Illinois lawmakers who recently ended the longest fiscal standoff of any state since the Great Depression are counting on an ironic strategy to dig out of mountains of debt: borrowing even more money.
It’s an unorthodox approach, considering deficit spending largely created the mess, and Illinois’ worst-in-the-nation credit rating makes borrowing inordinately expensive. However, supporters say it’s the best way to begin to erase $14.6 billion in overdue payments to vendors and service providers.
Bills that are 90 or more days past due incur 12 percent in late-payment fees. By paying off a chunk of that at a time with the sale of bond proceeds, the state could cut that rate in half.
“We are being smothered by our liability and our indebtedness, not only in the state and trying to deal with the budget, but with the people we owe money,” said Democratic Sen. Donne Trotter, of Chicago, the assistant majority leader who sponsored the measure.
Trotter said it currently takes Illinois about 200 days to pay a bill, but his plan would reduce that to as few as 60 days.
The Democratic-controlled General Assembly endorsed the budget — and a $6 billion borrowing scheme — over Republican Gov. Bruce Rauner’s vetoes. However, it’s unclear whether Rauner will actually use the borrowing authority given to him. He has said nothing about it in the 10 days since the budget was passed, and his spokeswoman, Eleni Demertzis, declined to comment on Thursday.
It’s not necessarily “unorthodox.” For two years, the state spent more than it was taking in, under judicial orders and executive branch contracts and leases. Revenues now balance with spending, but businesses and not-for-profits are owed billions. Continuing to borrow from them is irresponsible and forces continued and unnecessary hardships. It’s therefore better (and in many cases cheaper) to borrow on the bond markets.