Wednesday, July 07, 2010

Hynes report paints dire fiscal picture

By Jamey Dunn

At the close of the 2010 fiscal year, Illinois is running a record tab of unpaid bills and making payments more slowly than ever before.

According to Comptroller Dan Hynes’ quarterly report on state finances, Illinois rolled over $4.7 billion in unpaid bills into the new fiscal year. Not all the bills have come in, and the comptroller estimates that number could reach $6 billion by the August 31 deadline for submitting payment requests. The number of unpaid bills at this time last year was almost $2.8 billion.

The state takes on average 153 workdays to fulfill a payment request, up from 99 days last year. The General Assembly passed and Gov. Pat Quinn approved a measure that gives Illinois until December 31 instead of the usual August deadline to pay its bills from last fiscal year. Hynes estimates that after those debts are paid, Illinois will face its biggest budget deficit to date. The current shortfall is $4.692 billion.

Part of that deficit is due to drops in revenue. Income tax revenues, both personal and corporate, were down $1.6 billion at the end of fiscal year 2010. Sales tax collections were down $465 million. Taxes from other sources, such as investment income, insurance and inheritance tax, were down $123 million.

Revenues from last fiscal year fell $1.3 billion short of projections. So, according to Quinn’s Office of Management and Budget, Quinn, Hynes and State Treasurer Alexi Giannoulias have agreed to move forward with $1.3 billion in borrowing to make up the gap. The cash is expected to come in near the end of July and will go to pay down the backlog of bills.

Hynes’ report says without this borrowing, Quinn’s newly approved power to shift money from special funds to the general revenue fund and the securitization of national tobacco settlement payments, which will produce $1.2 billion upfront, Illinois would have no hope of meeting the extended December deadline to pay off last fiscal year’s bills.

But the report said services and programs for this year will suffer as Illinois stretches to pay down its debt. “It will be extremely challenging to close out fiscal year 2010 and maintain key functions of state government. Other than payments for mandated debt service on state bonds, general state aid to education, federal stimulus related Medicaid and critical state operations, an extremely limited amount of fiscal year 2011’s obligations are likely to be addressed in calendar year 2010 while the state is still dealing with the prior fiscal year’s bills.”

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