So the budget is $2 billion in the red. And the governor says he'll have to veto the excess spending. But with his popularity at an all-time low and talk of impeachment as the feds go after his inner circle, Blagojevich is throwing down the gauntlet more gently than usual.
"It's unconstitutional. It's irresponsible. It's misleading. It makes all kinds of promises it can't keep. And you would have to be out of your mind to sign a budget like that," he said.
Governor Blagojevich is giving Illinois House members, who adopted a new budget at the end of May but not enough new revenue to pay for it, another chance to get it right by July 9, when the next round of bills are due. Or he'll start cutting.
"These actions will have real consequences to real people," said Blagojevich.
"What we're seeing is the latest chapter in the governor saying, 'It's going to be my way or the highway,'" said State Rep. John Fritchey, (D) Chicago.
Fritchey says there is no reason to go back to Springfield because house members still don't support the revenue sources on the table to pay for the new programs, including billions of dollars in construction projects.
"The governor's proposal and what the senate has sent over is a massive expansion of gaming, a leasing off from the valuable state asset in the lottery and a restructuring of our pension debt. All of which are things that are very troubling to a lot of not just house Democrats but house Republicans as well," said Fritchey.
Republicans want the construction projects. So they're willing to go back to Springfield to negotiate.
"It's a phony-baloney budget, and now we got cuts that those cuts hurt the people that need our help the most," said State Rep. Angelo "Skip" Saviano, (R) Elmwood Park.
House Speaker Michael Madigan has no plans to call his members back to Springfield because, according to a spokesman, nothing's changed since they rejected the spending plan last month. And if Blagojevich has to cut, so be it. That's his job.
But a lot of house members will be getting heat from their constituents if the cuts are too painful. So the budget battle may not be over for awhile. And we'll be hearing calls for higher taxes from some circles after the November election.
Amtrak train subsidies, $150 million in school construction grants and a significant number of state employees are among the possible victims. There's also hundreds of millions of dollars at stake for health care providers, social service agencies and colleges and universities.
Blagojevich stopped short of ordering lawmakers back to work but stressed they could easily avoid the fiscal doomsday if the House returns by July 9 to approve three ideas: Creating a new $34 billion statewide construction program, borrowing to pay off pension debt and taking money out of state funds set aside for special purposes.
"This way is the best way. It's up to the House," Blagojevich said at a news conference at his Chicago office.
A spokesman for House Speaker Michael Madigan did not immediately return a phone message seeking comment Tuesday afternoon. House Republicans, whose support is critical to patch the hole, signaled they're not on board the governor's plan yet.
The announcement could signal more fighting between Blagojevich and lawmakers that has plagued the state Capitol since last year.
Democrats in the House and Senate approved a clearly unbalanced budget and left town May 31, eager to avoid a repeat of last year's long overtime session and happy to let Blagojevich take the heat for messy cuts.
But now the governor is trying to put the onus back on the House and Madigan, his nemesis.
The Senate, led by Blagojevich ally Emil Jones, approved the revenue-generating ideas and the capital program before leaving town. The pension bond and fund sweeps ideas never came up for a vote in the House, and Madigan used a parliamentary maneuver to defeat the gambling expansion that funds the construction package.
The governor immediately called the budget for the fiscal year that starts July 1 $2 billion out of whack but has spent the last few weeks weighing his options. If a new budget isn't in place not long after July 1, the state can't pay its bills.
Blagojevich could veto the whole budget. But that would risk another marathon session and alienating Jones and Senate Democrats, or raise impeachment talk from angry lawmakers. He said Tuesday that is still an option but not his preference.
The governor could sign the budget and withhold large amounts of spending throughout the budget year. But he would then face wrath for the pain felt by people and programs statewide.
"For me to sign this budget would be lying to the people of Illinois," Blagojevich said. "It would be like writing a check that I know would bounce."
Instead, he's trying to build pressure from constituents and interest groups on the House to pass the measures the Senate already approved. The House can fill the budget hole, create hundreds of thousands of jobs, improve infrastructure and even boost flooding recovery by doing so, Blagojevich said.
If not, he warned, the House will be blamed for draconian cuts throughout state government.
Madigan has refused to come to meetings with Blagojevich and other legislative leaders. His top assistants who have gone to the meetings criticized the governor for trying to manufacture a budget crisis rather than use his authority to get the budget on track.
Other obstacles are in the way.
The city of Chicago -- in line for a large casino -- has opposed the gambling expansion needed to pay for the construction program.
Republicans, whose votes will be needed for any revenue ideas, aren't sold on the pension bond or fund sweeps yet. A top House Republican said the GOP wants to talk with the speaker about getting a capital bill passed soon.
Jones said in a statement that the House knew it was "playing a dangerous game in which the people of Illinois could lose" when it left town without approving the money necessary to cover extra spending. He reiterated the Senate has done its job and now the House must act.
"These aren't easy votes to make, but they are necessary to finish the people's work," Jones said.
The Associated Press contributed to this report.