After 15 Republicans joined Democrats in overriding Governor Bruce Rauner's veto of the state's first budget deal in three years, it was assumed by uninformed observers that the worst of the state's fiscal crisis was behind it.

In fact, the budget deal did not address the more than $15 billion in unpaid bills that have accrued over the last several years, nor did the agreement deal with the massive unfunded pension liability that "officially" stands at $130 billion.

The state's bond rating could still fall to junk status. Even if it doesn't, Illinois cannot beg, borrow, or steal enough cash to even begin to cover those obligations.

Reuters:

The $36 billion spending plan relies on a $5 billion tax increase that permanently hikes the flat personal income tax rate to 4.95 percent, up 32 percent from its prior 3.75 percent rate. To address the state's nearly $15 billion in unpaid bills, Illinois depends heavily on borrowing. Lawmakers approved $6 billion of 12-year bonds to raise money for repayments. But State Representative Greg Harris, the House Democrats' point person on the budget, has acknowledged there is only enough revenue to support half of that borrowing amount. Illinois will also borrow up to $1.2 billion from various state accounts that have accumulated cash for specific purposes, while "sweeping" cash from other accounts – a government version of looking under couch cushions that is expected to yield $300 million. Illinois' $130 billion pension liability is one of the largest in the nation, and the new budget takes only small steps to address the structural underfunding of Illinois' five retirement systems. The new law gives the state five years to phase in changes retroactive to fiscal 2014 in actuarial or investment return assumptions made by the pension systems for an estimated savings of $892.1 million. Seemingly small changes in projected investment results can have significant impact on a pension fund's actuarial calculations. Last year, when the Illinois Teachers' Retirement System reduced its earnings assumption to 7 percent from 7.5 percent, the change caused a $660 million spike in the state's fiscal 2018 contribution. The new budget attributes $500 million in savings to the creation of a new tier of pension beneficiaries. But that tier applies largely to newly hired employees, raising questions about how the state expects to book that savings in the current fiscal year. That estimate was lifted straight from the proposed budget presented by Rauner earlier this year. The projection has not been independently verified by legislative leaders, and Rauner's office has not responded to requests for an explanation of how the estimate was calculated.

The state is talking about savings of a few hundred million dollars while the pension system needs tens of billions of dollars to return to fiscal health. There is an air of unreality surrounding the entire debate, as if moving a few decimal points around will address the problem. Politicians won't face the facts, because if they did, it would open a chasm beneath their feet that could be filled only by massively increasing taxes.

The Illinois constitution guarantees those pension payments regardless of how much money the state has. Rauner tried changing the pension system, but the courts – and the unions – shot him down. So, during the next economic downturn, those revenue projections will fall dramatically, forcing the state to pay a lot more into the system. Since the prospect of borrowing to make up the pension deficit isn't realistic, the only way the state can meet its constitutional obligation is raise the state income tax to unprecedented levels. This is the ticking pension bomb that looms over everything the legislature does. And no one has any idea what to do about it.

Few Democrats or Republicans in the state are talking out loud about a federal bailout. They are still pretending they can solve their fiscal problems without going hat in hand to Washington. But, if anything, the idea of a federal bailout of the state's finances is even more unrealistic than the idea they can borrow their way to solvency.

This leaves the prospect of the biggest, the messiest, the most painful bankruptcy in U.S. history. The politicians will play out the string, kicking the can down the road as far as they can to avoid facing the unthinkable. But this is only going to make things worse in the long run.

Eventually, they're going to run out of road.