CHICAGO – A one-time infusion of higher-than-expected income tax revenue helped Illinois make a $2.7 billion dent in its chronic bill backlog but the salve is temporary as the number is expected to again climb in the coming months, Comptroller Judy Baar Topinka said Wednesday.
The state entered the fourth quarter of the fiscal year in April with an $8.5 billion backlog but over that month cut that figure down to $5.8 billion, dramatically shortening vendors’ wait time for payment to one month from five to six months.
An infusion of tax income tax revenue drove the decline and has helped put the state on course to carry about $6 billion of fiscal 2013 obligations into the new fiscal year July 1. That’s down from the previous year and a previous estimate of $8 billion. The state has closed out the last three fiscal years owing between $7.5 billion and $8.5 billion.
Topinka cautioned that the relief is temporary warned in her office’s state quarterly fiscal report Wednesday that payment times are expected to again lengthen in the coming months as the office expects the state will owe $7.5 billion by August.
“Illinois is the only state in the nation where $5.8 billion in unpaid bills sounds like real progress and one-month payment delays are something to celebrate,” Topinka said. “The sad truth is that even with more than a billion dollars in unexpected tax revenue we owe schools, hospitals, not-for-profits and private businesses in every part of the state and this is as good as we expect it to get.”
Gov. Pat Quinn recently announced that the state expected to close out the fiscal year June 30 with a one-time infusion of $1.3 billion in additional income tax revenue. It came from assets, bonuses, or early dividends received by businesses and individuals seeking to have their income taxed at 2012 rates in anticipation of higher federal tax rates this year.
“Illinois must not let a strong tax season burn a hole in its pocket,” Topinka said Wednesday. “This is not the time for new spending. Just the opposite, we need to use these final days of session to pass the leanest budget possible, and address the long-term challenges facing our state.”
The partial expiration of a state income tax hike looming in fiscal 2015 also dampens the state’s future ability to chip away at the bill backlog – a warning that echoes those issued by the Quinn administration in its three-year financial forecast.
The strain to find the revenue to pay down Illinois’ bills heightens the urgency for pension reform as pension payments will rise by nearly $1 billion next year to $6 billion. Lawmakers are scheduled to end their session next week and two vying pension reform packages are pending.
The state’s backlog totaled $6.5 billion at the close of the fiscal year’s third quarter on March 30, up $940 million from a year earlier, the new report showed. The backlog included $4.9 billion in general revenue fund bills and $1.6 billion in education related aid. Additional bills held by state agencies brought the figure up to $8.5 billion.
Base revenues for the first nine months of the fiscal year rose by 6.6% while expenditures rose by 7%. Those numbers rose to 11.2% and 11.1 %, respectively, when April was also counted.
If current revenue and spending projections based on existing appropriation levels hold with no additional spending approved by lawmakers, Topinka said the state will carry at least $6 billion of obligations into the new fiscal year July 1 and the backlog could grow to $7.5 billion by August.
The state is planning in the coming months a sales tax refunding in the $600 million range and a $1 billion new-money GO issue.
In a statement late Wednesday, Quinn’s assistant budget director Abdon Pallasch said in response to the comptroller’s report: “Gov. Quinn is working with the General Assembly to use the $1.3 billion in one-time revenues to pay down old bills. This is consistent with the governor’s approach to stabilizing the state’s finances by bringing discretionary spending down to 2008 levels, working to pass pension reform; revamping the Medicaid budget and the Workers Comp process in Illinois.”