Moody's Investors Service says the stalemate is symptomatic of "severe" challenges, such as ballooning pension payments, debt costs and dwindling revenues, as a 2011 temporary income tax increase rolls back.
Moody's says Illinois' projected budget hole is about $5 billion, and addressing it will become harder if lawmakers approach the September end of the fiscal quarter without a budget deal.
The Republican governor and Democratic-controlled Legislature haven't agreed on a July 1 fiscal year budget. Money is still being spent, including through court orders.
Rating agencies have given Illinois the worst rating of any U.S. state.