 On Thursday, the Urban Institute
released a report that ranks Illinois as the worst in the nation for
late payments to human service nonprofits. According to the report,
72 percent of Illinois nonprofits have experienced late payments,
compared with 41 percent of providers nationwide.Illinois also
received the third-worst ranking in the nation with 59 percent of
nonprofits saying that reimbursements don't cover costs, and another
72 percent saying the government changes the terms of contracts and
grants. The unreliability of payments and contract terms makes it
difficult for these nonprofit organizations to craft budget plans or
arrange services.
As a result, 31 percent of Illinois nonprofits said they had to
reduce the number of services and programs they offer. Another 65
percent have had to freeze or reduce salaries, while 54 percent had
to cut employees, 38 percent have had to draw on reserves to make
ends meet, 42 percent were forced to borrow money or increase their
line of credit, and 28 percent had to reduce health care, retirement
or other benefits.
Unfortunately, it doesn't look like there is a light at the end
of the tunnel for Illinois. Comptroller Dan Hynes released his
quarterly report on the state's finances, which shows Illinois'
financial status deteriorating as obligations continue to exceed
revenues.
According to Hynes ' Comptroller's
Quarterly, the state began fiscal 2011 in July still owing
and paying on the previous year's bills. As a result, more than $6.4
billion in fiscal 2011 revenue will be used to pay last year's
bills. The Comptroller's Quarterly said even though Gov. Pat Quinn
borrowed $1.3 billion in July to help catch up on obligations, there
are vendors and providers still awaiting payment from invoices
submitted last March. In September, the backlog was $5.5 billion.
Last year at that time, the state owed $2.9 billion.
The state has until Dec. 31, 2010, to pay off all fiscal 2010
debt. Hynes' report said that to accomplish this, the state must
realize three specific revenue enhancements. This includes $1.2
billion that Illinois expects to receive by borrowing against future
funds owed the state from a nationwide tobacco company case, as well
as revenues from interfund borrowing (though $1 billion was
budgeted for Quinn to draw money from, only $263 million has been
transferred in the first quarter.).
The state is also relying on the revenue generated from the
ongoing tax amnesty program. The program began Oct. 1 and will
extend through Nov. 8. Though originally anticipated to bring in
$200 million, that estimate has since been reduced and the
Department of Revenue refuses to speculate on possible returns.
According to Hynes: "A significant failure of any of these
sources will place remaining fiscal year 2010 obligations in
jeopardy. ... Unsatisfied payees could
be forced to seek legal and judicial remedies to obtain payments in
amounts unprecedented in the state's history."
In summary, the quarterly report noted: "The structural imbalance
in the current budget, combined with higher debt service costs and
the loss of federal stimulus revenues, creates the very real
possibility that the governor and the General Assembly will face a
working deficit of $15 billion or more when the fiscal year 2012
budget is crafted early next year."
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 Bomke said it's clear that the public wants its leaders to
prioritize, although the task is made difficult by what the people
find most important, since elementary and secondary education and
Medicaid consume a majority -- almost 60 percent -- of the state's
budget.
Republican lawmakers have argued that core restructuring and
reform, especially in Medicaid, needs to occur in order to maximize
savings, eliminate fraud and abuse, and instill confidence in the
public that tax dollars are being spent wisely.
The apparent conflict between the public's willingness to
consider paying more to protect some services, and their opposition
to raising taxes, may indicate that Illinoisans do not have
confidence that the current administration and its legislative
leaders have made a serious attempt to pare spending.
Finally, a new report from Bloomberg News shows that Illinois is
also faring poorly when compared with some foreign governments not
known for solid financial management. Not only is Illinois tied with
California for the worst credit in the nation, but Bloomberg
found that Illinois recently had to pay a higher interest rate to
borrow money than Mexico, Portugal and Peru.
Mexico defaulted on its debt in 1982, and Portugal is
consistently listed as among the most financially troubled nations
in Europe. The state paid a top yield of 7.35 percent -- more than
Peru, which had a top rate of 7.1 percent. Just like an individual
with a poor credit rating, when a state or country seeks lenders, it
may be forced to borrow at a higher interest rate if the state or
country is considered a poor credit risk.
In less than two years, Illinois has seen its credit rating drop
eight times, and one credit rating agency has warned that the state
could receive another drop soon. If that occurs, Illinois will have
had three times as many credit rating drops under Quinn as it saw
under former Gov. Rod Blagojevich, who held the previous record for
the most credit rating drops.
[Text from file sent on behalf of
Sen.
Larry Bomke by Illinois
Senate Republican staff]
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