The clock is ticking on the state of Illinois to pull together its first state budget in three years – but more structural fixes will be needed to resolve a multi-billion dollar debt crisis that threatens to make it the first state to be slapped with a "junk" credit rating.

For the third year in a row, the Prairie State is creeping up on its July 1 budget deadline without much progress on the financial front. The state government has continued to operate through appropriations and court orders, effectively allocating funds to schools, pensions and public entities. Pundits have taken to calling it the "Venezuela of the Midwest."

Government spending has essentially been running on "autopilot" for the past two years, says Diana Rickert, vice president of communications at the Illinois Policy Institute.

"Even without a state budget, almost all of state spending is still going on. Almost 90 percent of state spending is going on without a budget," she says.

But funding is tight, and the state has been running an annual deficit for years, effectively ballooning its debt burden. Should state officials fail to get a longer-term fix ironed out by Saturday – which is looking increasingly likely with every passing day – it would throw Illinois into uncharted waters.

"Illinois is just unique here. The prospect of going three straight years in modern times is something that we haven't seen any other state do," says John Hicks, executive director of the National Association of State Budget Officers.

Hicks notes states like Pennsylvania, Minnesota and Tennessee have also reached some kind of budgetary impasse at one point or another in the past, which were all eventually sorted out internally. But no state has gone three consecutive years without a formal budgetary road map in recent history.

Illinois Comptroller Susana Mendoza has described the state as being in "massive crisis mode" as she attempts to prioritize which bills get paid in absence of a budget plan. Earlier this month, she warned that a slew of recent court orders mandating that the state pay certain debt holders will completely exhaust the state's discretionary spending, which includes tax dollars typically funneled to, among other things, domestic violence shelters and ambulance services.

"The magic tricks run out after a while, and that's where we're at," she said in mid-June, according to The Associated Press .

Credit ranking outfits like S&P and Moody's are expected to slap Illinois with a "junk" credit rating should it fail to produce a budget by the state's July 1 deadline. S&P analyst Gabriel Petek wrote earlier this month that the state is "at risk of entering a negative credit spiral … further exacerbating its fiscal distress" when his ratings outfit downgraded Illinois from triple-B status to triple-B-minus – one step above "junk." The lower rating means it will cost money to raise debt to run the state and limit its options when it comes to lenders.

Hicks says a junk status would "have a continued effect on their cost of borrowing in Illinois." With more government money tied up in interest payments, less money is expected to be available to support programs and projects that benefit taxpayers.

And demographics aren't exactly on the state's side to bring in more government revenues. Temporary tax increases to help cover debt and pension payments expired at the end of 2014, and the number of workers employed throughout the state in May – contributing income taxes to the state's coffers – was more than 125,000 smaller than it was 10 years ago.

"Illinois has shrunk three years in a row. We used to have 26 representatives in Congress. We're predicted to have 16 in a couple of years. That's what's happening to the population," says Ted Dabrowski, vice president of policy and a spokesman at the Illinois Policy Institute.

The institute found the size of the Illinois labor force has contracted by 230,000 since the Great Recession hit in 2007. And data from The Pew Charitable Trusts suggests personal income growth in Illinois has been among the worst in the nation in recent years.

"The context is we are in the third-longest economic recovery in modern history, and Illinois' indicators are not reflecting that expansion," says Barb Rosewicz, research director at the Pew Trusts. "This is a time traditionally during an economic recovery when states would be setting aside funds to put into their reserves in anticipation of whenever the next economic downturn comes, which will be inevitable. But because of the Illinois budget problem, it has not been able to replenish its rainy day funds at all, which puts it in a vulnerable position in the event of a broader economic downturn nationally."

Indeed, the absence of a long-term budget plan also has done nothing for the state's $15 billion debt burden and rapidly escalating pension obligations. Even an eleventh-hour budget fix isn't expected to completely patch the state's financial troubles.

"Just because you don't do something for two years doesn't put you at a junk bond rating. That's not the issue. The last two years are really a culmination of about three decades of mess," Dabrowski says.

Dabrowski and Rickert place the blame at the feet of a Democratic party that at times in recent decades ran "unchecked" with a supermajority in the Illinois House and Senate. Legislation wasn't passed when Democrats called all of the shots that would have alleviated the state's growing pension problem or rein in escalating debt – aside from a temporary tax increase passed in 2010 that did not fully resolve the state's problems.

And now that the supermajority is gone and Republican Gov. Bruce Rauner is in place to oppose Democratic House Speaker Michael Madigan, the negotiation of bills that could help the state's debt situation has become complicated.

"[W]hen [Rauner] came in, he refused to sign on to what Madigan wanted, and it was really the first time someone had taken him on in decades, so that's where this gridlock really started," says Dabrowski. "So now, you get to where we are today, and you've got a pension system that's eating up a quarter of the budget now. It's eating into everything, from education to social services to higher ed to roads. And you have these unpaid bills that keep going up."

Dabrowski's and Rickert's Illinois Policy Institute as of 2013 had received roughly $500,000 in donations from Rauner, according to the Springfield State Journal-Register and Reuters.

Pension problems are not unique to Illinois, though. Eileen Norcross, a senior research fellow at George Mason University's Mercatus Center who helps direct its state fiscal rankings , says states like Illinois, Kentucky, Connecticut and New Jersey are among several that are beleaguered by pension obligations and unpaid debt.

But she says the situation in Illinois is further complicated by a provision in its state constitution that essentially prevents the government from doing anything that would result in "diminished or impaired" pensions.

"That pretty much ties their hands. They can't change benefit formulas going forward for their employees," she says. "They've built a house that is so rigid on very weak foundation, so there's no give. It's been built by politics and fiscal institutions that are really poor."

How the state moves forward from here is complicated. Under current law, states can't file for bankruptcy like Detroit, for example, so Illinois will likely have to dig itself out of its debt and pension hole. There's a general consensus among analysts, though, that a quick budget fix for fiscal year 2018 won't be enough to completely turn the Illinois debt and pension problems around.