Report: State's unpaid bills to hit $22 billion by 2018

Illinois' backlog of unpaid bills will reach nearly $22 billion within five years if lawmakers don't take action to fix the state's worst-in-the-nation pension crisis, according to an analysis released Monday by a Chicago-based watchdog group.

The report from the Civic Federation notes some improvement since last year, when it was forecasting a $35 billion backlog in overdue bills. The improved outlook is largely because of $1.6 billion in Medicaid cuts Gov. Pat Quinn signed into law last year.

But the overall financial picture remains dire, with annual payments toward Illinois' $97 billion unfunded pension liability threatening to “swamp all of state government,” Civic Federation President Laurence Msall said.

This year, the state's annual pension payment is about $5.1 billion, or roughly 22.1 percent of the state's general fund. The payment will grow to $7 billion — or nearly 31 percent of all general funds — by 2018 without pension reform, the analysis found.

That would mean even less money would be available for the state to pay its bills.

Currently, the backlog is $7.8 billion. An increase to $21.7 billion by 2018 could mean health care providers, nursing homes and other vendors would be waiting more than a year to be paid, Msall said. That raises the question of whether they would be able to keep their doors open or continue to provide services such as health care for state employees and retirees.

“No one knows if the state will be able to continue to operate under that scenario,” Msall said.

The report comes about a week before Quinn is scheduled to present his budget for the next fiscal year. Projections issued by his budget office last month showed the growing pension costs would result in a cut of about $400 million for education. It also projected cuts for public safety and economic development.

The Chicago Democrat has said pension reform is his top priority — a refrain echoed by other top lawmakers. But legislators remain unable to agree on how to fix the problem. Proposals have included raising the age at which public employees may retire, reducing annual increases for retirees and asking employees to contribute more. Some lawmakers also say the cost for teacher pension funds should be shifted to local school districts — a proposal Republicans fear could lead to property tax increases.

Msall said Monday they should be working to “immediately” address the issue.

The report also recommends the state expand eligibility for Medicaid in order to receive additional federal funds available through the Affordable Care Act; continue Quinn's long-term plan to move the developmentally disabled from institutions and into community-based settings and “aggressively pursue” cuts in state funding of retiree health care insurance premiums.

Abdon Pallasch, Quinn's assistant budget director, said the administration welcomes the Civic Federation's report.

“Last year, they supported our successful rescue and overhaul of the Medicaid program, which led to a better outlook for our budget from the Civic Federation this year,” Pallasch said. “The Civic Federation continues to support our efforts to reform the state's public pension systems, which will stabilize the state's finances.”