The Chicago Civic Federation's 2012 report says that without immediate cuts in the amounts Illinois spends on its employee pension and Medicaid systems, in five years the state's backlog of unpaid bills will rise to nearly $35 billion.
"We don't want to see the state of Illinois continue down a path that is completely unsustainable," said Laurence Msall, president of the Chicago Civic Federation.
Msall has issued the same warning annually for at least the past decade. But this year's report is the most dire to date.
"We believe that structural change is needed in the state pension program," said Msall. "The benefits for existing employees going forward needs to be reformed. We have to stop talking about Medicaid reform and move it forward."
Comptroller Judy Baar Topinka, who is trying to reduce the state's current $5 billion bill backlog, says after Illinois pays for pensions and Medicare there's not enough money left for everything else.
"You have got to look at the two big eaters that are just chomping up the budget which is Medicaid and pensions," said Topinka.
Chicago Mayor Rahm Emanuel says he is not concerned the state's problems might undermine his effort to restore Chicago's fiscal health. He says city employee pension reform is a top priority.
"And I think that will be true also for the state and I look forward to what the governor has to say on Wednesday, because with the report out it's more than a flashing yellow light," said Emanuel.
Governor Pat Quinn, who last year signed the general assembly's 67 percent income tax increase into law, reportedly is ready to recommend a more aggressive approach to Medicaid reform and that local school districts pay more for teacher retirement costs.
Meanwhile, Msall says the state must reduce the amount it pays to current retirees.
"All the retirees, for the first time we're saying, need to look at the fact that they automatically get a three percent increase regardless of whether the state can afford it, regardless of what's happening to the other employees. We can't afford that," said Msall.
The pension and Medicaid system are likely topics to be included in the governor's state of the state address at noon Wednesday in Springfield.