Fiscal year 2019 revenue shortfalls are expected to cause a $1.5 billion to $2 billion increase in the bill backlog.
January 30, 2019
SPRINGFIELD, IL — The one-year anniversary edition of the Debt Transparency Act (DTA) report, released by Comptroller Susana A. Mendoza’s office today, lays out the fiscal challenges facing Illinois as the Governor and General Assembly begin work on the fiscal year 2020 budget.
“Since my office started publishing Debt Transparency Act reports last year, they’ve provided a crucial, monthly window into the state’s finances. These reports give our new Governor and members of the General Assembly a valuable tool to inform them about the state’s fiscal situation heading into this year’s budgeting process,” Comptroller Mendoza said. “It will take years for our state to recover from the damage caused by the failed budgeting practices of the previous administration. The first step on that path is approving a responsible budget for next fiscal year.”
The report, which is an addendum to the monthly report, highlights the need to use realistic projections for revenues and savings for the fiscal year 2020 budget.
“The current budget was a consensus budget, but it’s important to remember that it did not solve all of our state’s fiscal problems. In fact, it will make the bill backlog worse,” Comptroller Mendoza said. “I urge Governor Pritzker and the General Assembly to use realistic projections when estimating revenues and cost savings and to avoid relying on any concepts they know cannot be realized in fiscal year 2020. Failing to do so essentially amounts to shoveling more bills onto our already unsustainable bill backlog.”
Budgeted revenue shortfalls of the fiscal year 2019 budget are expected to cause a $1.5 billion to $2 billion increase in the bill backlog. The fiscal year 2019 budget counts on revenues from sources, such as selling the James R. Thompson Center in Chicago, that aren’t going to be realized. It also includes savings from proposals, such as a pension buyout plan, that will potentially fall short for the current fiscal year.
The report also calls for direct action to reduce the state’s bill backlog and describes the potential consequences of failing to reduce the backlog, including a negative impact on the state’s credit ratings. Illinois ratings currently remain just above “junk” status.
“The major ratings agencies have cited Illinois’ rising backlog as a reason for previous ratings downgrades,” the report says. “Moody’s Investors Service specifically noted that one way Illinois can improve its near-junk bond rating is to show ‘progress in reducing payment backlog’ and ‘prevent renewed build-up of unpaid bills.’”
Low bond ratings cost taxpayers more when the state borrows for major initiatives, such as repairs to roads and bridges and other infrastructure needs.
“Crafting a responsible budget that meets the needs of our state for the next fiscal year is going to be an incredibly challenging task. I urge policymakers not to forget about Illinois’ bill backlog, which currently stands at $7.5 billion,” Comptroller Mendoza said. “Without direct action, there’s no hope of substantially reducing our stack of unpaid bills. In fact, the backlog is going to grow because the current budget is based on some revenue assumptions, which aren’t going to happen. As long as the backlog is delaying payments, Illinois is being a bad business partner to thousands of small businesses and schools and putting more strain on our already weakened social safety net.”
Key findings of the report include:
The unpaid bill backlog continues to force the Office of the Comptroller into crisis management; impede timely bill processing; cause instability for state programs; and creates unnecessary and costly late payment interest penalties.
Budgeted revenue shortfalls of the fiscal year 2019 budget are expected to cause a $1.5 billion to $2 billion increase in the bill backlog.
Given that the fiscal year 2019 budget also failed to address the current backlog of bills, taking significant steps in fiscal year 2019 to pay down the backlog of unpaid bills – or even keeping it static – is impossible.
Temporary tools to manage the backlog granted under the current budget do not resolve systemic budgetary issues. Dedicated funding is needed to lower the bill backlog.