CHICAGO — Illinois ended the last fiscal quarter with a pile of $5.9 billion in overdue bills, $2 billion more than a year ago even though tax collections are on the rise, Comptroller Judy Baar Topinka reported this week in her office's quarterly overview of the state's balance sheet.
The release of the report came as Gov. Pat Quinn's budget director Jerry Stermer testified before a legislative hearing on state finances and suggested that the administration would like to resurrect a borrowing plan to pay down bills.
The increase in the bill backlog at the end of September - marking the end of the first quarter of fiscal 2013 - over the same period last year occurred even though taxes generated an additional $150 million. The increased backlog is due primarily to the faster clip at which state agencies are submitting bills and a hike in monthly pension payments.
"Beyond those numbers, potential shortages in the fiscal year 2013 budget further cloud Illinois' fiscal future," the report warned. That's due to pressures the state faces to increase appropriations in areas such as health insurance and the Department of Children and Family Services. The fiscal 2013 cut funding in those areas but more revenue may be needed just to keep those programs and departments operational.
"If additional appropriation authority is granted without accompanying revenue increases or spending cuts in other areas, Illinois will make little headway in reducing the payment delays that have plagued the state in recent years," the report warned.
The backlog at the end of October rose to $6.5 billion. The state closed out fiscal 2012 on June 30 with an $8 billion backlog and Quinn's $33.7 billion 2013 budget earmarked $1.3 billion to make a dent in the backlog before the close of fiscal 2013.
For the most recent quarter, general fund revenues increased by 7.1 % while base spending grew 4.6 % in the first quarter. Individual income tax receipts grew $61 million, or 1.8 % during the first quarter, corporate income taxes climbed by $87 million, or a strong 18.4 %, and sales taxes declined by $20 million, or 1.1 %. Federal revenues increased by $359 million, or 64.5 percent, as the state paid off more Medicaid bills which in turn triggered a federal match. General Funds base spending increased by $352 million, or 4.6 %.
In summary, the comptroller's report warned that payment delays will continue. "However, the magnitude of the delays and the overall outlook for the state's fiscal condition will be contingent on the action of the state agencies and the General Assembly throughout the remainder of the fiscal year," it read.
The state's unpaid bill backlog, along with its past operating deficits, and mammoth pension obligations are the central factors behind a series of rating agency downgrades and are watched closely by investors who impose an interest penalty on state paper.
Stermer on Thursday brought up during a legislative hearing the option of borrowing to pay down bills, but the administration later downplayed its focus on the issue, saying pension reform tops the governor's agenda heading into the new year.
Quinn has previously floated borrowing between $6 billion and $8.75 billion. Republican opposition prevented the three-fifths majority needed to pass new borrowing. Quinn is a Democrat and the party's majority was increased to at least three-fifths following the election this month, however new borrowing may remain a hard sell for Democrats as such deficit financing could further erode the state's ratings.
"While we have always been interested in refinancing as an option to help pay down old bills, there is no new plan on this issue right now. The budget director today reiterated our interest in working with the General Assembly on this issue, which is not new," said state budget spokesman Abdon Pallasch.
Standard & Poor's rates the state's general obligation debt A with a negative outlook. Moody's Investors Service rates the state's $32.8 billion of general obligation debt A2 with a stable outlook and Fitch Ratings assigns an A rating and stable outlook.