By Fiona Ortiz and Karen Pierog
SPRINGFIELD/CHICAGO, Illinois (Reuters) - Illinois blew through a budget deadline this week, and now the state faces court battles over spending and a political standoff between rookie Republican Governor Bruce Rauner and veteran Democratic House Speaker Michael Madigan, who has dominated state politics for three decades.
Rauner said he can soften the impact of a looming government shutdown and continue paying state workers on time and in full. Democrats said there are strict limits on what the governor can spend without a budget that has been approved.
Lawmakers and political observers said the delay and confusion, if it drags on, could take a toll on the business climate and hurt Illinois' credit ratings, which are already lower than any other state's.
"I've been through overtime sessions before, but this is such a different dynamic," said Democratic State Representative Elaine Nekritz, who has been in office since 2003. "We are fighting over things that are not budget related, so I don't know what breaks that logjam."
In the state capital of Springfield, a confused attorney general and comptroller have asked a judge to clarify what can and cannot be paid without a budget. The American Civil Liberties Union obtained judicial orders compelling the state to keep funding programs for people with disabilities.
Rauner, a former private equity investor who has been governor since January, has said he will not entertain any revenue increases until the legislature passes his proposed "reform agenda" including tort reform, a local property-tax freeze and reductions in workers' compensation coverage.
This week, Madigan and other Democratic leaders invited speakers representing hospitals, transportation and social services agencies to testify before the General Assembly about the likely impact of a shutdown. The health officials warned that without budget appropriations, they cannot get matching federal funds for Medicaid, a health program for low-income people. This would put services at risk.
Members of Rauner's cabinet refused legislative requests to testify in the House chamber.
Madigan, Democratic House Speaker for 30 of the last 32 years, is known for his persistence. But political insiders cautioned that he could surprise with a sudden deal, as he has done in past years with pieces of major legislation, including pension reform.
Lawmakers on both sides of the aisle said they were bracing for a government shutdown. Each side blamed political rivals.
"The speaker is used to having his own way and I don't think he's going to give in any time soon, so unfortunately the near-term prospect is a shutdown of state government for a while," said Republican State Senator Matt Murphy.
AN IDEOLOGICAL BATTLE
Madigan has called Rauner's agenda "extreme" and used the term repeatedly in a press conference Tuesday.
Rauner vetoed a budget passed by the Democrat-controlled General Assembly in May, saying it violated the state constitution's balanced-budget requirement because spending outstripped revenue by $4 billion.
The fight has gotten personal. Rauner last month began running television advertisements blaming Madigan for the budget impasse, drawing on a $4.25 million fund put together by himself and real estate mogul Sam Zell.
Lawmakers said they did not see any sign of compromise.
"This is about a power struggle, I guess. The governor's boss and he's got the money to prove it. That's not responsible government," said state Senator David Koehler, a Peoria Democrat.
Democrats could take up an emergency one-month spending plan for a final vote next week. However, Rauner has signaled he would veto such a measure. To override a veto, Democrats would almost certainly have to get all 71 of their members to the floor to vote as a block.
Lawmakers and political observers say if the battle were only about the budget, it would have been solved by now.
"In the past it was over things like should we put this much money in this pot or that pot. There was never any of this other ideological stuff," said Charlie Wheeler, director of the Public Affairs Reporting program at the University of Illinois at Springfield.
"Rauner has a bottom line of being anti-union... and that goes against a core belief of the Democratic Party, so those kind of things aren't negotiable," Wheeler said.
(Editing by David Greising and David Gregorio)