Illinois State Comptroller Susana A. Mendoza recently announced that the state’s backlog of unpaid bills has fallen to $3.5 billion from a high of $16.7 billion in 2017, meaning that, for the first time in years, the state is paying its bills as they come in.
There remains $3.5 billion in interfund transfers owed to other branches of government, group health insurance bills with limited appropriation authority, and invoices at state agencies that have not yet been forwarded to the Office of Comptroller for payment.
“This is a remarkable day that I have been working toward since I took office in December 2016 amid the budget impasse when the previous administration was paying nursing homes and hospice centers up to a year late and they let the backlog climb to $16.7 billion,” Comptroller Mendoza said in late April when the backlog first dropped to $3.5 billion.
Comptroller Mendoza has said that when the backlog gets down to $3 billion in a $42 billion budget, that’s essentially within the 30-day payment cycle common in private industry.
“This achievement is the result of diligent daily management of the state’s cash flow by my office, supported by state agencies that now provide monthly updates on the number of bills and late payment interest penalties they are holding at their offices,” she said.
The Debt Transparency Act, resulting in monthly Debt Transparency Reports, was a hallmark initiative of Mendoza’s in 2017. It has eliminated costly surprises and has allowed for more effective management of the state’s checkbook.
Paying down the backlog has been aided by steady revenue receipts, even during the pandemic. April, when state residents and businesses pay their taxes, is generally the best revenue month for the state. Though the deadline for filing taxes was postponed to May 17 this year, it appeared many filers may have submitted their taxes by April 15 anyway.
Mendoza cautioned that the low bill backlog does not mean the state has overcome its fiscal challenges.
The backlog does not reflect the more than $3.6 billion Illinois borrowed mainly from the Federal Reserve to pay state medical bills during the worst days of the COVID-19 pandemic and return money to the Illinois economy.
The comptroller had hoped to utilize a portion of the $8.1 billion in American Recovery Plan Act funds to quickly pay off the borrowing. Unfortunately, recently issued federal guidance prohibits those funds from being used to pay off borrowing. Comptroller Mendoza has filed an appeal and requested a rule change with the U.S. Treasury.
Thankfully, as a result of a number of factors, including the state’s investments in key economic sectors like small businesses and childcare providers, Illinois’ revenues have come in stronger than expected.
This overperformance, in tandem with effective cash management by the Illinois Office of Comptroller, will be instrumental in beginning to pay down the outstanding federal debt while awaiting a decision from the Treasury.
In the meantime, while they await the final ruling, Comptroller Mendoza has informed the bond rating agencies that the state’s bill backlog is under control and assured them she is doing everything possible to manage the current backlog of bills and address Illinois’ finances head on.
She asked the agencies to consider these positive factors and progress made paying down the backlog when evaluating Illinois’ credit worthiness. ■
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