CHICAGO, Nov 7 (Reuters) - Illinois has paid all of its bills from the prior fiscal year at the quickest pace in four years but pensions, the biggest drag on the state’s finances, remained unresolved as lawmakers on Thursday wrapped up their last scheduled session of the year.
Strong revenue in July, August and September enabled Illinois to repay remaining bills for fiscal 2013, which ended on June 30, at the speediest rate since 2009, Illinois Comptroller Judy Baar Topinka disclosed in a quarterly report released on Thursday.
As of the end of September, the state’s bill backlog stood at $4.6 billion, down $1.3 billion from the prior September. However, Topinka projected that when all fiscal 2014 bills for the period arrive in her office, the state’s total backlog for bills invoiced as of the end of September was $7.5 billion.
The report cautioned that Illinois “remains in a financially precarious position” as income tax collections are expected to decline in the final quarter of fiscal 2014 versus the same period in fiscal 2013. That is due to a one-time revenue surge in April 2013 as investors rushed to take capital gains on their investments at the end of 2012 to avoid higher federal taxes.
An uncertain economic outlook could also slow growth in sale tax revenue, according to the comptroller.
“If the forecasted decline in revenues materializes, and the state spends its increased appropriations, the financial position of the state will deteriorate,” the report said. If a hike in income tax rates enacted in 2011 is rolled back as scheduled in 2015, that would affect the next state budget, the report noted.
Illinois is struggling with a structural budget deficit and a huge unfunded pension liability. State lawmakers ended their fall session without voting on reforms to reduce the $100 billion unfunded liability for Illinois’ five retirement systems.
The Democrat-controlled Legislature did pass reforms for the Chicago Park District pension fund that increases contributions from workers and from the district and makes changes to retirement ages and cost-of-living increases for retirees.
At a hearing Wednesday on the bill, House Speaker Michael Madigan said the legislation was the product of negotiations between the district, the pension fund and workers with the aim of boosting the funded level for pensions to 90 percent from the current approximately 50 percent.
But Senate President John Cullerton, who supported the measure, said on Thursday that park district unions that did not support the bill could go to court to challenge it on the grounds it violates Illinois constitutional protections for public worker pension benefits.
The lack of action on state pension reform has helped pound Illinois’ credit ratings to the lowest among states, boosting Illinois’ borrowing costs in the U.S. municipal bond market.
The state is still eyeing a general obligation bond sale this fall for an ongoing capital improvement program.
“We are evaluating the cash on hand versus projected cash needs and that will determine the timing of any issue,” John Wisenheimer, Illinois’ capital markets director, said on Thursday.
Meanwhile, legislative leaders are awaiting an actuarial analysis of the latest tweaks to a potential reform plan and could return to session for a vote if there is an agreement, said Steve Brown, Madigan’s spokesman.