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IL: Borrowing for old bills an ‘aah’ sure to be an ‘ugh,’ treasurer says

By   /   December 6, 2012  /   1 Comment

Illinois Treasurer Judy Barr Topinka

By Jayette Bolinski | Illinois Watchdog

SPRINGFIELD — It’s really enough to make your head spin.

A proposal in the state legislature to borrow $4 billion to pay down the state’s backlog of bills could mean a double-whammy for Illinoisans who ponied up to pay off old bills as part of a 67-percent “temporary” personal income-tax hike.

The problem is that none of that tax money has gone to pay down the backlog, which now stands at a half-billion dollars more than it was two years ago.

It’s a structural issue, said state Treasurer Judy Baar Topinka.

“This is not hard to understand. If you keep doing the same thing over and over and over again, you get the same result,” she said.

“If you borrow $4 billion, you’ll pay off the backlog now, but then that cycle will start all over again, and you’ll have another backlog because the structure stays the same, and at the same time now we’ll have a $4 billion bond debt that’s been added on to what we have already.”

In January 2011, Illinois lawmakers promised to use part of a 67-percent  personal income tax hike to pay down old bills — bills that amounted to $8.5 billion. Today, as they consider borrowing $4 billion — again to pay down old bills — the backlog stands at more than $9 billion.

As of Wednesday, there were 196,141 unpaid bills at the comptroller’s office, amounting to $6.9 billion. Add to that the bills that haven’t been sent to the comptroller yet, including $1 billion in Medicaid payments and $1.4 billion in employee health insurance payments.

So where did the tax money meant for old bills go? To pensions and Medicaid, experts say. That, coupled with a spending problem, is why the state is coming around again, looking for money to pay unpaid bills, said Ted Dabrowski, vice president of policy at the Illinois Policy Institute, a right-leaning think tank.

“That promise is broken. All it did was fill the coffers. It allowed the state to pay down the pensions. And that increased tax load helped them avoid reforms on pensions and allowed them just to keep spending more money,” he said.

Topinka agrees. Lawmakers may be trying to do the right thing, but borrowing to pay down the old bills is “a short-term, feel-good ‘aah’ that ends up an ‘ugh,’ she said.

“What happened to the magic tax increase that came out last session that was supposed to pay for the unpaid bills? That went totally to Medicaid and totally to pensions, and we did not get Dollar One to pay for unpaid bills,” she said. “So now they’ve still got the unpaid bills to pay and they want to borrow $4 billion.”

The borrowing proposal, House Bill 6240, has 17 co-sponsors, all Democrats. But bill sponsor Rep. Esther Golar, D-Chicago, facing opposition to the plan, asked for more time before a committee vote. The Legislature returns Jan. 3 for its final “lame-duck” session, and it could come up then, but its future is uncertain.

Phone calls and an email to Golar’s office this week were not returned.

Ultimately, more borrowing is out of the question, Topinka said, and that means vendors will have to continue to wait, at least until the economy improves and revenue picks up.

“The state really cannot afford to do this because we might be able to pay them this time around, but if they are doing work with the state the next time around, we will be in the same hole, if not worse, because now we will have the interest payment on a greater debt load we have to pay,” she said. “So it doesn’t solve the problem.”

Until the state changes its ways, its debt will continue to mount, vendors doing business with Illinois will have to wait months to be paid, and taxpayers will be on the hook for even more, the experts say.

Topinka said she believes the economy is improving and, given time, will enable the state to pay down the backlog in a more reasonable manner.

Most vendors, she added, probably would tell her to borrow the money so they can be paid, but that only stands to make the state’s finances worse.

“They (the vendors) have not done anything wrong here. They need to be paid,” she said.

Contact Jayette Bolinski at jayette.bolinski@franklincenterhq.org. Find Illinois Watchdog on Facebook and follow us on Twitter @ILSthouseNews.

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  • barkermr

    The Ideal is to borrow, the money and pay the bill off, but at the same time be paying back what you borrowed and come together using you head for more than a hat rack think of ways to pay the up coming bill that will be due the next year at the same time. Money is being wasted some place go back over the books and start from scratch.