By Karen Pierog
CHICAGO Feb 25 Illinois' stack of overdue bills
could nearly triple to $21.7 billion in five years unless the
state takes action to curb its public pension costs, a financial
watchdog group said on Monday.
"Lawmakers need to adopt a long-term mindset and restructure
the unaffordable pension systems that are keeping the state in
its fiscal downspin," Lawrence Msall, president of the
Chicago-based Civic Federation, said in a statement.
The group's report said the amount of unpaid bills would be
down from the nearly $35 billion it previously projected the
state would face by fiscal 2017, largely due to cuts Illinois
made last year to Medicaid, the healthcare program for the poor.
But the $21.7 billion in outstanding bills owed to vendors,
social service providers, hospitals and others in fiscal 2018
would be 2.8 times the $7.8 billion in forecast bills in fiscal
2013, which ends on June 30.
Illinois stands alone among states in the scope and way it
has institutionalized late payment of bills as a
State Comptroller Judy Baar Topinka reported on Monday that
her office had $6.88 billion in bills dating back to the end of
August when the first half of fiscal 2013 ended on Dec. 31. That
was up $2.6 billion from the same period in fiscal 2012.
Estimates of bills that state agencies have yet to send to
the comptroller would push that amount to more than $9 billion
at the fiscal year's halfway point, according to the
comptroller's quarterly report.
Topinka also reported that the legislature may have to pass
more spending before the end of fiscal 2013 on June 30 to cover
health services to the poor and other costs.
PENSIONS WEIGH DOWN BUDGET
Illinois has the worst-funded state pension system, at 39
percent, far below the 80 percent level considered healthy.
Lawmakers in the Democrat-controlled legislature have been
unable to rally around a plan that would reduce pension costs
and labor unions have warned that they will rely on strong
protections for retirement benefits in the Illinois Constitution
to fight changes.
The Civic Federation said pension costs, including annual
state contributions and payments on outstanding pension bonds,
could gobble up nearly a third of state-generated revenue in
five years. It added that the state must also prepare for
increased Medicaid costs in the future.
"We've reached a breaking point where the state will not be
able to make its future pension payments without sacrificing
basic government services," Msall said.
Compounding Illinois' fiscal problems is the partial
expiration in 2015 of income tax rate increases the state
enacted in 2011, according to the report. The forecast assumes
the rate increases will expire as scheduled, and the drop in
revenue, combined with burgeoning pension payments, is projected
to result in a $4.2 billion operating deficit in fiscal 2018.
Deputy Majority House Leader Lou Lang introduced a bill last
week that would make the personal income tax rate increase
permanent, coupling the move with pension changes.
That proposal joins other pension reform
measures the legislature is supposed to consider this year.
Credit-rating agencies have cited the partial expiration of
the tax increases as a negative factor for Illinois, along with
the state's nearly $97 billion unfunded pension liability and
structural budget deficit. Illinois has the lowest ratings among
states from Standard & Poor's and Moody's Investors Service.