In Springfield ...

According to a report issued by the National Conference of State Legislatures, Illinois finished its fiscal year in the worst financial shape of any state in the nation. The budget crisis is making life harder on people across the state, whether it's expectant mothers reliant on the Illinois Department of Human Services' Family Case Management program or those who use non-Medicaid funded community mental health and disability services.

To bring in new revenue and help stop the bleeding, Gov. Pat Quinn’s (pic 2) budget director David Vaught told Bloomberg that the Quinn administration expects lawmakers to raise the state's income tax rate from 3 to 5 percent during the January lame-duck session. State Sen. John Cullerton (D-Chicago), whose body passed a 2 percent hike last year, thinks the plan has a lot of merit. And State Sen. Larry Bomke (R-Springfield) (pic 8) told Gov. Quinn’s chief of staff Jerry Stermer Monday that he would be open to an income tax increase if the revenue was specifically targeted to cover short-term borrowing notes that would be used to pay down the state’s $6 billion in unpaid bills.

But with an election coming up, Gov. Quinn himself is balking at the idea, telling reporters that he would likely veto any income tax increase greater than the 1 percent hike he supports. The governor's repose to the dust-up accentuates Illinois' bankrupt budget conversation.

In other statehouse news, two progressive pieces of legislation (a nursing home reform [pic 3] bill and a wage theft protection bill) were signed into law, a U.S. District Court questioned the fundamental practices of Illinois' only "supermax" prison, and we urged progressives to expand access to responsible small-dollar loans and reform the procedural rules of the Illinois House.

In Chicago ...

In a closed-door meeting Friday morning, Richard Daley's (pic 6) top budget aides told Chicago aldermen that the mayor's preliminary 2011 budget projections show that the city is facing a $654 million shortfall. The budget situation is so dire, in fact, that Daley's own budget director acknowledged Friday that the administration might dip into the mayor's coveted tax increment financing (TIF) fund so they can use the money to shore up the deficit. We outlined a series of approaches to redirect the money to cash-strapped taxing bodies on Thursday.

Despite the financial shape of the city, the mayor seems to be quietly gearing up for a 2010 reelection bid. The latest evidence? He's supporting a housing ordinance introduced by Ald. Pat Dowell (3rd Ward) that will make for a good stump speech applause line.

If the mayor does run for another term, you can be sure Walmart will factor into his campaign pitch. Although Ald. Joe Moore (49th Ward) (pic 5) threatened to delay a vote, the City Council voted Wednesday morning to clear the way for a third Chicago Walmart store, this one in the South Side neighborhood of Chatham. But the parking meter deal, which is proving to be worse than critics even imagined, could be one of Daley's weak spots. So could violent crime. If you're wondering why there are still hundreds of senseless shootings on Chicago streets every year, be sure to check out Chicago Sun-Times' excellent series on crime published this week as well as this WBEZ discussion.

Finally, at a strike authorization vote Thursday evening, UNITE-HERE Local 1 members who work at four Chicagoland Hyatt locations gave themselves the option to walk off the job if contract negotiations continue to sputter. The union's 6,500 hotel workers have been in citywide negotiations since August 2009.

In Washington ...

Just when it appeared that the U.S. Congress was prepared to leave state governments flailing in the wind, a few key Democrats made some noise on Capitol Hill about re-upping their support for Medicaid assistance and a successful TANF jobs program. On Thursday, House Democrats introduced new legislation that extends the  TANF Emergency Fund through FY 2011. Later that day, Senate Majority Leader Harry Reid (D-NV) tacked an amendment onto an unrelated Federal Aviation Administration bill that would provide state governments with $10 billion in funding for teachers’ jobs and $16.1 billion in funding for Medicaid assistance. The bills aren't perfect but they are big improvements over the status quo.

The Obama administration won a key legal battle Thursday when a federal judge blocked some of the most restrictive provisions of Arizona's immigration-enforcement law from going into effect. We tried to figure out how the ruling would influence similar legislation that Illinois Republicans say they will introduce next legislative session. We also provided an update on Illinois' own Sen. Dick Durbin's (pic 1) effort to pass the DREAM Act this year.

It'd be easier to get bills like the DREAM Act an additional unemployment benefits passed in Washington if the Senate reformed its rules to minimize the use of the filibuster. In Illinois, both Democratic U.S. Senate nominee Alexi Giannoulias (pic 7) and Rep. Danny Davis (pic 4) think the anti-majoritarian requirement needs fixing.

On The Campaign Trail ...

According to Rasmussen Reports' analysis of their latest statewide Illinois poll, the U.S. Senate race remains very close. Currently, Democratic nominee Alexi Giannoulias leads Rep. Mark Kirk 43 percent to 41 percent. The bigger news in this campaign, however, has to do with Gov. Quinn's decision to call a November 2 special election for a U.S. senator to fill out the remainder of Roland Burris' term. We explained the 7th U.S. Circuit Court of Appeals ruling that prompted Quinn's maneuver here.

In the governor's race, a new statewide Rasmussen Reports survey of likely voters indicates that Republican gubernatorial candidate Bill Brady has widened his lead over Gov. Quinn. But the front runner caught some bad publicity this week when someone connected to his campaign replaced factual policy positions on its candidate's Wikipedia page with a series of canned talking points. The Quinn side offered Rich Miller a good response. "If Bill Brady doesn’t think his record is too extreme then why did he erase it….?"

Walmart certainly doesn't think Brady is too extreme for Illinois. Illinois State Board of Elections disclosures show that the Arkansas-based retailer shoveled $50,000 last month into his campaign fund. On the other side of the consumer spectrum, both Gov. Quinn and Alexi Giannoulias earned the endorsements of Citizen Action/Illinois, one of the state's largest public interest organizations.

On the congressional front, Republican 10th Congressional District candidate Robert Dold told supporters on Facebook to bone up on Rep. Paul Ryan’s (R-WI) radical budget plan and Rep. Judy Biggert's campaign released the results from an internal poll showing her with a big lead in the 13th Congressional District.

In The Blagojevich Trial ...

Jury deliberations began on Wednesday in former Governor Rod Blagojevich's federal corruption trial after the prosecution and the defense both finished their closing arguments and rebuttals. Expect a verdict next week.