In mid-August 2015, the state government of Illinois began to “technically default” on payments it owes on its outstanding debt, joining the fiscally troubled U.S. territory of Puerto Rico in the hall of debt shame. Writing at Business Insider, Certified Financial Advisors Michael Comes and John Mousseau describe how that happened and what that means.

In what has been a not-so-stunning turn of events over the last week, the State of Illinois has failed to appropriate funds on a certain class of its outstanding appropriation-backed sales tax debt issued by the Metropolitan Pier & Exposition Authority (Met Pier). The mechanics of this missed payment mirror Puerto Rico’s default on its appropriation-backed Public Finance Corp. (PFC) bonds earlier this month.

To be sure, Illinois has not missed a payment on its outstanding debt. It has, however, failed to make a monthly payment to the trustee for a December 15th payment, a covenant breach that constitutes a “technical default”— not a payment default, but typically the first step that fallen angels take on the way to a payment default. In mid-July Puerto Rico failed to appropriate funds to a trustee, which later resulted in a payment default on a class of its outstanding debt….

S&P has stated in a recent report that the Illinois non-appropriation “underscore[s] the fiscal challenges associated with the protracted budget stalemate.” In other words, the political process has corrupted sound decision-making. The State of Illinois, like Puerto Rico, has the funds to make the debt service payment, but the Illinois legislature did not appropriate the funds because it did not have a 2016 budget enacted as of the July 1 due date.

So it’s not that they don’t have the money to be able to make the payments, so much as the state has what has been called a “strange budget impasse” between its long Democratic Party-controlled legislature, which wants to increase taxes and spending, and its recently elected Republican governor, who has sought to restrain and reverse the state’s excessive growth of both taxes and spending in recent years.

Last week, Illinois’ technical default spread to include winners of the state government’s lotteries. ABC 7 Eyewitness News reports:

CHICAGO (WLS) — Due to Illinois’ state budget impasse, Illinois Lottery officials now say that any winners over $600 will experience a delay in payments.

Beginning Oct. 15, officials say they anticipate that the lottery’s check writing abilities will be exhausted.

Previously the delay only applied to winners over $25,000. Officials say that all outstanding winnings will be paid once a budget is passed.

Since the money for the state lottery’s payouts comes directly from the purchases of lottery tickets in the state, the state’s action to replace the jackpots it owes with $600 and IOUs is an indication that the lottery’s funds are being diverted to other purposes. The Chicago Tribune reports on a just-initiated class action lawsuit alleging improprieties in the offices of the Illinois State Lottery:

Two winners sued the Illinois Lottery in federal court last month, alleging fraud.

Their attorney, Thomas Zimmerman Jr. of Zimmerman Law Offices, said he plans to file an amended complaint later this month, adding at least 20 other lottery winners whose payments have also been delayed. He expects more winners will join the class-action suit now that the lottery has lowered the amount for immediate payouts.

“The state is violating the lottery law by using the money to pay the lottery’s operating costs and ongoing administrative expenses … without first paying winnings,” Zimmerman said. “Is the lottery director not earning a paycheck? And all of the employees who run the lottery, how are they getting paid?”

That is a good question to ask, as also is the question of how the state’s legislators are being paid without having passed a budget to authorize their salaries and expenses. The answer to that question turns out to be pretty straightforward, as they would appear to have specially looked out for their own interests. Robert Steere of the Illinois Policy Institute marked the occasion back in September 2014, when the state’s legislators put themselves at the front of the line for getting paid, with or without a budget, thanks to a law signed by the state’s previous governor in the months before being voted out of office:

In the waning hours of the final day of this year’s spring session, state politicians chose to exempt their own budget from the scrutiny of the annual appropriations process, the first line of defense against irresponsible spending.

House Speaker Michael Madigan and Senate President John Cullerton joined forces to introduce and enact a law prohibiting reductions from year to year in the appropriations made available in the annual state budget for legislators’ salaries and legislative operating expenses. Plus, their new law permits the payment of these salaries and expenses even if there is no annual appropriation for that purpose.

No other office or agency of state government is given such a free pass on budgetary oversight.

The next stop on the Illinois state government’s technical debt default train appears set to be state employee pension funds, where according to the Reuters news agency, upcoming payments will be delayed:

Illinois will have to delay a $560 million November payment to its pension funds, and may also delay or reduce a similar payment in December, state Comptroller Leslie Munger said on Wednesday, blaming a cash crunch stemming from the state’s budget impasse.

“The fact is that our state simply does not have the revenue to meet its obligations,” Munger told a news conference in Chicago.

Despite the delay, state pension funds will be paid in full by the time fiscal 2016 ends on June 30 using money from heftier revenue months in the spring, she said. Illinois has the worst-funded pensions and lowest credit ratings among the 50 states.

Meanwhile, employees of the Illinois state government are still being paid their wages and salaries in full thanks to a court ruling, so the delay in funding their extraordinarily generous pensions really only represents a minor inconvenience for them.

The state of Illinois’ current precarious fiscal situation did not arise overnight nor did it arise by accident. Its elected officials have been too careless with their fiscal responsibilities for too long, which is why the people of Illinois are now faced with such a deteriorating condition in their public finances. It will take state officials who genuinely put the public’s interests ahead of their own to reverse its course and put it on a sound footing.