While both give it a negative outlook, S&P put Illinois on review for a rating cut after the state’s highest court overturned a 2013 pension overhaul intended to resolve a $111 billion unfunded retirement liability.
To contact the reporters on this story: Tim Jones in Chicago at tjones58@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Michael B. Marois, Justin Blum