As Illinois runs out of options in budget crisis, tax rises seen in the cards [5/20/2015 GMT]

Republican Bruce Rauner smiles after winning the midterm elections in Chicago, IllinoisBy Megan Davies, Nick Brown and Karen Pierog NEW YORK/CHICAGO (Reuters) - With no easy way to financially engineer or negotiate its way out of a budget and pensions crisis, Illinois is likely to dish out some unpleasant medicine to its residents in the next few years. Given the Democrats' control of the state legislature and their opposition to many proposals for spending cuts, municipal bond fund managers see little alternative for Republican Governor Bruce Rauner other than eventually agreeing to hike taxes, such as raising the state’s income tax or broadening its sales tax base. Chicago, the third biggest U.S. city and the place where about one in five of the state's residents live, is suffering from similar pension issues and may have to take additional pain, the investors said.

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