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Illinois is facing a deficit of several billion dollars, is behind on payments to healthcare providers, has understaffed agencies, and has hit an impasse on an important infrastructure bill.

All that was true even before the state鈥檚 governor was arrested last month on corruption charges. Now, the scandal surrounding Gov. Rod Blagojevich, who continues to defy calls to step down, is incurring real damage as Illinois flounders in a difficult fiscal crisis without an effective leader at the helm, many lawmakers and observers say.

鈥淗e was a bad governor before the arrest, but now we have no governor,鈥� says Dick Simpson, a political science professor at the University of Illinois in Chicago. 鈥淭he state is absolutely frozen. Not a single decision is being made about anything important.... In a recession like this one, we need someone to make the best possible hard decisions and to coordinate efforts to pull together and deal with it, and we don鈥檛 have that.鈥�

The latest unexpected twist in the Blagojevich saga came on Tuesday, when he defied the wishes of state officials and US senators by naming a replacement for President-elect Obama鈥檚 vacated Senate seat. The decision was a reversal of an earlier statement by Governor Blagojevich鈥檚 lawyer, who had said the governor would not seek to appoint anyone to the seat.

The Senate leadership has vowed not to seat his pick, former Illinois Attorney General Roland Burris, but it is unclear whether they have the legal right to carry through on this promise.

Meanwhile, impeachment proceedings are under way against Blagojevich in the state capital, and few people expect him to remain governor for long, despite his protestations that he is innocent of the charges against him.

The whole affair, say critics of the governor 鈥� a group that, at this point, includes most lawmakers, pundits, state officials, and voters 鈥� has created a circus in which everyone is watching to see what Blagojevich does and how the impeachment plays out, but no one is tackling the serious issues in the state.

鈥淚f we were in the best of times, maybe you could get by with an ineffective governor, but that鈥檚 not the situation we鈥檙e in,鈥� says Jay Stewart, executive director of the Better Government Association, a government watchdog group, noting that the state is behind in many of its payments and the deficit is only getting worse. 鈥淭hese monumentally complex matters can鈥檛 be dealt with while he鈥檚 governor. No one trusts him, no one believes him, and a lot of people don鈥檛 think he鈥檒l be governor much longer.鈥�

In addition to the gridlock on the budget and other important legislation, the governor鈥檚 legal troubles have already cost the state at least $20 million in additional interest payments, when the state postponed a bond sale by several days immediately following Blagojevich鈥檚 arrest. In the interim ratings agencies downgraded Illinois鈥檚 debt rating. Standard & Poor鈥檚 put the state on a negative credit watch, due in part to Blagojevich鈥檚 legal troubles and the degree to which they鈥檒l hinder efforts to solve the deficit problem.

鈥淏efore, [Blagojevich] was ineffective, but we weren鈥檛 at absolute gridlock. Now, nothing can get done,鈥� says state Rep. Jack Franks (D), a frequent critic of the governor.

State deficit at $5 billion

The budget deficit is currently almost $5 billion, he notes, schools don鈥檛 know how much money they鈥檒l have next year, and a much-needed capital-spending bill that would help create jobs and fix crumbling infrastructure doesn鈥檛 have a hope of getting passed until the governor is gone.

Perhaps most troubling, the state is behind on Medicaid and other healthcare payments, so many doctors have stopped taking new Medicaid patients, pharmacies aren鈥檛 filling prescriptions, and there鈥檚 a danger that some nursing homes and pharmacies will be forced out of business.

鈥淭his [scandal] is not something that鈥檚 in a vacuum,鈥� says Representative Franks, who hopes the impeachment process will be nearing an end by the end of January. 鈥淩ight now the people of Illinois are suffering in many ways.... It鈥檚 a domino effect throughout the entire state government.鈥�

Professor Simpson, who teaches at the Chicago campus of the University of Illinois, says that the school has been told it will either have to make a 2 percent or 6 percent budget cut next year. 鈥淲e can absorb 2 percent, but 6 percent means we fire people,鈥� he says. 鈥淚f someone were in power and were doing something about it, we鈥檇 know what our cut was, we鈥檇 have a plan that鈥檚 reasonable to project what to do next year, and we could always hope that someone would do something useful about trimming other parts of the state budget. The uncertainty means that every employee has to worry about their job.鈥�

Blagojevich鈥檚 office didn鈥檛 return calls, but the governor has stated that he is continuing to do his job, and each day his office issues press releases of bills he has signed and the sort of gubernatorial announcements and proclamations that are the everyday stuff of government.

Move to name senator shocks many

Many Illinoisans were stunned by Blagojevich鈥檚 move to name a US Senate replacement, since one of the central charges against him was that he had tried to 鈥渟ell鈥� the seat to the highest bidder.

鈥淲e can鈥檛 take much more around here,鈥� says Dawn Clark Netsch, a professor emeritus at Northwestern University鈥檚 law school and a candidate for governor in 1994. 鈥淲e鈥檙e not the only state in trouble, but ours is pretty serious. We just don鈥檛 need all this business on the side.鈥�