* Back in May, Treasurer Dan Rutherford became a darling of the austerity cheerleaders by saying this…
The treasurer said lawmakers must cut spending and live within their means in order for Illinois to pay off the debt.
“You can’t borrow anymore money,” said Rutherford. “And if I need to send letters to the rating companies to tell them the treasurer of Illinois is opposed to any more borrowing, I’ll go ahead and do that.”
Rutherford said alerting national rating agencies and bond houses could make it more expensive for Illinois to borrow. He said hopes that step would give lawmakers pause before asking for a billion dollars.
Rutherford even raised the spectre of bankruptcy back in January…
“If you look seriously at a condition for a sovereign government: To go bankrupt would send the bond market into turmoil, and I believe it would actually break a considerable trust that those have who deliver goods and services to the government.
* But Rutherford has now changed his tune…
One of the few people with a foot in each camp is Treasurer Dan Rutherford, a Republican.
In May, Rutherford sharply condemned the idea of taking on more debt and threatened to lobby credit-rating agencies to reject the borrowing if Illinois were to go that direction.
But last month he told the Illinois State Chamber of Commerce that not paying bills is “criminal” and it might be feasible to borrow money to pay them.
“For those of you that are owed money from the state of Illinois, I support the idea of looking at refinancing some kind of a package to take the burden of the debt load off of you and put it on the state,” Rutherford said.
In politics, a “flip-flopper” is somebody who changes positions away from your viewpoint. A “statesman” is somebody who flip-flops in favor of your viewpoint. I happen to agree with this egregious Rutherford flip-flop, which, I suppose, makes Rutherford a statesman in my eyes. But he really has some explaining to do.
* From the AP…
Don’t look for quick action to reduce Illinois’ huge backlog of unpaid bills, despite universal agreement among state leaders that the debt is unfair to businesses, charities and local governments that provide valuable services.
Progress is blocked by fundamental disagreements on how to solve the problem and a lack of any sense of urgency among officials. Even with the Legislature’s fall session beginning next week, officials report little or no discussion of what can be done to pay the bills, which total billions of dollars.
* But the Paul Simon Public Policy Institute’s latest poll shows a slim majority opposes borrowing…
The State of Illinois is late paying its bills to organizations that perform services and provide goods to the State. By law, it has to pay those vendors a high rate of interest on those late bills. Iʼm going to read two statements some people are making about how the State should deal with this situation, then ask you which statement comes closer to your views. If you havenʼt thought much about the issue, just tell me that.
* The State should borrow money at a lower interest rate to pay off those late bills, saving money on interest and getting money to businesses and organizations that need to be paid. 39.1%
* The State should just pay its bills as well as it can with current funds and not borrow money to try to fix its problems. 50.3%
* Havenʼt thought much about it 8.7%
* Other/Donʼt know 1.9%
Discuss.
*** UPDATE *** From Treasurer Rutherford’s communications director…
Just wanted to clarify TDR’s position on repayment of unpaid bills. These are some direct quotes from my conversation with him this morning:
“My message has been consistent from when I met with Governor Quinn in February after his budget address and through multiple meetings with the governor’s budget director.”
“We cannot keep spending money we do not have. Illinois has the worst credit rating of any state. Bipartisan pension reform is needed to rebuild our economy and credit.”
“While I am open to a short-term cash management tool, we cannot burden the young citizens of our state with more debt. Already people in Illinois owe more to their government than citizens of Indiana, Wisconsin or Missouri.”
“It is nearly criminal that Illinois government is abusing its vendors by not paying its bills.”
“I have negotiated contracts all over the world in the private sector. One cannot agree to only one part of a contract and hope that the rest of it will come together. That is what the General Assembly did when they raised the income taxes, under the pretense of paying current bills, and then did not resolve the largest liability hanging out there…the state public pensions.”
If the state doesn’t have the money to pay off those late bills, then short term borrowing merely reshuffles the deck chairs.
* Related…
* Deadbeat Illinois: Late payments cost millions in interest: Last year, delays on bills paid months or even a year late meant $27.1 million was paid out of state coffers in interest under the Prompt Payment Act. In 2010, at the height of the state’s budget woes, interest payments totaled more than $62.3 million after sharply increasing over the previous five years.
* Deadbeat Illinois: Political stalemate over Illinois’ debt poses dire threat
* Behind on its bills, state shares $5 billion shortfall with businesses, nonprofits
* Social Services Wait as State Pays Lawyers $285K
* Editorial: Deadbeat? Say, no more
* Commentary: JDC closure would be a disaster for community
* Former Illinois DOT chief gets new state job
* Supporters of Tamms inmate: Solitary should not be dumping ground for mentally ill
* What will RTA get for $45,000 public relations contract?
- PublicServant - Monday, Oct 24, 11 @ 6:48 am:
-”despite universal agreement among state leaders that the debt is unfair to businesses, charities and local governments that provide valuable services.”
State Employees also provide valuable services, so where’s the outrage and universal agreement among state leaders that State Employees ought to have their pension borrowing repaid?
- Shore - Monday, Oct 24, 11 @ 8:17 am:
This is why I am not buying rutherford for any higher office in Illinois. Conservatives won’t trust him for reasons like this and he’s a longtime springfield person.
- wordslinger - Monday, Oct 24, 11 @ 8:25 am:
–“For those of you that are owed money from the state of Illinois, I support the idea of looking at refinancing some kind of a package to take the burden of the debt load off of you and put it on the state,” Rutherford said.–
Maybe Rutherford got a little wobbly given the fact that he was speaking to a lot of folks who are owed money for goods and services rendered and want to be paid.
Not every vendor is like some of the docs and hospitals who can carry the debt for the extra juice.
His initial comments were so ludicrously silly as to invite ridicule rather than scorn. Except for short-term cash flow borrowing, the treasurer has no role in public finance, and everyone in the industry knows it. His phone calls and letters would have been discounted as irrelevant.
- Anonymous - Monday, Oct 24, 11 @ 8:26 am:
Taking a stand against borrowing before the budget is passed is responsible, as is taking a stand in favor of borrowing after the budget is passed. Rutherford proposes to borrow to catch up delinquent payments to vendors. The taxpayers benefit from reduced interest on the debt. I’m not sure I see this as a “flip flop”.
- Michelle Flaherty - Monday, Oct 24, 11 @ 8:32 am:
Anon, so before May 31 it’s a flip flop but after May 31 it’s not? Before May 31 he’ll threaten to sink the state’s credit rating but after May 31 he thinks its hunky dory? That’s some interesting logic. You should seek employment with the Quinn admin. Who knows, you could end up running the budget office.
- Aldyth - Monday, Oct 24, 11 @ 8:59 am:
Gee. Do you think the national coverage Illinois’ deadbeat status has anything to do with his change of heart?
- Ahoy - Monday, Oct 24, 11 @ 9:06 am:
I actually view people who flip-flop as people who stick their finger in the air to see which way public opinion is going. This is simply a change of mind, and it’s a good thing. The polling above clearly shows that the people in Illinois just don’t understand this issue. Also, do we really want people in office who make a decision and won’t change their minds even after facts prove otherwise? Our society needs to allow people to change their minds while still calling out the Romney’s and the Kerry’s of the world.
Kudo’s to Rutherford for having some guts to admit he was wrong and to find a solution to paying off these bills that are damaging our economy. Statesman, flip flopper, call him what you will, this time he’s right.
To anonymous above, I couldn’t disagree with you more. You decide how much debt you are going to restructure and then you factor the payments into the budget. Passing a budget and then factoring in a payment plan would be backwards because you would be restrained by the budget you passed and not a feasible payment plan.
- steve schnorf - Monday, Oct 24, 11 @ 9:43 am:
Rutherford consistently said his opposition to the borrowing was based on the amount and the length of the debt. I’ve said before the Rs would probably accept 4 for 4 (maybe now 3 for 3) with the right guarantees.
- walkinfool - Monday, Oct 24, 11 @ 9:46 am:
For Rutherford to recommend against borrowing, (wrong, but at least responsible) is one thing. But to individually go to the financial markets and publicly encourage rating agencies to downgrade our debt, as he effectively did this Spring, was completely irresponsible, and destructive to the mission of his State office.
His latest position shows a return to sanity on his part.
- Team Sleep - Monday, Oct 24, 11 @ 10:00 am:
He is most certainly setting himself up for something higher than State Treasurer. I’m guessing Governor - I don’t see him running for Senate. He could possibly be worried that the vendors and agencies who are owed serious $$$ would come out in full force against him and put boots on the ground and cash in the bank for his opponent. Make no mistake about it - unless someone like Aaron Schock runs for Governor in 2014, Dan Rutherford will be the GOOP frontrunner. It seems crazy that we’re already talking about an election that won’t take place for more than three calendar years, but if this debt keeps snowballing everyone under the dome will feel the heat.
- PublicServant - Monday, Oct 24, 11 @ 10:02 am:
He may have returned to sanity, but will he stay on his meds?
- Demoralized - Monday, Oct 24, 11 @ 10:05 am:
I continue to fail to see the logic of those who are opposed to borrowing. I’m glad that the Treasurer has changed his tune. I think it is borderline criminal what the state has done to it’s providers. To me, opposing borrowing means you are just fine with the state using the vendors as the bank as opposed to a real bank. Borrow the money already.
- Ahoy - Monday, Oct 24, 11 @ 10:16 am:
I would also propose to those of us who support the State restructuring its debt to stop using the term “borrowing.” We’re already borrowing the money, let’s start using the term “refinance” or “restructuring out debt.” I think using the term borrowing is confusing some people… like the Senate and House Republicans. For some reason they don’t understand that they money is already being borrowed. That or they are wanting to make this an election issue and throwing small businesses, service providers and local governments under the buss to try to win an election.
- D.P. Gumby - Monday, Oct 24, 11 @ 10:27 am:
“The rent’s too damn high”
Borrow at a lower interest than what the State has to pay the unpaid vendors and pay the vendors and move on. Take a second mortgage on the Capitol or sell Starship Illinois a/k/a Thompson Center.
- just sayin' - Monday, Oct 24, 11 @ 10:29 am:
I’m shocked…shocked…that unprincipled politics are going on in here.
- Colossus - Monday, Oct 24, 11 @ 10:41 am:
Gumby -
Because of you, every time I walk into JRTC, I am now going to hear “We built this city on ROCK…AND…ROLL!”
I hope you enjoy your special spot in hell!
- 47th Ward - Monday, Oct 24, 11 @ 10:57 am:
===Conservatives won’t trust him for reasons like this===
Since when is paying your bills not a conservative value? Since when is borrowing at higher rates from vendors a conservative position?
On the other hand, conservatives probably can find other reasons not to like Rutherford, but this isn’t one of them. Paying your bills is most certainly a conservative position.
But good for Rutherford, who may be learning the difference between governing and campaigning. It would be nice if other Republicans figured this out too.
- Its Just Me - Monday, Oct 24, 11 @ 11:40 am:
There is short term borrowing to pay bills, and long term borrowing to spend money you don’t have. The two are very different as Steve pointed out.
- Demoralized - Monday, Oct 24, 11 @ 12:21 pm:
It’s Just Me:
This isn’t borrowing to pay current costs. The state has already incurred the debt. The money has been spent. I’m fine with writing the legislation to state that the funding must be used for bills already incurred.
- Bubs - Monday, Oct 24, 11 @ 12:50 pm:
Taken literally, the positions arer inconsistent, I agree. But I always understood Rutherford to be against borrowing to meet new spending. I don’t think he ever meant that the fiscal crisis was to be resolved by stiffing those owed money.
Unless I am mistaken, the State can actually save money by borrowing to meet this section of the debt, given current interest rates, and contractual interest provisions in most contracts. It also injects the money immediately into commerce.
- Get Real - Monday, Oct 24, 11 @ 1:29 pm:
Bubs…he said he would call bond agencies if the state tried to borrow. Borrowing for even 3-5 years would require bonding. So, is it his plan to call the bonding agencies and rat out himself. This is a classic case of a pol trying to have it both ways without realizing a reporter was in the room documenting it. What a phony
- Working hard in Southern IL - Monday, Oct 24, 11 @ 1:33 pm:
Bubs @ 12:50 pm: “Unless I am mistaken, the State can actually save money by borrowing to meet this section of the debt, given current interest rates, and contractual interest provisions in most contracts. It also injects the money immediately into commerce.”
No, you are not mistaken. Seems like a no brainer. Hmmm, that may explain why it hasn’t been done.
- walkinfool - Monday, Oct 24, 11 @ 2:40 pm:
Rutherford’s statement about the tax increase was false. There was no “pretense of paying current bills” with the tax increase when proposed.
It was part of a three-part plan: a. tax increase for the medium term, b. budget process reform with a statutory spending cap for the long term, and c. short-term borrowing to restructure the current debt in accounts payable. The first two parts were passed, and on a separate vote, the restructuring debt part failed, with a GOP bloc vote against. The tax increase alone was not sold or positioned as a way to pay off the short-term bills, and even included funds identified to pay off the interest on the short-term debt restructuring, when it passed.
I personally think failing to pass the debt restructuring was simply the stupidest substantive vote in the GA in the past three years. And it cost the taxpayers money. Of course it came with a chorus of “no more borrowing” political messaging, by people who knew better.
It makes me wonder if Rutherford was even paying attention at the time.
- Ahoy - Monday, Oct 24, 11 @ 2:46 pm:
–If the state doesn’t have the money to pay off those late bills–
The state needs to start budgeting a plan to pay off these late bills. That’s one of the benefits of the debt restructuring, it laid out a 7 year plan to pay off the bills through a bank (not vendors).