* Amanda Kass looks at the bill backlog. You can skim this first part if you are already well-versed in the budget impasse…

I estimated that the state’s General Fund spending was $32.8 billion in FY2016*, which was only about 7% less than the last “normal” year, FY2015. In other words, during the two-year impasse, most of the state’s spending was still legally authorized for a variety of reasons.

Even though most state spending was legally authorized in FY2016 and FY2017, the state didn’t actually have enough revenue to pay all its bills, so a backlog built up—leaving a growing number of vendors with state contracts in the lurch. Imagine trying to keep your business afloat while waiting years to receive payment for services already rendered. Instead of just holding onto the bills, some of these vendors turned to third-parties to offload this debt. Vendors are able to do this because of the Vendor Payment Program (VPP), which then Governor Pat Quinn created in 2011.** Under the VPP, a vendor sells its debt to another entity (known as a “Qualified Purchaser”), and this provides the vendor the cash it needs to keep operating. The state incurs a penalty charge when it pays bills late, and the interest rate is 9% or 12% depending on the underlying service. The Qualified Purchaser gets the interest penalty fees when the underlying bill is eventually paid by the state.

* OK, so now that you have the background, let’s move forward…

Importantly though, the VPP is only for bills that are for legally authorized spending, and the program was suspended in 2015 during the budget impasse. In 2016, Governor Bruce Rauner created the Vendor Support Initiative (VSI), which is just like the VPP except it’s for bills for which “no appropriation or other legal authority currently exists to pay the invoice.” This brings me to my first head scratcher: how was the Governor able to unilaterally create this program? Moreover, how were bills allowed to stack up if there was no legal authority to spend money on those goods and services? Remember, during the impasse most state spending was legally authorized, and several court cases occurred specifically to hash out whether spending on specific aspects of the state government (for items like state employee payroll) could continue.

That first question is a very good one. How could the governor unilaterally create this new Vendor Support Initiative, which deleted the previous requirement for an actual appropriation? The state constitution is clear that no expenditures can be made without an appropriation. Also, why were some vendors allowed into VSI and others weren’t? I suspect that some were simply more “important” to the governor than others (Dept. of Corrections vendors vs. human service providers).

The answer to the second question about how the bills were allowed to stack up is fairly straight-forward: During the long impasse, the Rauner administration convinced some crucial vendors (particularly Department of Corrections and human service providers) that they’d eventually get paid. So, those vendors kept providing their goods and services - or new vendors were brought in if somebody dropped out. And some of those same vendors (Corrections) were enticed to stick around by unilaterally deeming them qualified for late payment interest benefits in Rauner’s new Vendor Support Initiative, which means they could also sell their debts to Qualified Purchasers without a formal appropriatioin.

* Back to Ms. Kass…

This brings me to my final set of questions: Which vendors have sold off their bills, and how many bills have Qualified Purchasers bought? This should be relatively straightforward to figure out because Qualified Purchasers are required to submit monthly reports detailing this information. Nearly a year ago I submitted a Freedom of Information Act request to the Department of Central Management Services (CMS) asking for those reports from April 2011 through May 2017 for all Qualified Purchasers (QP). What I got back seemed like incomplete records and didn’t align with previous reporting done by Dave McKinney. For example, the records I received for Payplant (a QP) showed it hadn’t bought any bills, while McKinney reported that Payplant purchased $475,330 worth of bills between November 2015 and August 2016. I also didn’t receive any reports for Illinois Financing Partners (another QP), which Pierog reports has purchased $1 billion worth of receivables since 2015. I sent several follow-up emails to CMS and even asked the Public Access Counselor (which is part of the Attorney General’s office) to review CMS’s response, but never heard back from either entity.

Sounds like Comptroller Mendoza needs to look at this issue as part of her budgetary transparency initiatives.

…Adding… From Rep. Stephanie Kifowit (D-Oswego)…

Hi Rich, I just read your post on the VSI program. I have actually been critical Of the new program under the Rauner administration since it was changed from VPP and effectively removed the Comptroller from the equation. As Vice Chair of General Services I have been on the record, and directly asked questions to the qualified purchasers of the legitimacy of the new program. My concerns were routinely rebuffed by CMS. I’m glad this situation is finally being brought to light.