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* From a letter sent by Comptroller Susana Mendoza to Gov. Rauner, the four legislative leaders and all state legislators…
As Illinois’ Chief Fiscal and Accountability Officer, my Office is responsible for managing the state’s financial accounts as well as providing the public and the state’s elected leadership with objective and timely data concerning the state’s difficult fiscal condition. As you are quite aware, I have been very vocal regarding these issues and the budgetary impasse since assuming office six months ago; however we are now reaching a new phase of crisis.
Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year. My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.
We are effectively hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year.
My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state’s Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state’s financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.
For the record, however, and as a message to the financial markets, please know that debt service payments will not be delayed or diminished going forward and I will use every statutory avenue or available resource to meet that commitment. It is a necessary pledge in order to attempt to avoid further damage to our already stressed credit ratings and to make possible the additional debt financing that we all know will be required to achieve some measure of stability going forward.
Ultimately it is the only way that we can preserve what remains of our ability to provide vital services to our state’s most at risk populations.
Currently, more than 90 percent of Illinois’ monthly spending is directed toward core functions of state government mandated by court orders, consent decrees, or state law including continuing appropriations. These include certain Medicaid programs, debt service, payroll, K-12 General State Aid and state pension contributions. With the inevitable cash management impact related to the outcome of the MCO lawsuit, this Office will soon be facing the prospect of deciding which court order or statutory mandate the state can accommodate. I hope we can all agree that this is more than an unprecedented situation; it is simply unacceptable.
Even absent pressure from additional court orders, we still foresee unmanageable financial strains, beginning in July, that will severely limit any payments in core areas not under court mandate or consent decree that provide essential services to the state’s most vulnerable individuals, including but not limited to, long-term care, hospice, and community care and supportive living centers serving the senior community, and ambulatory and other critical medical supplies for the poor and disabled.
In large part, through careful cash management and effective stewardship of the state’s General Revenue Fund, our Office has made every effort to triage this crisis in a way that has prioritized and enabled some hardship payments to the state’s most vulnerable citizens and the programs that serve them while still meeting core obligations. That ability will eventually cease.
It is critical that the state’s fiscal situation be addressed immediately before the cash shortages this summer cause further deterioration. I am available to discuss this situation, and possible remedies, with you personally, as a group in a leaders meeting or individually at your earliest convenience.
In the meantime, I will be meeting and communicating with other public stakeholder groups to share these same warnings.
My closing message is simple: The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state’s most in need citizens. We must put our fiscal house in order. It is already too late. Action is needed now.
I eagerly await your response as to next steps for furthering this discussion.
posted by Rich Miller
Tuesday, Jun 20, 17 @ 1:24 pm
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Notice that she classifies pension contributions separate from debt service.
I stand by my guess / prediction yesterday that she will be forced to defer pension contributions until next Spring.
Comment by RNUG Tuesday, Jun 20, 17 @ 1:39 pm
So why do we continue to spend 600 million/month in excess of revenue? That certainly is not Rauner’s doing. When Cullerton said the Senate passed a balanced budget does anyone know if that template were to become law-will expenditures equal revenue. I tend to doubt the Democratic legislature has passed a truly balanced budget even once in the past 25 years
Comment by Sue Tuesday, Jun 20, 17 @ 1:44 pm
Sue, it’s his agencies spending the money. And when his agency directors were asked during budget hearings where they could cut spending they had no suggestions.
Comment by Anonymous Tuesday, Jun 20, 17 @ 1:51 pm
She shouldn’t have to prioritize paying these court orders herself. She should request that a judge be assigned to prioritize these orders. Otherwise she is going to be sued no matter which way she turns.
I suspect non-appropriated court orders such as employee pay will come in at the bottom of the list.
Comment by A Jack Tuesday, Jun 20, 17 @ 1:52 pm
I will say this… CMS is Business as usual … no discretionary cuts being taken as a whole here or in DOT either. Supplies, Parts, desks, chairs, car and truck parts ….. all like there was no problem at all…. short on money… really not here, or they don’t act like it.
Comment by Allen D Tuesday, Jun 20, 17 @ 1:55 pm
==So why do we continue to spend 600 million/month in excess of revenue?==
You been living under a rock? It’s called court ordered spending. That’s the point. We’re spending more than we’re taking in so somebody is going to get the shaft even more than they are now.
Comment by Demoralized Tuesday, Jun 20, 17 @ 1:56 pm
One area for significant savings is the AFCSME contract but the Dems have supported the Union’s stalling strategies. Rainer has been unable to implement his final proposal and we all know Madigan has done whatever he could to interfere including the passage of the arbitration legislation.
Comment by Sue Tuesday, Jun 20, 17 @ 1:58 pm
===That certainly is not Rauner’s doing==
You need to seek immediate medical attention. No snark.
Comment by Rich Miller Tuesday, Jun 20, 17 @ 1:58 pm
“…It is a necessary pledge in order to attempt to avoid further damage to our already stressed credit ratings…”
This just struck me as odd. To me it comes across as “I’m saying this because I HAVE to, and not necessarily because I think it will come to pass.” Either way, I’m doubting anything anyone says will improve our ratings. The only thing that could help now is action, like maybe, you know, passing a budget or something.
Comment by weary Tuesday, Jun 20, 17 @ 2:00 pm
The Democratic Senate bill spent the amount set forth in Rauner’s spending plan. Most of this money is by statute, consent decree or court order.
The Senate plan had some false savings that the Governor claims are real. It also had hefty tax increases. It would have balanced on paper, but not in reality.
Rauner has adopted the standard practice of false but agreed numbers. He is claiming pension and health care savings that are not demonstrable. The GA went along, or the tax increases are even larger.
Comment by Last Bull Moose Tuesday, Jun 20, 17 @ 2:04 pm
Rich Bruce Rainer inherited the State’s level of spending including the Medicaid expansion, pension fiasco, AFCSME and other union contracts- how in the heck can you say the Governor is responsible for the excessive level of spending- I understand the State needs revenue and a return of a 5 percent income tax bracket but even with that level of revenue Illinois will be spending more then it takes in due to the structural deficit which includes pension contributions exceeding 33 percent of current revenues
Comment by Sue Tuesday, Jun 20, 17 @ 2:06 pm
“That certainly is not Rauner’s doing.”
What do you base that on, his commercials? His self-portrayal as a fiscal conservative? From what I understand, he is spending at a significantly higher pace than his predecessor. “That certainly is not Rauner’s doing.” Wake up! That is EXACTLY what he is doing and it is no mistake. The reality is, since there is no budget to cap his spending authority, he is purposely spending like a drunken sailor (couldn’t resist) to hasten our descent into a “bankruptcy” that is not available to the State.
Comment by Original Rambler Tuesday, Jun 20, 17 @ 2:07 pm
== which includes pension contributions exceeding 33 percent of current revenues ==
Current pension plan contributions are much less than that. Most of it is paying down the pension debt. You need to distinguish between the two categories.
Comment by RNUG Tuesday, Jun 20, 17 @ 2:35 pm
RNUG- I guess that should make us feel better that a portion of the contribution goes to pension debt service. It still is taking 33 cents for every dollar to deal with pensions. Add in Medicaid and that doesn’t leave s whole lot. I recently was in Boston- a monthly commuter pass costs less then half what CTA charges all because MA continues to subsidize their public transit. We in Illinois have the highest RE taxes in the USA and the services are going down in terms of what taxpayers get from the State. It can’t continue like this or more productive folks will see a better future elsewhere leaving behind residents who need more in State assistance then they contribute. It’s not a pretty picture
Comment by Sue Tuesday, Jun 20, 17 @ 3:12 pm
Sue:
You have a problem with the AFSCME situation? Talk to the courts. There is a process that is being followed and it will eventually come to a conclusion.
Also, at what point is the Governor responsible for anything? Give me a date. We’re at 2 1/2 years and that apparently isn’t the cut off so what is the date?
Comment by Demoralized Tuesday, Jun 20, 17 @ 3:18 pm
Mendoza can say bonds will get paid first, but honk off a judge by not being able to comply with a court order, and the call might get taken out of her hands.
Comment by wordslinger Tuesday, Jun 20, 17 @ 3:42 pm
-Sue-
We do have the highest Property Taxes, but we are 29th in terms of total taxes collected, which includes the Property Taxes.
If your making a million a year, you want to live in Illinois. 3 3/4 percent looks pretty sweet.
Comment by WhoKnew Tuesday, Jun 20, 17 @ 3:53 pm
Who knew- what good is a 3.75 percent tax rate if the State spends as it is 6?
Comment by Sue Tuesday, Jun 20, 17 @ 4:22 pm
As if
Comment by Sue Tuesday, Jun 20, 17 @ 4:23 pm
Sue, what specific savings has Rauner proposed? His budgets were spending at the same general level as current expenditures and the Senate budget, except for savings in the most recent proposal from unspecified “pension reforms” (which cannot reduce the $100B plus unfunded pension amounts, because those are amounts already earned and are protected by the state and federal contracts clauses) and a few billion from an unspecified “grand bargain.” If he won’t propose any cuts, how is he not to blame for the current level of spending.
Comment by Whatever Tuesday, Jun 20, 17 @ 7:26 pm