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Unclear on the concept

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Illinois

* Greg Hinz follows up with Comptroller Judy Baar Topinka about her projection yesterday that the state would have $8 billion in unpaid bills at the end of this fiscal year...

According to the comptroller, the amount of outstanding bills she won’t have the money to pay will hit the $8-billion-plus mark at the end of fiscal 2011 on June 30 — almost exactly the level of a year ago.

“You would have thought the single biggest increase in income taxes we’ve ever had would have paid the backlog of bills,” said Ms. Topinka, referring to the two-thirds hike in the individual income tax that took effect on Jan. 1. “It hasn’t happened. How do you explain that to the public?”

It’s a good question, and one that implies that all those Democrats who run Springfield are spending like mad.

As we’ve discussed time and time again, the tax hike was designed to all but eliminate the structural deficit. The unpaid bills were supposed to be paid off with a big loan, the payments for which were actually included in the tax hike.

Also, the tax hike took effect January 1, but employers didn’t adjust their payroll programs until early March. We know this because income tax receipts spiked way up in March. So, the state will have just four months of additional tax hike revenues. That new money will not reduce the overdue bill backlog. It was never designed to do that.

That being said, Topinka is right that this will be extremely difficult to explain to voters. Heck, it’s difficult to explain to legislators and reporters. “You raised my taxes and still can’t pay your past-due bills? What the heck?”

posted by Rich Miller
Thursday, Apr 28, 11 @ 2:35 pm

Comments

To be strictly technical, .25% of that tax hike was to handle past-due bills (or at least the interest on the borrowing that didn’t happen to pay for those past-due bills). In theory, that could go to pay down the bills very slowly.

Comment by John Bambenek Thursday, Apr 28, 11 @ 2:41 pm
–It’s a good question, and one that implies that all those Democrats who run Springfield are spending like mad.–

Does this guy ever deal in facts? “Implies,” “seemed to suggest.” How about practicing journalism on occasion.

Comment by wordslinger Thursday, Apr 28, 11 @ 2:42 pm
I know the money is starting to come in now that employers have adjusted withholding, but don’t we need to wait until April 15, 2012 before we see serious cash from the tax hike?

Comment by Anonymous Thursday, Apr 28, 11 @ 2:42 pm
===In theory, that could go to pay down the bills very slowly. ===

Yes, it could.

Comment by Rich Miller Thursday, Apr 28, 11 @ 2:42 pm
===Topinka is right that this will be extremely difficult to explain to voters. Heck, it’s difficult to explain to legislators and reporters. “You raised my taxes and still can’t pay your past-due bills? What the heck?”===

That sure explains Radogno’s refusal to support the borrowing component of the tax plan. Quinn’s number might have been too high, but there’s no question that borrowing to pay past due bills was (and still is) the smart fiscal approach to this crisis.

But like a lot of things, it got hijacked by politics.

Comment by 47th Ward Thursday, Apr 28, 11 @ 2:42 pm
The income tax increase was supposed to have been coupled with the borrowing plan to both reduce the backlog of payments and gain firmer footing for the future. I would have thought the GA, especially the Dem PR machine, would spun the heck out of that proposal. Topinka is now using the Republican refusal to accept the borrowing portion of the equation as a sap on the Dems. Of course, she won’t describe the whole process as it was meant to play out for financial stability, but she has learned a few political tricks of her own it seems.

Comment by Anonymous Thursday, Apr 28, 11 @ 2:48 pm
Topinka should watch her own spending. According to Phil Kadner’s article in today’s Southtown, Topinka just hired Gerald Gorman(Husband of Cook Co. Commish Elizabeth Doody Gorman) as a contract employee at $6000 a month for 6 months. Is he even qualified?

Comment by Anon Thursday, Apr 28, 11 @ 2:56 pm
I know the money is starting to come in now that employers have adjusted withholding, but don’t we need to wait until April 15, 2012 before we see serious cash from the tax hike?

No.

Comment by dave Thursday, Apr 28, 11 @ 3:01 pm
- In theory, that could go to pay down the bills very slowly. -

So would you be in favor of making the hike permanent? Or am I missing something?

Comment by Small Town Liberal Thursday, Apr 28, 11 @ 3:05 pm
the .25 is permanent. It is amazing how few people, who read this blog even, know this.

Comment by Time Keeps on Ticking, Ticking Thursday, Apr 28, 11 @ 3:09 pm
===the .25 is permanent===

Yes, that’s for human services and education spending.

Comment by Rich Miller Thursday, Apr 28, 11 @ 3:13 pm
especially the Dem PR machine

I think that’s one just one dude in Springfield eating apples with the Speaker.

Comment by George Thursday, Apr 28, 11 @ 3:13 pm
I think the .25% that is permanent was originally sold as permanent property tax relief, but there wasn’t any tax relief in the final bill.

Comment by Old Milwaukee Thursday, Apr 28, 11 @ 3:14 pm
interest on the past due bills are 1-2% a MONTH. Interest on the bonds even if it was poorly received by the market would be around 7% a year.

1-2% a month is like 12-24% a year (i know not really but im to lazy to do the actual calculations)

They need to issue the debt to repay these bills, I hate saying it but its necessary, you cant cut your way out of this deep of a hole.

Comment by bondlover Thursday, Apr 28, 11 @ 3:15 pm
===In theory, that could go to pay down the bills very slowly. ===

– Yes, it could. –

Not when you factor in the requirements of the Prompt Payment Act. We’re paying roughly 12% per year interest on everything that is over 60 days past due — 24% APR on Medicaid bills.

Call it roughly $1 billion in interest?

Comment by Yellow Dog Democrat Thursday, Apr 28, 11 @ 3:35 pm
==How about practicing journalism on occasion==

Quite right, WS. Hinz is the genius who told the world that Debbie Halvorson had a lock on the IDOT Secretary gig. He’s had quite a few other major flubs over the years as well. His “reporting” is incredibly lazy and faulty. I put no more stock in Hinz’s information than I would in talking to a guy at the corner bar.

Comment by phocion Thursday, Apr 28, 11 @ 3:55 pm
The amount of outstanding bills is almost exactly the level of a year ago. Does that mean we actually matched income and expenditures for the last year?

Comment by Bigtwich Thursday, Apr 28, 11 @ 4:14 pm
So here’s what we’ve got: Many of the same policy leaders who opposed the income tax increase then went on to oppose using some of its proceeds for debt-restructuring bonds that could pay-off the bill backlog. And now they’re griping that the bill backlog isn’t being paid off?

I’d say “wow,” but it’s entirely to be expected, ain’t it?

Comment by Linus Thursday, Apr 28, 11 @ 4:19 pm
The easiest thing to explain is that it is Tugboat Annie Topinky in charge of paying bills.
Just pay ‘em and skip the pressers.

Comment by CircularFiring Squad Thursday, Apr 28, 11 @ 4:44 pm
I like JBT but I find it baffling that many CapFax readers have a better grasp of state finances than she does.

Comment by Yellow Dog Democrat Thursday, Apr 28, 11 @ 4:48 pm
The reporter’s next question to JBT should have been “What would be the state’s fiscal status had the tax increase not been passed?” To suggest the tax increase’s impact isn’t clear is misguided.

Comment by Mark Buerhle Thursday, Apr 28, 11 @ 6:49 pm
Hinz does not have his bond facts straight. The State sold $3.7 billion in bonds for the FY11 pension payment and sold $3.5 billion in bonds for the FY10 pension payment. So there is really no difference between FY10 and FY11 for pensions — the GRF payments were borrowed in both years.
The big difference is FY11 SPENDING is up dramatically over FY10,,,well above the $2 billion-plus in new tax revenue we will get in FY11. We desperately need to cut spending if a 67% tax hike didn’t fix our deficit.

Comment by mom of teens Thursday, Apr 28, 11 @ 7:15 pm
I generally agree with yellow dog but part company here. I think Topinka’s point was that we bonded for pension payments this year….almost 4 Billion Dollars, and yet our debt is the same as it was a year ago. That means our budget was out of whack by almost 4 Billion Dollars last year. Come July, we will have to make the pension payments (almost 400 Million per month) and the Federal Stimulous money that gave us an enhanced medicaid match will be gone (costing us about 1.2 Billion per year). Between the two, they will eat up every bit of the tax increase. So, we need big cuts or a responsible mix of cuts and bonding to pull us out of this mess. But borrowing without cutting spending will do nothing but increase our debt load and monthly debt service obligations.

There are a lot of ideas out there….Senate Republicans have put out a plan, the Governor has put out a plan and Senator Cullerton has put out some revenue generating ideas. Its going to have to be some combination of those proposals to bring us back to a sound fiscal footing. I think JBT is right to point that out now, before the General Assembly adjourns.

Comment by Raising Kane Thursday, Apr 28, 11 @ 9:39 pm