Illinois Comptroller Susana Mendoza announced this week the state has paid down its bill backlog to a manageable level.
"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," Mendoza said Wednesday.
Illinois went without a budget for over two years between July 2015 and August 2017 as legislators and former Republican Gov. Bruce Rauner waged a heated battle over the state's financial problems. During that time, the state's bills continued to add up. While no funds were appropriated, the comptroller was still required by law to pay local governments, pensions and debts.
As of this week, the amount of Illinois' unpaid bills dropped to $3.5 billion. That's down $13.2 billion from a height of $16.7 billion in November 2017.
"The reason it's a good thing is businesses and others who contract with the state won't have to wait as long to get paid. It's not typically something that is touted as an accomplishment because it's more a base thing you expect from the government," said Adam Schuster, director of budget and tax research at the Illinois Policy Institute.
The comptroller's office says they can now pay the state's bills as they come in and the most recent unpaid bills come from this week. They say the remaining $3.5 billion are intragovernmental transfers- funds the state already has that need to be moved from one state agency to another.
According to the comptroller's office, a bill backlog of $3 billion on a state budget of $42 billion is acceptable debt in the private sector over a 30-day period.
"(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," Mendoza said.
The Debt Transparency Act took effect in January 2018, which requires state agencies to submit monthly debt reports to reduce surprises about new bills for the comptroller's office.
Schuster said Illinois was able to pay down its bills largely thanks to $6 billion of bonds sold at the end of 2017. Now, federal aid was able to help the state in the short term as the state looks to pay its bills for the end of the fiscal year.
"We're not out of the woods, there hasn't been any underlying improvement in the state's fiscal situation," Schuster said.
Mendoza also warns it is not smooth sailing for the state yet. The current bill backlog does not reflect an additional $3.6 billion the state borrowed from the federal reserve to fight the COVID-19 pandemic last spring.
"I'll say it as often as I need to: Illinois must craft a balanced state budget for fiscal year 2022 without depending on the one-time federal relief money the state received," she said. "Responsible budget-making directs the fate of the backlog as we continue making headway with our finances and show taxpayers and the credit rating agencies that we're serious about restoring Illinois' financial stability."
Mendoza wants Illinois lawmakers to use $3.6 billion of the $7 billion the state received from the American Rescue Plan to pay the state's COVID bills before spending the aid on other things.
Schuster said other debts the state carries over from year to year such as pension debt and annual deficits mean Illinois has more debt beyond the $3.5 billion of unpaid bills.
According to the legislative Committee on Government Forecasting and Accountability, Illinois' bill backlog will rise again to $19.1 billion under the state's current five-year average growth in spending.
Schuster said spending caps, a requirement that Illinois' budget balances at the end of the year, and pension reforms are needed to prevent Illinois from tallying up another large backlog of unpaid bills.