Illinois Democrats look at loan to pay state's overdue bills

Despite repeated failures, Illinois Democrats again are considering a multibillion-dollar loan to pay down the state's backlog of past-due bills, now hovering at a near-record $9 billion.

Republicans, led by State Comptroller Judy Baar Topinka, continue to resist the short-term loan idea as a way for Illinois to pay down stacks of invoices overdue by as much as four months to businesses, charities and local governments performing some of the state's most essential services.

But an influential Senate Democrat, John Sullivan, is working on a borrowing proposal to re-introduce in this spring's legislative session. A House budget leader, Rep. Frank Mautino, said a loan would mean “tremendous” savings and should be part of upcoming budget negotiations with Gov. Pat Quinn.

The first big obstacle, however, is one matter that everyone agrees on: The borrowing idea won't be considered until lawmakers come up with a solution to an even bigger problem — the state's $96 billion pension deficit. Attempts to solve that crisis broke down earlier this month, meaning the issue could remain on center stage through the legislative session that ends May 31.

“It all depends on solving the pension situation because that eats up 20 percent of our budget and counting,” Topinka said in an interview with The Associated Press. “We do have to solve that problem because all other issues rest upon that solution.”

Meanwhile, with the continuing inaction in Springfield, frustrated community service providers are struggling to keep going. And some accuse the state of using the pension problem as an excuse to delay payments.

“Last year, it was Medicaid. Now it's pensions. What's it going to be next year?” said Judith Gethner, executive director of Illinois Partners for Human Services, a statewide advocacy group of human-services providers.

Gethner's agency conducted a survey of 250 human-service providers last fall and found that three-fifths were awaiting late payments from the state — and 45 percent were so cash-strapped they were considering program cuts. One major provider, Lutheran Social Services of Illinois, says it has gone as far as hiring consultants to recommend the least-painful cuts.

Overspending and an economic downturn have shredded state finances. The bill backlog hasn't budged despite a 67 percent increase in the income tax two years ago, which brings in an extra $6 billion a year. But after years of lawmakers underfunding the pension funds of state employees, the amount from increased taxes won't even cover the required pension payment next year.

Democrats say paying off the overdue bills through borrowing would save the state money. Selling bonds would cost less because the state would pay less in interest than it currently shells out in late payment fines to the service providers, said Mautino, a Spring Valley Democrat.

But the issue has met stiff resistance, particularly from Topinka, who writes the checks and whose office is sitting on bills dating back to Sept. 4.

“You certainly don't borrow to pay a debt,” Topinka told the AP. “All you're doing is consistently getting into debt.”

Republicans fear Democrats will start new programs with the borrowed money. But Mautino said legislation would specifically target the bill backlog.

The state's penalty for late payments is 1 percent a month, starting 90 days after Topinka's office determines a bill is valid. But the law allows only private businesses and nonprofits to dun the state for late fees. Government bodies can't — including the University of Illinois, the state's largest creditor, which the comptroller says is owed $432 million.

Calculating savings isn't as simple as comparing interest rates, according to Quinn's budget office. The Democratic governor, who unsuccessfully pushed to borrow $8.7 billion in 2011, is still supportive but focused on pensions.

Sullivan, a Rushville Democrat, says paying bills is the principled thing to do.

“We've asked schools to educate our children. We've asked different companies that provide goods to the state — whether it is health care or office supplies — we've asked them to provide that service, and now we've said `Oh and by the way, we're not going to pay you,”' Sullivan said. “That's just not morally right.”

Sullivan hasn't settled on a proposed figure to borrow. His $6.2 billion plan in 2011 failed.

So did a more recent, $4 billion plan by Rep. Esther Golar, a Chicago Democrat. A House committee never took a vote on it in last fall's veto session.

Golar did not respond to requests for comment. Steve Brown, spokesman for House Speaker Michael Madigan, D-Chicago, said Topinka's vociferous testimony against the measure during last fall's session had “a chilling effect” because borrowing is “the kind of thing that needs a bipartisan coalition.”

Rev. Denver Bitner, president of Lutheran Social Services of Illinois, said it's unfair for the state to treat its service providers like banks from which to borrow money.

In the past month, the state has owed as much as $12 million to his agency, which operates foster care, mental health treatment, senior housing and other programs. The group recently closed a 24-bed residential program for substance abuse treatment in Chicago's South Side that had operated for 33 years.

Gethner said politicians know faithful nonprofits will find a way to keep going, even without the money.

“The government is taking advantage of mission-driven organizations.”

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Online

Illinois state comptroller: http://www.ioc.state.il.us

Lutheran Social Services of Illinois: http://www.lssi.org/

Illinois Partners for Human Service: http://www.illinoispartners.org/

Ÿ Contact Regina Garcia Cano at https://www.twitter.com/reginagarciakNO