* From the Tribune earlier this week…
Democratic Comptroller Susana Mendoza is again raising the pressure on Republican Gov. Bruce Rauner, calling on him to move forward with a proposal that would allow the state to borrow $6 billion to begin paying down Illinois’ massive pile of unpaid bills. […]
At an unrelated news conference at the Thompson Center, Rauner said the borrowing plan was “not an optimal answer” and suggested he’s looking to work on new plans. Democrats who control the General Assembly, though, might not be interested in renegotiating a budget they approved to break the stalemate last month.
“We will be working with the General Assembly on proposals to actually have an appropriation to pay down debt and have a plan to reduce it and also to have reforms so we don’t stay in this position — where we actually have truly balanced budgets today and going forward,” Rauner said.
Rauner was unable to win changes including freezing property taxes, curbing workers’ compensation costs and weakening union rights. He said, though, that his proposals are “the only answer for our indebtedness, and going out and borrowing more is not going to help the problem.”
There is $6 billion in new financing authority in the budget package, but even optimistic projections say the state could only borrow maybe $3 billion.
That being said, it almost sounds like the governor wants to use the state’s bill backlog as “leverage” to finally get some of his reforms passed.
* Let’s back up to this passage from the governor’s FY18 budget book…
With a history of unbalanced budgets and the budget impasse, the state has accumulated $11 billion in unpaid bills. The Governor is willing to work with the legislature to sell bonds or take other actions to reduce the backlog of bills owed by the state in conjunction with an overall balanced budget agreement. Financing would enable the state to stop accruing high interest on some unpaid bills.
So, he was all for a borrowing program for unpaid bills back then. And he was right because, as the comptroller often notes, the state is paying $2 million a day in interest on its unpaid bills.
* And remember when the governor signed on to the Republicans’ “Capitol Compromise” plan?…
“The comprehensive balanced budget we are offering today will provide care for our state’s most vulnerable citizens,” said Deputy Republican Leader Patti Bellock. “With last week’s court ruling on the $2 billion backlog of unpaid Medicaid bills, it is critically important we take immediate action to address this backlog. Our plan includes more than $4 billion in bonding to help pay off old bills. We must address this crisis now. The consequences of not taking action now would be devastating to human services.”
So, why the sudden change in tone?
As we’ve already discussed today, the governor’s policy director Michael Lucci used to be a commenter on this blog when he was with the Illinois Policy Institute. He was a bit of a hothead and occasionally liked to personally insult me, so I eventually got tired of dealing with him and put him into automatic comment moderation. As a “free market” enthusiast, you’d think the Looch would respect a private company owner’s modest rules about decorum.
* Anyway, before Lucci was hired as Rauner’s chief policy guy, he was the Illinois Policy Institute’s chief policy guy and posted several comments on this site about state debt.
This is how Lucci responded July 5th to Rep. Greg Harris’ contention that money should be borrowed to pay down that mountain of overdue bills…
Harris’ plan is to borrow more from the banks and sweep funds to pay $8 bil from the backlog of bills.
In other words, put the debt on a different credit card and drain your liquidity.
This is exactly what a debt crisis looks like.
In other words, he prefers owing money to struggling social service providers and business owners at insane interest rates rather than borrowing money on the market.
* On July 5th, when Gov. Rauner vowed to stop a veto override and shrugged off warnings that Illinois could be downgraded to junk bond status, Lucci wrote…
Illinois is in a debt crisis.
In a debt crisis, what is good for Wall St. is bad for the people.
It’s worth noting that Dems carried 5 pieces of legislation to bail out the banks this spring. So we know where they stand.
* Also on July 5th, on a post I did about looking at the tax hike in a different way, Lucci wrote…
Illinois has a debt crisis, and this tax hike is addressing a cash-flow issue. And you’re cheerleading it. And it solves nothing but a political cash-flow issue. The debt crisis worsens by the day.
But glad to see another “tax-eater” (that’s you, Rich) is getting to work campaigning on behalf of the tax increase. Someone’s gotta do it.
So, the debt caused by the impasse is merely a “political cash-flow issue.”
* Keep in mind that this gentleman is now the governor’s top policy advisor and was hired 6 days after he posted those comments.
Lucci isn’t wrong about the state’s long-term debt, of course. The state absolutely has to get a handle on that and this budget didn’t do it. Heck, as I’ve said before, it didn’t even adequately address the shorter-term debt from the impasse and didn’t adequately fund government’s current spending levels.
But, from his comments (and there are more), he seems to not care a whit about the plight of providers, vendors, state leaseholders, etc. who are owed billions of dollars by the state government despite contracts signed by the governor, nor about the huge resulting state interest payments.
So, pardon me if I’m a bit suspicious about how the governor seems to now be brushing aside questions on refinancing that debt.
* GOP Lawmaker Urges Rauner To Resolve Bill Backlog with Bonds: “Unless there’s some alternative, then I strongly encourage the governor to take advantage of the borrowing authority that he has and lower those old bills and start eating away at these outrageous interest charges that we have built up.”