Illinois Debt Crisis Deepens As Comptroller Admits No Idea What True Balance Of Outstanding Bills Is

Back in July, the state of Illinois narrowly avoided a junk bond rating with a last minute budget deal that included a 32% in hike in income taxes.  Republican Governor Bruce Rauner vetoed the budget and called it a "disaster," but both houses of the state legislature voted to override his veto.  Meanwhile, S&P and Moody's were apparently both convinced that the budget deal was sufficient for the state to remain an investment grade credit and all lived happily ever after, if just for a few months.

But, with the state's past due payables hovering around a record $16 billion...

...which is a 3-fold increase over the past two years...

...one has to wonder, as we have on many occasions, just how solid Illinois' credit rating really is.

But as staggering as Illinois' $16 billion in unpaid contractor bills is, per a report from the Associated Press today, it may not even fully reflect the true extent to which the state has stiffed its vendors.

Illinois is chasing a moving target as it tries to dig out of the nation's worst budget crisis, and a review obtained by The Associated Press shows $7.5 billion worth of unpaid bills — as much as half the total — hadn't been sent to the official who writes the checks by the end of June.

 

Although many of those IOUs have since been paid, a similar amount in unprocessed bills has replaced them in the last three months, Comptroller Susana Mendoza's office said Monday. That's in addition to $9 billion worth of checks that are at the office but being delayed because the state lacks the money to pay them.

 

The mound of past-due bills tripled over the two years Republican Gov. Bruce Rauner and Democrats who control the General Assembly were locked in a budget stalemate, which ended in July when lawmakers hiked income taxes over Rauner's vetoes.

Of course, in the end, it's Illinois taxpayers who end up getting hurt the most as the state is racking up penalties of 1% per month on unpaid bills that are outstanding for more than 90 days.  As the AP points out, there is roughly $5.5 billion worth of trade claims that are past 90 days overdue meaning that taxpayers are paying just over $650 million a year to cover interest payments on unpaid contractor bills.

In some cases, agencies were waiting to send their receipts to Mendoza because lawmakers haven't approved the spending. For example, the Department of Corrections had $471 million in unpaid bills on hand as of June 30 largely for that reason.

 

"Ascertaining the precise nature of the state's past-due obligations and liabilities is an essential component of responsible cash and debt management," the Democratic comptroller wrote in a letter to Republican Rep. David McSweeney, a budget hawk from Barrington Hills who requested the review.

 

Mendoza and McSweeney plan to use the findings to urge lawmakers to override Rauner's veto of legislation that would require monthly reporting of bills not yet submitted for processing. The measure, authored by Mendoza's office, would include a breakdown of how old each bill is and which ones have received legislative approval to be paid.

 

The age of bills is important because many that are 90 days or older face a 1 percent-per-month late-payment fee; about $5.5 billion of the current $15.9 billion backlog is subject to the penalty. Mendoza estimates the state will ultimately pay $900 million in late-payment fees on the existing pile of debt.

 

The Department of Central Management Services, which handles personnel, procurement and employee health care, has most of the June 30 bundle, with $5.8 billion. That's mostly doctor's bills owed to employee medical providers under the state group health insurance plan.

Add that to the state's $130 billion pension underfunding...

IL Pension

...and you start to understand why Illinois bonds are trading well over par and near all-time highs...makes perfect sense really.

Comments

shizzledizzle Decay is Constant Wed, 10/11/2017 - 18:11 Permalink

I strongly reccomend rural Missouri... Not far away from you currently, their taxes are reasonable and really nice land can be had for around $1500 - $2000 an acre. I jumped over the border from Arkansas because property taxes there are becoming absurd (Due to the influx of Walmart Executives). Beautiful place though and that particular area faired quite well in the 2008 downturn in comparison to places like Atlanta GA (where I was living at the time).

In reply to by Decay is Constant

Juliette Wed, 10/11/2017 - 17:51 Permalink

One after another of the states of the US of Assclowns will collapse under their debt! IL is just the start ... Puerto Rico is a de facto state, too, so there are two already.

silverer Wed, 10/11/2017 - 17:56 Permalink

The vendors are morons. When they don't pay you when payment is due, you stop providing services unless you feel generous. I'll bet 90% of those people are confident they'll get paid, because "a state always pays its bills". Nice try, vendors. I'll tell you what will happen. The way out of debt for Illinois won't be pretty. They will be forced to do something ugly, and I'll bet the vendors will be lucky to get $0.10 on a dollar.

indygo55 Wed, 10/11/2017 - 18:00 Permalink

They don't know in this world of technology because they don't need to know. They don't need to know because there is no incentive or penalty. They believe it will blow up and they will be bailed out. They being the State Fund. Not that THAT is gonna happen.

QIG Throat-warbler… Wed, 10/11/2017 - 18:09 Permalink

The Govenror is a shlock, a faker. He should go. If he was half as capable as he needed to be they would be making money. But he is more intersted in making it possible for people to violate our immigratin laws, much too busy to care antyhting about the tax payers.I worked in Chicago 20 years, Great city. Hard working people of great creativity. At the top though, it is total corruption and lies.

In reply to by Throat-warbler…

Stormtrooper affirmed_78 Wed, 10/11/2017 - 19:25 Permalink

States cannot file bankruptcy because they are sovereign.  The fed.gov is their agent and has no control over state finances.The states, however, can outright default and just not pay.  Wouldn't be the first time in history.  So, if you are smug enough to think that you are guaranteed payments for state debts, you may get a lesson in history very soon.

In reply to by affirmed_78

affirmed_78 Wed, 10/11/2017 - 18:03 Permalink

Again, the burden will be spread out quietly among the populace, who won't really feel an immediate hit.  Bondholders will never take a haircut and there is a seemingly endless wave of money happy to takeout existing holders.

Thisfuckenlife Wed, 10/11/2017 - 18:09 Permalink

You were stupid enough to think the state would automatically pay you for any work you did... for them. Now you're stunned when they didn't have an endless treasure chest of money to fund it all. All Idiots Deserve Government.

SweetDoug Wed, 10/11/2017 - 18:23 Permalink

''''Here's a cure for the pension problems!Go back and retroactively, fire and punish all those who couldn't balance a fucking budget, pay a bill, or just kept on keeping on this process!Think of the savings! OJOV-V

Anteater Swamidon Wed, 10/11/2017 - 18:36 Permalink

And even if you never get paid and have to join a hopeless class-action lawsuit, you still get to look forward to all of your accountsbeing hacked through a leak at the State Comptrollers, just likethe MIC contractors found out in 2013, when Pentagon had allof its MIC contractor accounts and bank information hacked."Get Equifax. Sorry." That's all the notice that we got, beforehackers hit our Pentagon direct-deposit pass-through account.Think they got $19.95, about the cost of an Earl Scheib paintjob.

In reply to by Swamidon

FakeTapper Wed, 10/11/2017 - 18:35 Permalink

Illinois is fucking ruined. Everyone who lives here knows it  Everyone with a brain has left or is looking to get out. Let the pensions fail along with the rest of the state government.