Monday, July 01, 2013

State ended its fiscal year
with $6.1 billion in unpaid bills

By Jamey Dunn

As its 2014 fiscal year begins today, Illinois still has a stack of $6.1 billion in unpaid bills.

The backlog will be smaller than the $7.5 billion in bills the state owed when FY 13 began last July. However, state Comptroller Judy Baar Topinka estimates that the backlog will grow to $7.5 billion by August. The state ended the FY 13 fiscal year with 73,184 unpaid bills. The oldest bill was from June 2013. Those bills make up about half of the estimated $6.1 billion. Topinka said the rest are sitting at state agencies and have not yet been sent to her office.

Abdon Pallasch, Gov. Pat Quinn’s assistant budget director, said that a bump in the backlog heading into the last half of the calendar year is “cyclical” and to be expected because the bulk of the state’s revenues come when people pay their income taxes in the spring. However, he said that recently, the backlog has experienced a “steady downward trend” as more than $1 billion in unexpected tax revenue — dubbed the “April surprise by Quinn’s camp — allowed the state to pay off old Medicaid bills and bring in matching federal funds. “Part of the focus is to tackle the backlog of bills brought on by under-appropriations of state programs by the General Assembly. That backlog had risen to $9.1 billion in 2012. But thanks to the governor's cost-cutting and focus on paying the back bills, that backlog is down to $6.3 billion and on track to go down to $5.9 billion by the end of FY14,” Pallasch said. “Passage of comprehensive pension reform would greatly aid the governor's efforts to keep bringing that number down. A one-time infusion of $1.3 billion in tax receipts in April also is aiding the effort.” A one-day special session on pension reform in June produced little results, and Quinn has given lawmakers until July 9 to reach a compromise. A conference committee comprising members of both parties and both chambers is meeting to try and craft pension changes that can pass in both the House and the Senate.

Topinka said the additional revenues helped to get some bills paid, but it really only made a small dent in what the state owes to vendors, schools and service providers. “Make no mistake, the ‘April surprise’ is history,” Topinka said. “That windfall allowed us to aggressively pay down bills and provide some relief to vendors, but it did nothing to address the state's systemic budget problems.” She stressed that the state must come up with a comprehensive plan to address its backlog. “Despite years of hand-wringing about state finances, nothing has changed. We continue to force businesses, hospitals, schools and service agencies to wait months on end for promised payment from the state. It is unconscionable and further highlights the importance of keeping spending flat and restoring our fiscal integrity.”

Quinn has supported borrowing billions to pay down the backlog and essentially refinance the state’s debt to vendors at a lower interest rate. However, Topinka has been a vocal opponent of the idea, likening it to taking out a credit card to pay off other debts. In recent years Quinn backed off the borrowing idea as it has consistently failed to get the needed backing to pass in the legislature. He and Democratic legislative leaders have instead opted to slowly chip away at the state’s backlog each year.

The state has faced billions in unpaid bills for years.  For more on that, see Illinois Issues March 2010. 

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