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* My syndicated newspaper column is, in a word, glum…
I’ve been saying for the past couple of years that Illinois government is one of the biggest drags on our state’s economy. Now, a new survey shows just how true that is.
The survey was conducted in October and November by Illinois Partners for Human Service. It found that almost half - 49 percent - of private human service providers have laid off staff. Why? Because the groups are at least partially funded by the state and the state is a total deadbeat when it comes to paying its bills.
The group sent out its survey to 1,000 organizations, of which 282 replied. And just for those 282 respondents, 1,167 staff had been laid off. Even more frightening, those 282 providers were serving 118,000 fewer clients because of the state’s budget crisis.
Extrapolate those numbers out and the totals are truly gruesome. The survey found that the average human service provider laid off 13 percent of its staff. According to the organization, there are 400,000 human service workers in Illinois. If those layoff numbers hold up statewide, that’s about 52,000 people. Heck, even if it’s only half that, it’s still 26,000 people without jobs.
Imagine, for a moment, the reaction we’d see if an Illinois company announced it was laying off more than 20,000 people. It would be the greatest crisis ever. Except, it’s already happened and hardly anybody has noticed because it’s been done in dribs and drabs throughout the state without press releases or fanfare.
Of course, the object of these providers is to provide their clients with services like alcohol and substance abuse treatment, or caring for delinquent teens, or helping single moms find jobs, or the hundreds of other things these groups do to prevent Illinois from spiraling into Third World hell. According to Illinois Partners for Human Service, about 2 million Illinoisans receive services from private providers. That means we’re looking at hundreds of thousands of people who either cannot get services or are getting reduced services because of the state’s late payments.
The comptroller expects to pay off Fiscal Year 2010’s past-due bills in the coming days because of the tobacco bond proceeds. Fiscal Year 2010 ended in June. And Illinois Statehouse News reported last week that the state already has accumulated $5.3 billion in past-due bills from the current fiscal year, which isn’t even six months old.
Like any business, these service providers crave certainty above all else. But there’s no certainty in this environment. Far from it. Nobody knows when they’re going to get paid or when this all will end.
The larger providers have taken out loans to make payroll and purchase supplies, but even that lasts only so long. Lutheran Social Services of Illinois, one of the largest providers in the state, exhausted its reserves and its credit line just before Thanksgiving because of overdue state bills. Only a late government intervention prevented mass layoffs and program shutdowns.
The smaller providers have no such reserves and can’t tap major lines of credit. These smaller providers reported to the human services partnership that they’ve even skipped payrolls to avoid layoffs and program closures. But they can do only so much. And even some of the large providers are not sure they can keep going much longer.
For a while, at least, some of the financial strain caused by the state might have weeded out the weaker or even less committed providers. Some providers have learned to cooperate with each other, rather than compete. They squeezed out the waste and the excess. They learned how to raise more private funds.
But in talking to those left standing, you get the distinct impression that the system is in real danger of collapse. So far, it’s pretty obvious that nobody in Springfield has been willing of late to make the tough choices.
Instead of cutting programs and/or raising taxes, they’ve exported the problem to these providers and other recipients of state money - schools, local governments, etc. Those recipients have then had to perform a sort of triage at the ground level and then hope for the best. That can only last so long. Triage is for emergencies, not chronic, yearslong treatment.
By refusing to inject any kind of certainty into the system, the state has created chaos and has endangered its entire network.
We’re spiraling down fast, and it’s our own fault.
* Related…
* Editorial: Broke state must slash spending fast
* Gambling supporters not worried about dip at Illinois’ riverboats
posted by Rich Miller
Monday, Dec 13, 10 @ 5:14 am
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Didn’t I read that there was a plan to sell the state debt on Wall Street in order to pay the vendors more quickly. The hedge fund or whatever would buy the vendor debt after 60 days and get the late fee interest from there on out.There are some moral hazard issues (do we really want Wall Street rooting for slow payments to vendors via their billions in potential campaign contributions) but at least it’s creative. And the vendors would get paid within 60 days.
Comment by cassandra Monday, Dec 13, 10 @ 9:10 am
That’s why I think the tobacco bond was a smart move. We leverage and transfer the risk of a shaky revenue source now, and get the proceeds into the state economy immediately.
Comment by wordslinger Monday, Dec 13, 10 @ 9:26 am
This may not be a good fit here, but it is another dimension to this problem that doesn’t consider the deadbeat state point. In a Forbes article about the top 10 states that people are fleeing, the Prairie State came in at No. 2. Illinois is expected to lose 27,000 people this year, consistent with its average annual loss over the last five years. The losses are likely linked to the state’s economy and tax structure. Job losses in manufacturing and industrial machinery are likely pushing people out of the state, Karp says, adding that state taxes have also been “an issue” for many residents.
Comment by Anonymous Monday, Dec 13, 10 @ 9:28 am
Does the 13% of the staff being eliminated equate to a percentage of critical services not being given, and if so, what is that percentage?
Comment by Cincinnatus Monday, Dec 13, 10 @ 10:25 am
While I commend the commentary, it says nothing about the solution. To address the solution would require much more pain.
Also, I laughed at this piece:
“The survey was conducted in October and November by Illinois Partners for Human Service. It found that almost half - 49 percent - of private human service providers have laid off staff. Why? Because the groups are at least partially funded by the state and the state is a total deadbeat when it comes to paying its bills.”
–No, the WHY should be “because they don’t have union contracts and therefore can easily reduce staff without having a PR nightmare.”
Comment by Logical Thinker Monday, Dec 13, 10 @ 10:38 am
**Didn’t I read that there was a plan to sell the state debt on Wall Street in order to pay the vendors more quickly. **
Yes - http://payments.illinois.gov
Comment by dave Monday, Dec 13, 10 @ 11:23 am
==and it’s our own fault==
Rich, the bad decisions and the dire financial straits of our state which you painted in your piece above are not in question. The repercussions are horrifying if not in some cases downright immoral. I don’t, however, in any way shape or form view it as “my” fault, and I suspect a lot of other frustrated taxpaying citizens of Illinois do not see it as “our” fault either– and like me feel utterly helpless to address the malfeasance .
Comment by Responsa Monday, Dec 13, 10 @ 11:23 am
–Yes - http://payments.illinois.gov–
Hadn’t seen this before. According to the link, the vendor gets 90 cents on the dollar upfront, with 10% put into an interest-bearing custodial account until the state pays off.
Once that happens, the rest of the money is released to the vendor “less offsets.”
There’s the rub. What are the offsets — the juice, in other words? What’s the participation level? Couldn’t find anything on the google except the link above.
Comment by wordslinger Monday, Dec 13, 10 @ 11:37 am
The State’s receivables program in the WSJ sounds like something out of a Bernie Madoff bestseller
Comment by State Mope Monday, Dec 13, 10 @ 11:44 am
Word, the current vendor pay does not include Medicaid related bills which for most community based non-profits is the largest part of the package. If a provider goes for this it’s basically a 10% hit plus losing whatever interest (1%-2% per month)that would have been paid to the provider on bills over 60 days late. It’s kinda like those JG Wentworth TV ads to collect court settlements. Trouble is most places already spent 100% operations money while waiting to collect that 90%. Sounds like a good deal for the investor. Not so good for the provider, but some will have no other choice.
Comment by zatoichi Monday, Dec 13, 10 @ 1:55 pm
At Logical Thinker, there are some Human Service providers whose employees are represented by AFSCME or SEIU. Their representation did not prevent the State from eliminating grants that provided services and jobs to its members or help in making payment on the backlog of bills a priority.
Comment by Anna Monday, Dec 13, 10 @ 2:43 pm
>We’re spiraling down fast, and it’s our own fault.
Not my fault at all, I voted for someone who is NOT currently in power. The persons at fault, are those worried more about their sex life being “interfered with” than their economic situation and foolishly gave the Dems yet another chance bucking the nationwide trend of dumping the left-wing out of office. You made your bed, now sleep in it.
Comment by Segatari Monday, Dec 13, 10 @ 3:58 pm
Segatari, voting for someone else suddenly means you aren’t a citizen? And who’s to say that your choice would’ve been any better? Considering his proposals, I doubt it. They were equally screwy.
Comment by Rich Miller Monday, Dec 13, 10 @ 4:02 pm
Wordslinger, the offsets would be payments offset by the Comptroller’s Office if the vendor owes other state debt (e.g., state income tax or child support).
Comment by state mope Monday, Dec 13, 10 @ 8:57 pm