By Benjamin Yount | Illinois Watchdog
SPRINGFIELD — Like any person who has a huge stack of unpaid bills, the state of Illinois has terrible credit. But lawmakers at the statehouse want to borrow $2 billion none the less.
An Illinois House panel on Wednesday approved a plan to borrow $2 billion to pay Illinois’ 6-month-old stack of unpaid Medicaid bills.
“This is money we owe,” said state Rep. Barbara Flynn Currie, D-Chicago. “We can talk all we want about the problems that remain on the table … But in the meantime, we owe these providers real money.”
The Illinois Comptroller’s office says the state owes $2.6 billion to hospitals, doctors and pharmacists for Medicaid costs.
But state Rep. David Harris, R-Arlington Heights, said it’s not what the state owes, but what the state will pay to borrow the money that is the bigger problem.
“It’s (like) an individual with a credit card who gets a great rate and says ‘I can relieve the pressure by borrowing’,” Harris said. “We’re not solving the problem of spending too much. We’re not solving the problem by paying down our old bills in a reasonable way.”
Harris and other Republicans say Illinois’ bad credit is going to drive up the interest rate on the $2 billion bond sale.
Greg Cox, a lobbyist who helped craft the borrowing plan, said Illinois likely will pay nearly 5 percent interest to borrow the $2 billion. That is more than the state agreed to pay when it borrowed $800 million earlier this year. And 5 percent interest is nearly three times what California is paying to borrow money.
“The thing no one likes to talk about Illinois bonds is, there is always a market for them,” Cox told lawmakers Wednesday. “The rate is high. Why would you buy a California bond, when you can buy an Illinois bond at (5 percent interest).”
But Harris said there is simply too much debt in the state.
“Our bonded debt has increase 25 percent over the last decade,” Harris was quick to note.
In addition to the $2.6 billion in old Medicaid bills, the state owes nearly $5 billion more to businesses, local governments and school districts. And Illinois has the worst-in-the-nation pension debt at nearly $130 billion.
“As opposed to paying $60 million in prompt payment interest, we will be paying about $40 million on this (borrowing),” said state Rep. Frank Muatino, D-Spring Valley, adding that borrowing money now will save Illinois money in the long run.
Mautino said by using the federal Medicaid match and redirecting money back into the state’s coffers, Illinois can pay off the $2 billion in five years rather than 10 years.
But state Rep. David McSweeny, R-Cary, said Illinois needs to show investors and taxpayers that the state is willing to cut costs before it borrows more.
“We need to adopt pension reforms before we even consider this,” McSweeny said.
The Illinois House has passed a few pension reform measures, but final reform plan has not surfaced.
The new borrow plan now heads to the full House for uncertain vote.
Contact Benjamin Yount at [email protected] and follow him on Twitter @ILWatchdog.