Like your cousin who doesn't pay his bills on time and squanders money he doesn't have, Illinois is paying the price -- in both cash and reputation -- for years of ignored warnings about its pension crisis, the worst in the nation.
Largely because of its unfunded retirement plans, Illinois has replaced longtime bottom-dweller California as having the lowest credit rating of any state. So when Illinois tries to borrow money, it faces the same problem as the spendthrift cousin: far higher interest rates.
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The state's financial failings are so well-known, they have inspired a name on Wall Street -- the "Illinois effect," a reference to the fact that cities, universities and other bond-issuing entities here must pay more in interest, even if they are responsible spenders.
"There are investors who won't buy Illinois or bonds with Illinois labels at any price. They just see it as toxic," said Brian Battle, director at Performance Trust Capital Partners, a Chicago-based investment firm. That means the state pays "the biggest penalty by a long, long shot."
Battle compared the Illinois situation to someone who has a good job and plenty of revenue. But "we just spend like crazy, don't pay our credit cards and haven't saved for retirement," he said.
Take the $1.3 billion in bonds Illinois is expected to sell this week to improve highways, rebuild a 40-year-old elevated train line in Chicago and buy land for an airport. Battle estimates the state will pay more than $18 million in extra interest each year than states such as Virginia or Maryland, which have high credit ratings.
That's an additional $450 million over the 25-year life of a bond issue. In personal terms, it's $36 taken directly from the pockets of each of Illinois' nearly 13 million residents. And that's for just one bond sale.
For decades, legislators skipped or shorted payments to state retirement funds, creating a $97 billion pension shortfall and making investors nervous year after year. Yet lawmakers in the Democrat-controlled General Assembly adjourned the spring legislative session last month without a deal. It was the fifth time in 12 months that they left town without solving the crisis.
Within days, two major credit-rating agencies downgraded the state to an all-time low for Illinois. Gov. Pat Quinn called lawmakers back for a special session last week, but they could agree only to form a bipartisan committee to keep working on the problem.
Contributing to the inaction are the state's strong constitutional protections for pension benefits and a powerful union lobby that has opposed across-the-board cuts.
Still, the seeming lack of urgency dumbfounds some onlookers. Among them is Bill Daley, a former White House chief of staff and U.S. commerce secretary from the famous Chicago mayoral clan. He has focused on the pension debacle as he explores a challenge to Quinn in next year's Democratic primary.
"You can't have 13 downgrades in four years ... and think people are going to come here and create jobs," Daley said, questioning the need for repeated legislative sessions that yield no progress. "This is Groundhog Day."
State leaders insist they are trying to deal with the crisis. But in a place known for backroom deals, compromise can be hard to find, even after years of trying.
House Speaker Michael Madigan, who has overseen a Democratic majority in the Illinois House for 28 of the last 30 years, acknowledges that fixing the pension mess is "extremely important for the future of the state."
"This is the time to step up and help the state of Illinois," he said. But the speaker has urged the governor to support Madigan's own solution, which would save the most money, rather than a rival proposal in the Senate that could stand a better chance of surviving a legal challenge.
In the past 50 years, just three states -- California, Louisiana and Massachusetts -- have had investment ratings as low as Illinois, but all have taken steps to correct it. Quinn's office has begged lawmakers do the same, even as the governor endures criticism that he hasn't done enough to broker a deal.
Abdon Pallasch, Quinn's assistant budget director, said the additional dollars spent to cover interest and the annual pension payment -- $6 billion this year, or almost 20 percent of the state's general-fund budget -- represent money that could be spent to achieve smaller class sizes, hire more police or ease prison overcrowding.
"No more alibis. No more excuses. No more delay. (Lawmakers have) had plenty of time," the governor said Monday. "Running in place is not a way to go when it comes to the pension crisis."
Illinois' interest rates are the result of simple supply and demand: Because fewer investors want to take the risk of buying the state's bonds, the ones who are willing to do so are able to charge more.
Several factors are behind the reluctance. Some investment funds and trusts have rules that prevent them from buying bonds that are approaching "junk" bond status, as Illinois is, Battle said. Many investors don't want any names in their portfolio that have made headlines for negative reasons, like Illinois.
The state has a constitutional provision that guarantees it will make its debt payments, but investors also see cities like Detroit reneging on debts or considering filing for bankruptcy and get jittery, said Richard Ciccarone, managing director and chief research officer at McDonnell Investment Management in Oak Brook, Ill.
Illinois' reputation also hits taxpayers on the local level, even in communities with sound budgets.
Suburban Chicago's DuPage County, a wealthy, conservative-leaning area, is among the 1 percent of counties nationwide with the highest-possible credit rating from all three major ratings agencies. But officials there estimate taxpayers will pay $4 million more in interest over the life of a recent $67 million bond issue than if Illinois had its financial house in order.
In March, Moody's downgraded credit ratings for four public universities, noting that the schools rely heavily on state money for operating expenses. The Illinois Sports Facilities Authority, which constructs and renovates sports stadiums such as Chicago's Soldier Field and U.S. Cellular Field -- home of the Chicago White Sox -- has been downgraded twice since January. Chicago also has seen its rating on million in bonds lowered.
Last year, Chicago Mayor Rahm Emanuel travelled to the state Capitol to testify in favor of reform, only to see his efforts -- like all the others -- fall flat.
Kathleen Strand, a spokeswoman for Emanuel, said he continues to stress the urgency of the problem, in hopes a solution can be found.
"The truth is," she said, "we have run out of time."