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City officials in Hartford, Conn., will begin formally exploring a course for bankruptcy, with the hiring yesterday of an international law firm that has expertise in financial restructuring, the Hartford Courant reported. Hartford has hired Greenberg Traurig to navigate a potential chapter 9 restructuring and to study alternatives that could pull the city from the brink of fiscal collapse. The fiscal year ended last week with no agreement on a new state budget and no consensus on even a short-term plan. That's left Hartford, which has asked for tens of millions of dollars more in state aid to close a $65 million budget gap, edging closer to bankruptcy. Hartford Mayor Luke Bronin has warned for months that if the city didn't get the assistance it needed, it could seek chapter 9 protection. Bronin said Thursday that he hasn't yet decided whether he would file, but noted Greenberg Traurig would be "working with us to examine the full range of restructuring options available to the city." Read more.

Get details on chapter 9 proceedings with Municipalities in Peril: The ABI Guide to Chapter 9, 2nd Edition, available at the ABI Store.

Moody's Investors Service warned yesterday that even if Illinois' House of Representatives takes action to enact a new budget today, the state still risks a downgrade in its credit rating to junk, Reuters reported. The Democratic-controlled House today will attempt to overturn Republican Governor Bruce Rauner's vetoes of spending and tax increase measures aimed at ending the state's unprecedented two-year budget impasse. Moody's said it placed Illinois' Baa3 rating, which is one step above the junk level, on review for a possible downgrade. The $36 billion fiscal 2018 budget and $5 billion income tax increase passed by lawmakers over the extended Fourth of July holiday weekend, may fall short in addressing the state's financial woes, particularly its huge unfunded pension liability and $15 billion unpaid bill backlog, according to Moody's.

Orange County has paid off the last of $1 billion worth of bonds it raised to emerge from bankruptcy, the Orange County Register reported on Saturday. Twenty-two years after declaring bankruptcy, the county’s repayment totaled nearly $1.5 billion. Repayments averaged $68 million a year — money that could have funded street improvements, libraries, health care and myriad other public services. The county still has about $20 million to pay off to various cities and agencies that have a separate repayment deal.

A standoff in Illinois between Republican Governor Bruce Rauner and Democratic Speaker of the House Michael Madigan over spending and term limits has left Illinois without a budget for two years, the Wall Street Journal reported today. State workers and some others are still getting paid because of court orders and other stopgap measures, but bills for many others are piling up. The unpaid backlog is now $14.6 billion and growing. Illinois is even late paying its utility bills to Springfield, its own capital city. On July 1, the beginning of the next fiscal year, billions of dollars in road projects are scheduled to grind to a halt. “Right now, our state is in real crisis,” said Gov. Rauner last week, on the eve of a special legislative session where lawmakers are trying to hammer out an agreement before the state enters its third budgetless year. Susana Mendoza, the state’s Democratic comptroller, predicted unpaid bills will soon top $16 billion. Any solution to the state’s dismal finances will need a three-fifths legislative majority to pass. Looming behind the fiscal train wreck are an estimated $250 billion in unfunded pension liabilities, the worst in the nation, according to Moody’s Investors Service. S&P Global Ratings has warned that it could lower the state’s rating to junk as early as this week if it doesn’t pass a budget.

After nearly five years, the city of San Bernardino has emerged from bankruptcy, the Associated Press reported yesterday. The city said in a statement yesterday that starting June 15 it began paying its creditors again under the terms of a bankruptcy exit plan that a judge approved in January. Drowning in debt, San Bernardino filed for bankruptcy on August 1, 2012. It came amid an unprecedented wave of cities declaring bankruptcy, including Vallejo, California and Detroit. Stockton, a Northern California city of similar size, declared bankruptcy just three days earlier. It emerged early in 2015.

The $49.6 million budget hole of Hartford, Conn., and the impending departure of one of its biggest employers, Aetna Inc., have shined a light on its unusual predicament: Half of the city's properties are excluded from paying tax because they are government entities, hospitals and universities, Dow Jones Newswires reported yesterday. It has less taxable property than the neighboring suburban community of West Hartford, which has less than half of the population than its urban neighbor. And Hartford's total property-tax receipts are about 25 percent below that of tony community of Greenwich. "The root of the problem is you have a city built on a tax base of suburb," said Mayor Luke Bronin. The mayor said that the small tax base along with growing fixed costs produced structural budget deficits that prior administrations sought to deal with through asset sales, short-term debt restructuring and property-tax increases. Bronin is now asking for financial help from the state to help close Hartford's budget hole.

Leaders of financially strapped Hartford, Conn., are struggling to persuade state legislators facing their own budget crisis to come up with tens of millions of dollars in additional aid to help the city avoid bankruptcy and ultimately become economically stable, the Associated Press reported yesterday. The city is seeking $40 million more from the state to help offset the deficit in next year's roughly $600 million budget. The extra money would come with some strings for Hartford, such as holding the line on spending and working with local unions to cut costs. So far, city officials have made deep spending cuts and sought about $16 million in labor concessions from seven city unions. But after one of the city's largest unions recently voted down a negotiated agreement that could have saved about $4 million over six years, that request for extra state aid has become a tougher sell in the General Assembly, according to Hartford Rep. Matt Ritter, who is also the majority leader of the House of Representatives. Meanwhile, only one of the unions, the firefighters, has so far agreed to labor concessions. The rest remain in negotiations or arbitration.