November 13, 2008 / 9:28 PM / 11 years ago

Illinois' unpaid bills near $4 billion, services at risk

CHICAGO (Reuters) - Illinois needs to take steps to ease a record backlog of unpaid bills totaling nearly $4 billion that could lead to cuts in services and even the closure of nursing homes, the state’s comptroller warned on Thursday.

Illinois Comptroller Dan Hynes said state suppliers now face a 12-week delay in getting paid at the same time the national credit crunch has made it difficult for them to borrow money to bridge the payment gap. He also said the unpaid backlog could top $5 billion by March.

“There can be no doubt that these record-setting payment delays pose a serious danger to the solvency and operations of any institutions that depend on state funding,” Hynes said in a statement. Payment delays could rise to 20 weeks by March, he said.

In a letter to Gov. Rod Blagojevich and legislative leaders, Hynes said changes were needed in Illinois law governing short-term borrowing in order to give the state more flexibility to deal with the problem,

“Unfortunately, due to the magnitude of this problem, the existing parameters of the short-term borrowing statutes are either inoperative under present circumstances or do not allow sufficient liquidity within the remainder of the fiscal year to be effective,” Hynes wrote.

He advocated establishing a revolving credit line to avoid repeated short-term borrowings.

“We agree that short-term borrowing could be helpful to pay bills quickly during this time of year and manage the state’s uneven cash flow,” said Katie Ridgway, Blagojevich’s spokeswoman. She added that the governor is interested in helping to get vendors paid on time and will review legislative changes that the comptroller proposed.

Because of the payment delays, Hynes said state vendors have been threatening to withhold goods or services or may be forced to go out of business.

He added that Illinois could face other consequences as well, including a delay of several months in more than $1 billion in payments to public school districts, the curtailment of food deliveries to prisons and mental institutions, and the inability of state police vehicles to fill their tanks using gasoline cards.

He also warned of the closure of nursing homes, day care centers and other facilities that have run out of cash to pay staff or their own vendors.

Local governments, universities, and community colleges could also face a tough time meeting payroll because of the state’s failure to pay cost reimbursements, according to Hynes.

Reporting by Karen Pierog; Editing by Jan Paschal

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