CHICAGO — Illinois finance officials and the state Attorney General’s office accused each other of scuttling the state’s proposed $1 billion general obligation note sale that was expected to generate as much as $80 million in additional Medicaid matching funds and pay off a backlog of Medicaid bills. The GO certificates were to sell competitively this past Monday and be repaid within 60 days, possibly with revenues generated through the state’s hospital assessment tax that is used to leverage about $600 million more in federal matching Medicaid dollars annually.The state’s treasurer and comptroller must approve short-term financings, and the attorney general typically signs off on all bond transactions. The state faced a deadline of this coming Friday, 60 days past the close of fiscal 2007, to close on the deal in order to count the proceeds under a fiscal 2007 supplemental appropriation that would allow the state to distribute the proceeds to hospitals under the assessment program. For accounting purposes, state law permits a 60-day lapse period for paying bills for 2007 and collecting revenues to count toward the prior year. “While we had a tight timeframe to pull this together, we were able to secure everyone’s sign-off needed, including the comptroller, treasurer, and rating agencies, with the exception of the attorney general, who missed last week’s deadline,” budget office spokesman Justin DeJong said this week. “We’re disappointed because an opportunity has been missed to help both the state and hospitals providing care to our Medicaid clients, but we’re committed to finding a way to make this work despite this set-back.”The deal was pulled together quickly in recent weeks, but lawyers working on the transaction warned last week that Gov. Rod Blagojevich needed to sign the $59 billion, fiscal 2008 budget before the state could proceed. The governor acted on the budget last Thursday, but the attorney general’s office raised other questions over the transaction and did not sign off by late last week when the state had hoped to post a notice of sale, according to budget officials.Attorney General Lisa Madigan’s office sharply denied any responsibility in the sale’s delay, stressing that its approval is needed solely on the final documentation and not for the state to proceed with the transaction. Madigan chief of staff Ann Spillane blamed the deal’s troubled timing on the governor’s failure to sign the supplemental appropriation in a timely fashion after its passage this spring. “The governor’s office botched the hospital assessment program by not signing the bill until Aug. 13 and is now looking for someone to blame,” she said, adding that staff lawyers had conceptually agreed to the borrowing although they were still reviewing various details.The state last sold short-term notes in late January. That $900 million transaction allowed the state to begin distributing to hospitals the additional Medicaid-related funds leveraged through the Illinois Hospital Provider Tax Assessment Program. Health care facilities pay a tax based on volume levels, and in return receive about $600 million more annually in federal matching funds. Madigan’s office also noted that the state could resurrect the borrowing under a fiscal 2008 budget appropriation. Separately, the strained relationship between Blagojevich and many lawmakers escalated this week when the governor announced that he had filed a lawsuit against Democratic House Speaker Michael Madigan of Chicago for failing to convene special sessions the governor ordered at the correct time or requiring members to attend. The governor called for 16 special sessions over the last two months as lawmakers worked on a new budget.The lawsuit filed last week in Sangamon County Circuit Court seeks a court order to compel Madigan, who is Lisa Madigan’s father, to follow the governor’s special session requests as he expects in the coming weeks to call several to address funding for a capital budget and a transit bailout. Madigan contends that while the governor can call a special session, he cannot compel members to attend or dictate the time.
