Good news has been all but nonexistent when it comes to the abysmal state of Illinois’ finances. The state’s pension shortfall stands at a hard-to-fathom $141 billion. Its bond rating continues to hover near junk status. And it was only a few years ago, 2017 to be exact, that Springfield’s backlog of unpaid bills had reached $16.7 billion.
But about that backlog. There’s some welcome news. Illinois Comptroller Susana Mendoza reports that Illinois’ stack of overdue bill payments has been whittled down to $3.4 billion. That’s very close to the amount the state would pay in a 30-day payment cycle. In other words, Illinois is now on track to pay its bills on time — within 30 days of receipt.
For that, we give Illinois a celebratory “corona foot shake.” (Look it up on YouTube. It’s a thing.)
Yes, it helped that the state borrowed $6 billion in 2017 to pay down old bills, which was cheaper than piling up late-pay interest costs. During the years when the state’s unpaid bill backlog was at or near its zenith, the amount of late payment interest penalties shouldered by taxpayers was sky-high, around $711 million in 2018. That’s an unconscionable amount of money Illinois taxpayers were forced to pay, on top of shouldering one of the nation’s highest tax burdens, because the state couldn’t pay. Imagine better uses for that money. There are millions.
Illinois owed billions of dollars to Medicaid providers, insurers, hospitals, day care facilities, homes for the developmentally disabled — even school districts. The bills started piling up in 2005 to around $1 billion. By 2009, the backlog was around $5 billion. It shot up to $6.8 billion in 2012 and continued to rise to that peak of $16.7 billion in 2017.
Why couldn’t the state pay its bills on time? Why did Illinois turn into such a deadbeat? Because lawmakers and governors for years passed unbalanced budgets, spent more than came in and refused to address old pension costs that today crowd out all state revenue.
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In a letter to three major rating services, Moody’s Investors Service, S&P Global Ratings and Fitch Ratings, Mendoza urged the agencies to consider “progress made paying down the backlog when evaluating Illinois’ credit worthiness.” A credit rating upgrade would make borrowing less expensive and help the state steady its financial outlook.
Still, the state’s got a long way to go before — if — it can dig itself out of debt. Springfield’s love affair with spending has to be reined in. According to the University of Illinois’ Institute of Government and Public Affairs, spending in Illinois from 2010 to 2020 exceeded incoming revenue by an average of $6.2 billion, or 10%, each year.
Mendoza also points out that the backlog reduction doesn’t take into account more than $3.6 billion that the state borrowed from the Federal Reserve to pay state medical bills during the peak of the pandemic. Money that Illinois is getting from President Joe Biden’s American Rescue Plan stimulus package should be used to pay back the amount borrowed from the Federal Reserve, Mendoza says. We’ve said it before, and we’ll say it again: That money shouldn’t go toward a splurge on pork projects.
The average Illinoisan knows what smart money management entails. Pay your mortgage and car loans on time. Don’t overspend and don’t overborrow. Sometimes, you have to say “no.”
We’ll let you know when lawmakers figure that out. In the meantime, here’s to small victories.
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