Wednesday, February 09, 2011
 
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Illinois' massive borrowing plan may not be enough

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[February 09, 2011]  SPRINGFIELD -- Even if a proposed $8.75 borrowing plan is approved by the Legislature, Illinois wouldn't be able to immediately clear its cache of old bills, the governor's office says.

During an Illinois Senate committee hearing Tuesday, Malcolm Weems, associate director of Gov. Pat Quinn's Office of Management and Budget, pegged the number the state owes, including corporate tax refunds and other non-contract bills, at roughly $9.5 billion. The entirety of the borrowed money would go directly to paying late bills, according to Weems.

"We actually wanted it to be a bigger number because our needs and our pressures are greater than the $8.75 (billion)," he said.

But borrowing some is better than none, Weems said.

Quinn's office has maintained that because the state pays a 1 percent interest rate to vendors whose bills are more than 60 days old, the more than $3 billion in interest from the borrowing would wind up being cheaper. It was a line that Weems repeated Tuesday.

His comments come a week before Quinn is scheduled to deliver his budget address to the Legislature.

The recent income tax increase would go to help pay off the debt as well clear the backlog of bills. Sen. Matt Murphy, R-Palatine, asked whether the projected $7.3 billion in new revenue this calendar year could be used in place of borrowing.

"If the policy decision were made just on the math, the policy decision were made that rather than borrow $8.75 billion, the idea was to take the tax increase revenue and pay down this backlog of bills, whether it's 12 months or 18 months ... couldn't that be done?" Murphy asked.

Not without "decimating" state government, Weems said. But he conceded that it was possible if one were just looking at the raw numbers. To maintain state services like education and health care, and pay down the backlog, it would take about 10 years, according to Weems.

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He said that paying off vendors quickly helps the state get the best deals it can from its contractors.

"What we're finding is we have vendors that choose to cancel contracts, and they want to rebid them because they are going to ask for a higher rate," Weems said. "We have some vendors that don't want to participate, and they don't want to answer any of our solicitations at all. They don't want to enter into a new contract with the state. We've had some bigger vendors who have tried to get us to agree in the contract to pay in advance."

Murphy and other Republicans, like Aurora Sen. Chris Lauzen, said that adding debt to a state already crippled by a deficit doesn't make financial sense. Instead, they want to use money from the tax increase coupled with cuts to state services to get the state in fiscal order.

Quinn will have to win over some GOP members in the Legislature. Any borrowing needs a three-fifths majority to pass. Neither the state Senate nor the state House of Representatives has enough Democrats to muscle the plan through.

[Illinois Statehouse News; By ANDREW THOMASON]

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