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Backlogs and “late bills” - A definition of terms

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Illinois

* I asked the comptroller’s office last week to explain the state’s pile of unpaid bills. This is most of what I received via e-mail on July 18th…

(W)e have a General Funds backlog here of $5 billion and we estimate there is another $1.8 billion in the HIRF. So the overall backlog has actually had an uptick to around $6.8 billion.

When the Comptroller gives backlog estimates, she is talking about the unpaid bills being held by the state - not using a technical term “past-due.”

We started the day with unpaid vouchers totaling $3.829 billion in the General Revenue Fund.

In addition to the $3.829 billion backlog in the General Revenue Fund, there is another $1.1170 billion in the School Funds for a total General Funds Backlog of $4.999 billion.

Our oldest regular voucher is 25 June 2013, those vouchers are 16 working days in arrears.

Our oldest medical voucher is 17 June 2013, those vouchers are 21 working days in arrears.

I was also told last week that “Nothing in GRF is older than 30 days.”

* But here’s an example of how the official backlog doesn’t mean that there are no extremely past-due obligations…

Though state aid to the public school system has dwindled in recent years, that alone does not paint the whole picture of districts’ financial woes. Some school districts are waiting on grant money that is in some cases is six months late.

Grants and other “categorical” funds for school functions such as transportation and special education are a part of the $6.8 billion backlog of unpaid bills in Illinois. Without the funds, districts are being forced to tap into other funds and put an even larger strain on their tax levies.

* Meanwhile, this is from a recent Washington Post editorial…

A new survey by scholars at Boston College finds that state and local pension plans have $3.8 trillion in unfunded liabilities, even assuming strong rates of return.

That sentence was eventually corrected…

A new survey by scholars at Boston College finds that state and local pension plans have $3.8 trillion in liabilities, $1 trillion of which is unfunded.

* The mistake was initially caught by Dean Baker at the Center for Economic and Policy Research, which puts the problem into perspective…

)(T)o put this in terms that may be understandable to Post readers, the unfunded liabilities are 0.22 percent of projected GDP over the next 30 years. And, as I noted in my earlier post, most state and local governments are already funding at levels that are consistent with making up this shortfall so there will no required tax increases or spending cuts to meet these future obligations.

* Paul Krugman added his two cents…

But how big is that $1 trillion anyway? It still sounds like a big number, doesn’t it? Dean tries to compare it with projected GDP, which is one way to scale it. Here’s another.

You see, the Boston College study doesn’t just estimate assets and liabilities; it also estimates the Annual Required Contribution, defined as

normal cost – the present value of the benefits accrued in a given year – plus a payment to amortize the unfunded liability

And it compares the ARC with actual contributions.

According to the survey, the ARC is currently about 15 percent of payroll; in reality, state and local governments are making only about 80 percent of the required contributions, so there’s a shortfall of 3 percent of payroll. Total state and local payroll, in turn, is about $70 billion per month, or $850 billion per year. So, nationwide, governments are underfunding their pensions by around 3 percent of $850 billion, or around $25 billion a year.

A $25 billion shortfall in a $16 trillion economy. We’re doomed!

OK, there are some questions about the accounting, mainly coming down to whether pension funds are assuming too high a rate of return on their investments. But even if the shortfall is several times as big as the initial estimate, which seems unlikely, this is just not a major national issue.

* It’s still obviously a local issue, however. But the constant comparisons between Detroit and Chicago/Illinois need to stop…

Elizabeth Foos, municipal credit analyst at Morningstar Inc., said Chicago is seeing a job rebound in areas such as a banking, financial services, transportation and health care.

By some gauges, Detroit barely functions. Foos said 40 percent of the city’s streetlights don’t work and more than half of property owners didn’t pay taxes owed in 2011.

Debt levels: Chicago’s property and sales tax revenues are improving with the economy and the city’s debt load is manageable. Foos has published reports on both cities indicating that if their debts are compared to the taxable value of their property, Detroit’s burden is more than twice that of Chicago.

Population: Detroit has lost 60 percent of its population since its 1950s peak. For the first decade of the 21st century, Detroit was down 25 percent. For the same time periods, Chicago lost 25 percent and 7 percent of its population.

* In other news, this is from a press release…

Illinois Department of Human Services (IDHS) Secretary Michelle R.B. Saddler today announced that the state was awarded a $4.1 million bonus for its effective administration of the Supplemental Food and Nutrition Program (SNAP). Illinois was recognized for its accuracy rate of 98.3 percent, which ranked sixth in the nation in fiscal year 2012.

That’s a pretty darned high accuracy rate, but not good enough for some folks…

Since Illinois has seen an explosion in the number of people receiving food stamps, even a slight error costs taxpayers millions.

In this instance, a mistake rate of less than 2 percent means $50 million is misspent.

That’s the hard truth behind the press release lauding Illinois for having a 98.3 percent accuracy rate for its Supplemental Nutritional Assistance Program. […]

“The more people you add and the bigger the program gets, the more cumbersome it gets. The more difficult it gets to manage. And you have money being given away that shouldn’t be given away,” said Ted Dabrowski, vice President of policy for the Illinois Policy Institute.

Dabrowski’s point doesn’t make a whole lot of sense. The state has a pretty darned high accuracy rate as the program increases in size.

* Related…

* Illinois Comptroller Talks to Not-For-Profits About Budget: “We have taken all of our not for profits and we’ve moved them up. So when it comes to money in the till we’re going to pay you first,’ said the Comptroller.

* Sole buyer in state vendor program says business is good: Although VAP has been in the program since its inception, Reape said it has only really ramped up in the past six months. He said the company has purchased about $130 million worth of receivables from more than 100 vendors.

posted by Rich Miller
Monday, Jul 22, 13 @ 11:14 am

Comments

==Our oldest regular voucher is 25 June 2013, those vouchers are 16 working days in arrears.==

==Our oldest medical voucher is 17 June 2013, those vouchers are 21 working days in arrears.==

==Some school districts are waiting on grant money that is in some cases is six months late.==

I guess this means that anything that can be billed is actually being paid on time? That’s surprising to me.

But I wonder how much of the bill backlog is normal vouchers vs. grants that haven’t been paid?

Comment by Robert the Bruce Monday, Jul 22, 13 @ 11:22 am
If I recall correctly, the standard for measuring unpaid bills / our bill backlog has remained constant for quite some now.

The last time we were below the $5 billion mark in unpaid bills seems like at least a decade ago.

Comment by Formerly Known As... Monday, Jul 22, 13 @ 11:24 am
when i was working for the state, i timely filed quarterly vouchers to reimburse another state agency for money they spent, acc to our contract. the comptroller held the bills for months, then billed me for late payment interest! i said bleep that, give me an audit finding. i am not going to pay interest under those conditions.

Comment by langhorne Monday, Jul 22, 13 @ 11:25 am
==Our oldest medical voucher is 17 June 2013, those vouchers are 21 working days in arrears.==

What medical vouchers would these be? Because the employee health care bills are being paid several months late if you have Healthlink and even later if you have Quality Care.

Comment by mythoughtis Monday, Jul 22, 13 @ 11:29 am
Anyone who seriously compares Detroit to Chicago, today, has not been to Detroit recently. Which I actually recommend everyone do - I was so numbed by the endless comparisons, I took a weekend trip to see and was alternately fascinated, inspired and horrified. It is a stunning place to visit if for all the wrong reasons, but there’s great stuff to see.

Comment by ZC Monday, Jul 22, 13 @ 11:30 am
Considering how many times CapFax has had to correct press releases from the Illinois Policy Institute, it is hilarious to hear them complain about error rates.

Comment by Juvenal Monday, Jul 22, 13 @ 11:32 am
=Dabrowski’s point doesn’t make a whole lot of sense. The state has a pretty darned high accuracy rate as the program increases in size.=

Yup. Too bad folks are not interested in facts interfering with their soundbites. For all the reasonable critiques one can put on DHS, they are doing some impressive work in this area.

Also, there have been multiple attempts to strip the bonus payments that Illinois received from SNAP via the Farm Bill.

Comment by Montrose Monday, Jul 22, 13 @ 11:41 am
“In this instance, a mistake rate of less than 2 percent means $50 million is misspent.”

there are logical fallacies to the assumption. The assumption is that an error means the State misspent money, and that the amount misspent was 100% of what was provided: i.e. every dollar that went to somone who has an error in their paperowkr was misspent.

But the reality is some errors may be missing documentation, wrong phone numbers or addresses, or changes in address that were not timely submitted. None of these mean the individual was not supposed to recieve the dollar amount provided to them.

Also there may be errors where individuals were underpaid. So money was not misspent, if anything an individual was harmed.

Many jobs consider a 95% accuracy rate to be a success. If your a watchdog calling 98% bad, then you dont understand what your watching for…

Comment by Ghost Monday, Jul 22, 13 @ 12:10 pm
Can we all just agree to ignore IPI from now on? They remind me of high school bullies that only have power because the school gives it to them.

Comment by Mac Monday, Jul 22, 13 @ 12:16 pm
Mr. Dabrowski, if you are more comfortable with smaller numbers, move to a smaller state.

Comment by Soccermom Monday, Jul 22, 13 @ 12:20 pm
Before you go making comparisons to the nations $17 trillion dollar economy and related GDP propaganda one may just want to ask oneself if there’s positive cash flow from the current money being borrowed? In other words is $1 trillion dollar of debt creating an increase of let’s say break even $1 trillion dollars in GDP. I think not.

Take away all that deficit spending and do we still have a $17 trillion dollar economy? Please show your work as to where the money will come from.

The power of exponents my friends. You just can’t keep borrowing and rolling over the debt never paying any of it off — trying it puts you on the road to Detroit.

Comment by oz Monday, Jul 22, 13 @ 12:24 pm
You are never going to please people like those at the IPI. They would prefer the SNAP program go away altogether I’m sure. You know, the whole “takers” argument.

This data is evidence that the program is pretty well run. But you won’t ever get those who claim massive amounts of funds going to the undeserving to admit anything like that.

Comment by Demoralized Monday, Jul 22, 13 @ 12:29 pm
Oz: I find it ironic that you use a Detroit comparison in replying to an article that shows comparisons to Detroit are ignorant.

Comment by Mac Monday, Jul 22, 13 @ 12:46 pm
=== * It’s still obviously a local issue, however. But the constant comparisons between Detroit and Chicago/Illinois need to stop… ===

Rich, you are correct. Unfortunately, the pension reduction forces will be constantly using Detroit as their new buzzword to mislead the folks to achieve their goal.

Comment by Norseman Monday, Jul 22, 13 @ 2:08 pm
Norseman,

I agree some people will try to make the comparison. I’m going to report what I said on the topic in another thread:

The argument in Detroit is the Federal Bankruptcy Court takes precidence over the State Constitution and State Courts. Right now, that is not what the Michigan State courts are saying. Don’t know exactly how that gets resolved re State’s Rights issues versus Federal Rights issues, especially since the authorization for the city’s “emergency manager” is under Michigan State law. Going to be interesting …

But I don’t see a direct impact on Illinois since there are a couple of significant differences. 1) Even though the city pensions are suppoedly protected under the Michigan Constitution, the state never owed the money; it was the city that owed the money to the pension funds (this is more like an individual Illinois city account in IMRF in Illinois). 2) Here, it is the State itself that is on the hook for the 5 big funds (not IMRF) and states can’t declare bankruptcy, so I don’t see how it ends up in a Federal bankruptcy court.

Comment by RNUG Monday, Jul 22, 13 @ 4:49 pm
–In other words is $1 trillion dollar of debt creating an increase of let’s say break even $1 trillion dollars in GDP. I think not. –

Until a couple of sentences later, when you write:

–The power of exponents my friends.–

Or, as the CBO reports:

–The fiscal policies that reduce the deficit will lead to less demand for goods and services, thereby holding down economic growth this year, as CBO reported in The Budget and Economic Outlook: Fiscal Years 2013 to 2023. If not for that fiscal tightening, CBO estimates, economic growth in 2013 would be roughly 1½ percentage points faster than the 1.4 percent real (inflation-adjusted) growth that the agency now projects, under current laws, from the fourth quarter of calendar year 2012 to the fourth quarter of 2013. –

Comment by wordslinger Monday, Jul 22, 13 @ 10:50 pm