Along with the state’s first full budget in 3 years, Illinois lawmakers this month approved plans to pay down the enormous bill backlog that was a byproduct of the financial stalemate.
But the person who will ultimately write the checks to pay down that backlog is warning that the end of the stalemate – and the higher taxes that were approved as part of that deal – aren’t a quick fix for eliminating the stack of bills that total nearly $14.5 billion.
“I need to do a good job of tempering people’s expectations,” said Comptroller Susana Mendoza. “It’s not like we won the Lotto. There’s still not enough money to cover the bill backlog, and we’re going to have to continue to have people, unfortunately, waiting longer than they would like to be made whole.”
Here’s a look at some of the issues surrounding the state’s payment of old bills.
How much of the backlog can be eliminated?
Negotiators said the plan included in the budget package would allow $8 billion of the backlog to be paid. An analysis of the plan by the Civic Federation said it could allow about $8.1 billion of the backlog to be paid. The Civic Federation used $15 billion as the starting point for the backlog.
Mendoza said, however, she would consider it a success if $5 billion could be knocked off the backlog. The higher figure, she said, would mean all of the moving parts of the payment plan “would have to be perfect for that to be the case.”
“I don’t want to give people false expectations that we are going to be able to pay off $7 billion to $8 billion,” Mendoza said. “I think that’s a number that a lot of people want to hear. I just don’t think it is a realistic number.”
But didn’t the state just raise income taxes by about $5 billion?
Yes, but remember those taxes don’t show up all at once. They are collected over the entire fiscal year that began July 1. Plus, it takes time for businesses to make adjustments to begin collecting those higher income taxes from employees in the first place. Mendoza said it could be September before additional revenue “will allow us to start to give some relief to some of these folks who have been waiting months and months for payment.”
Which bills will be paid first?
Both Mendoza and Rep. Greg Harris, D-Chicago, a principal architect of the budget plan, said a focus will be on Medicaid expenses and making other payments that qualify for federal reimbursements. That amplifies the financial impact of whatever state money is devoted to those old bills. Harris also said a focus should be made to pay bills that qualify for late-payment penalties to ensure the interest the state must pay on those bills doesn’t climb any higher.
Outside of higher taxes, how does the budget deal help pay down the backlog?
A major part comes from borrowing. The plan authorizes the state to borrow up to $6 billion that can be applied to old bills. However, Harris said that state revenues will only allow the state to borrow about $3 billion right now. If additional revenue becomes available in the future, that could be used to finance additional borrowing. Harris mentioned pension bonds that will be coming due. Money now used to repay them could be redirected to paying down further borrowing to pay old bills.
When is the state going to borrow the money?
That’s not clear. One of those who must sign off on the borrowing is Republican Gov. Bruce Rauner. His office said last week he had no comment on the borrowing.
Mendoza, a Democrat, said she’s sought a meeting with the governor’s staff to discuss the issue and has gotten a response that the budget staff hopes to schedule a meeting. As of late last week, though, that hadn’t happened.
Is there anything that can be done right away?
Yes, and it was last week that Mendoza’s office released more than $500 million for higher education. The money was sitting in a special account, but couldn’t be used because there was no budget. With approval of the budget, there was authority to spend the money.
It was considered part of the overall plan to cut into the bill backlog. The plan also allows the state to take $300 million out of dedicated state accounts and to borrow another $1.2 billion from those accounts. The borrowed money must be repaid in two years.
There is a potential hitch to tapping into those special funds. Mendoza said her office is reviewing those funds before taking money from them. There could be problems, for instance, if those funds also receive federal dollars that could not be used to pay general state expenses.
“I think the estimates that were originally put out were a little too liberal for my liking,” she said.
Will the backlog ever get down to zero?
The short answer is never. Even in the best of times, the state has a fair number of bills in the pipeline waiting to be paid. Harris pegged the amount at about $4 billion to $4.5 billion.
That’s why state officials usually use a standard of how long it takes bills to be paid, the target being 30 to 60 days.
“At this point, that would be fantastic,” Mendoza said. “Even if we had a $5 billion backlog, that’s manageable with a budget in place.”
“It will take us a while to get there,” she said.