Halfway through its current fiscal year, still without a budget and locked in a political stalemate with no end in sight, Illinois has come up with an effective way to close its widening budget gap.



Just don't pay the bills.

As Republican Gov. Bruce Rauner Wednesday prepared to deliver his annual state of the state speech to a legislature controlled by Democrats, there was little sign that a long-running, fiercely fought budget battle is any closer to resolution.

The state's budget for the current fiscal year should have taken effect July 1, but Rauner rejected the original plan offered by Democratic lawmakers. Instead, he has held out for a budget deal that includes reforms such as curbing union powers, setting term limits for lawmakers and cutting costs for businesses.

Many states, meanwhile, are already at work on next year's budget. (Pennsylvania is the only other state still operating without a completed budget.)

The Illinois budget impasse is further complicated by a wide shortfall in revenues needed to pay for the roughly $34 billion in spending approved in last year's budget. That shortfall amounts to about $4 billion, or 12 percent of state spending; a series of tax cuts that took effect a year ago have cut revenues by about $3.6 billion, 20 percent, through June 30, Moody's estimates.

Without a formal budget, Illinois has been limping along by extending parts of last year's spending plan, settling on piecemeal appropriations and battling out the impasse in the courts.

That's meant tapping special funds to pay lottery winners and scraping together money to keep 911 call centers running.

Read MoreHere's your share of state pension shortfalls



Other agencies are still waiting for funds to stay afloat.

So far this fiscal year, Moody's estimates that Illinois has accumulated more than $6 billion in unpaid spending, leaving schools, health-care agencies, local transit agencies and other service providers at risk of running out of cash.