Illinois Bill Payment Backlog ‘Potentially Catastrophic’

Published February 1, 2009

The Illinois state government owes more than $4 billion in late payments to hospitals, pharmacies, fuel suppliers, and other firms, and the total could reach $5 billion by March, according to State Comptroller Daniel Hynes (D).

“The situation is extraordinarily bleak,” said Senate Minority Leader Christine Radogno (R-Lemont). “This is the biggest backlog ever.” She blames the problem largely on years of overspending and a practice of pushing bills from one fiscal year into the next.

In a letter to Gov. Rod Blagojevich (D) and state lawmakers, Hynes said the situation has become “potentially catastrophic.”

Service Cutoff Threats

Hynes’s November letter apparently was prompted by two incidents in which vendors threatened to cut off services because Illinois was so late paying its bills. One vendor served food in state prisons, and the other provided fuel for the state’s police patrol cars.

Hynes expedited payments for those two vendors but said the situation is getting worse and he may not be able to expedite payments again.

About $1.5 billion of the problem stems from unpaid Medicaid bills. The remaining $2.5 billion encompasses “the entire spectrum of state service providers, vendors, and institutional payees,” Hynes wrote in his letter.

Lack of Trust

Radogno said part of the problem stems from lawmakers in both major political parties who “do not trust” the governor. “We need a governor who would get extraordinary powers and partner with us lawmakers to address the problem, but he’s so marginalized, and that’s a big problem,” Radogno said.

Blagojevich was arrested by federal officials on December 9 and charged with “a corruption crime spree.” A recent Chicago Tribune poll showed Blagojevich with an 8 percent approval rating, the worst rating for an Illinois governor ever recorded by the newspaper’s polling.

Blagojevich’s office did not respond to requests for comment.

Greg Blankenship, president of the Illinois Alliance for Growth, an organization promoting fiscal restraint in government, said, “This has been an issue in Illinois even during the boom years. This state has had a particularly nasty spending environment. Big business, labor, and government sit down to divvy up the pie. Corporatism is alive and well in Illinois; that’s what it comes down to.”

Purposely Late

Sheila Weinberg, chief executive of the Institute for Truth in Accounting based in Northbrook, Illinois, said the state has been purposely delaying payments to make an excuse to repeatedly borrow money.

“They let those bills pile up until providers start crying they will have to shut down,” Weinberg said. “Lawmakers get so panicked that they borrow money to pay the bills instead of paying them out of the normal budget. The borrowed money becomes ‘funds available,’ which becomes a way to spend more money. It’s just a way to expand spending.”

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.