New analysis shows big taxpayer savings from financing state’s overdue bills (VIDEO)

trotter sb42 presser

SPRINGFIELD— Illinois taxpayers could save billions of dollars in late payment costs if Gov. Bruce Rauner would take advantage of a new law allowing him to refinance that debt, a recent financial analysis concluded.

State Sen. Donne Trotter asked the Illinois General Assembly’s Commission on Government Forecasting and Accountability to investigate potential savings from the state borrowing now to pay down a backlog of old bills that is incurring upward of $2 million a day in interest penalties.

“It’s critical that we get the state’s backlog of overdue payments under control,” said Trotter. “This analysis proves the point that we can lower interest payments, save money and bring financial relief to providers and vendors who do business with the state.”

Trotter, a Democrat from Chicago, sponsored Senate Bill 42, which gives the governor the ability to access low-interest borrowing to pay down the backlog of overdue bills the state owes to businesses. The legislation authorizes up to $6 billion in borrowing that would be paid off over the next 12 years.

The commission’s analysis found that $5.5 billion in bills are prompt pay status, potentially racking up 12 percent in interest annually because they’re more than 90 days late. The commission concluded interest payments could reach $8 billion over the next 12 years if nothing is done to address the backlog.

However, the commission found that interest payments could be cut down to less than $2 billion if Rauner utilized the low-interest borrowing authority lawmakers gave him.

“The state already borrowed this money. But it borrowed it from businesses that never knew they were giving loans to Illinois. Let’s borrow from lenders at low-interest and get the money back in the economy. There’s a responsible path forward to make the best out of this bad situation and potentially save taxpayers billions,” Trotter said.

Marvin Lindsey is the CEO of the Community Behavioral Healthcare Association of Illinois. He says receiving late payments from the state has a real world effect.

“Community mental health and substance use organizations across the state are short-staffed because of state dollars that are owed to them. It’s unfortunate because many are in dire circumstances, including mothers seeking help for their children, people struggling with opioid drug addiction and mental health problems. This is simply unacceptable,” said Lindsey.

South Shore Hospital is owed more than $4 million by the state and approved managed care organizations. Hospital Vice President Leslie Rogers echoed Lindsey’s concerns.

“We’ve had to borrow money just to make our payroll. This and other cash flow issues led to two rounds of layoffs this year. Also, the interest from the loans has cost us more than $200,000 that we’ll never get back. We could’ve used that money to serve more people if the state and the managed care organizations had paid us on time,” said Rogers.

Bond ratings agencies have also said low-interest borrowing makes sense for Illinois. Recently, Standard & Poor’s made the following observation about Illinois’ debt:

“… given that the state pays elevated annualized interest rates of 9% or 12% on much of its unpaid bills, a debt financing does offers [sic] the potential for fiscal savings.”

Trotter’s legislation passed the General Assembly but was vetoed by Gov. Rauner. The General Assembly then overrode that veto. So far, Rauner has not utilized his ability to lower interest payments.

“I urge the governor to take action, so together we can move the state forward toward financial stability,” Trotter said.

Trotter's letter to the governor, delivered with the COGFA report, is here.