CHICAGO — While its revenues have picked up, Illinois still faces "staggering long-term financial challenges" as it carried $7.4 billion in unpaid obligations — including $3.8 billion in bills owed to schools, transit agencies, health care providers and others — into the new fiscal year, according to Comptroller Judy Baar Topinka.
The amount of unpaid bills at the close of the fiscal year on June 30, $3.8 billion, is down from $4.7 billion a year earlier, The state saw a pickup of revenues thanks in large part to an income tax hike approved midway through the fiscal year, according to the comptroller's quarterly report published Friday.
Some unpaid vouchers date back to January. The backlog is lower than Topinka's office anticipated at the end of the third quarter in March due to higher-than-expected fourth-quarter revenue collections.
Base spending increased by 15.6% during the fiscal year, fueled in part by the state's decision to tap the general fund to pay down Medicaid bills before July 1 when a higher federal reimbursement expired, and by the start of repayment of 2010 pension-related bonding.
Base revenues grew by 12.6%, generating an additional $3.5 billion for state coffers due to the income tax increase, the economic recovery, and several one-shot revenue boosts including a $1.2 billion tobacco bond issue and a tax amnesty program. Income tax collections climbed by $2.7 billion, or nearly 32%.
Fiscal 2011 marked a turnaround after a three-year decline in general revenue fund balances, but Topinka cautioned that the improvement may be temporary because of the one-shots that bolstered the balance sheet in fiscal 2011, and because several billion dollars of other obligations have not yet been counted.
They include employee health insurance bills and corporate tax refunds.
When those other fiscal 2011 obligations are added to the unpaid bills the state carried into the new year, the amount of unpaid fiscal 2011 debt rises to $7.4 billion.
The comptroller expects to owe $650 million in tax refunds, and $1.2 billion for employee health care, while the state must repay interfund borrowing.
State vendors also may still submit $1.2 billion in additional fiscal 2011 bills before the close of the lapse period on Aug. 31, during which bills can be submitted for the previous year. The state has until Dec. 31 to pay them.
"After Illinois pays those obligations, the outlook for the remainder of fiscal year 2012 is unclear," the report read. "Illinois continues to face staggering long-term financial challenges, and enters fiscal year 2012 without some of the key revenue sources and spending shifts that have been used to support previous budgets."
While tax revenues are picking up, they will be sapped by growing pressure on spending. That's because the state faces the loss of several one-time revenues used to prop up its last budget, including the tobacco borrowing and stimulus funds.
In the new fiscal year, the state also must begin making pension payments that it has borrowed to cover over the last two fiscal years.
Those pressures mean it's unlikely that the state's bill backlog will fall dramatically over the next 12 months and most vendors will continue to face significant payment delays, the comptroller's report warned.
Gov. Pat Quinn late last month signed into law a $32.99 billion general fund budget.
When all funds are counted, the state's budget for fiscal 2012 rises to $56.2 billion.
After a series of downgrades, Illinois' GO bonds are rated A1 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.