Treasurer Frerichs: Gov Rauner Needs to Stop Campaigning and Start Governing

State Capitol:  On Monday morning, State Treasurer Mike Frerichs held a press conference to demand Gov Rauner focus on forming an agreement on a state budget and quit campaigning around the state.

“You need to get the parties together and have actual dialogue,”  said Frerichs

He pointed out the state’s growing unpaid bill backlog is over $12.5 Billion, and that now every citizen of Illinois has to pay the equivalent of $1000, to pay that bill backlog off.   He noted if no budget is formed before the next governor is sworn into office, the bill backlog would be around $21 Billion, or 80% of the state’s operating budget.

The backlog of unpaid bills has grown dramatically over the last two years for several reasons.  A primary reason is the state has not passed a full budget since Gov Rauner came into office in January 2015.   Without a state budget in place, a number of programs are having spending determined by a judicial order to continue spending on these programs, which means there is no funding restriction, as there would be in a budget that establishes a line item.

Since the last operating budget ended in June 2015, the state’s backlog of bills has skyrocketed.

Also in January, 2015, the state’s 5% income tax level was returned to its 3.75% level that it had been prior to it being raised in January 2011, on a temporary basis.  This rollback in the income tax cost the state treasury approximately $5 Billion annually in tax revenue.

Now Billions of bills pile up due to a lack of money available to pay them.  As a result, nonprofit organizations are struggling to operate, or are being forced to close their doors.  Colleges and universities are without hundreds of millions of dollars they would have had, and this is impacting the regional economies of areas around the state, where a university — as with Eastern IL in Charleston, or Western IL University in Macomb, or SIU in Carbondale — are the economic engines of their region of the state.

Additionally, while K-12 schools, have seen an increase in per-pupil spending under the Rauner administration, they are NOT being paid for tens of millions of dollars in required spending outside the classroom, such as compensation for school bus operations, in what is referred to as “categorical spending.”

And the 200 some hospitals around the state, are now owed BILLIONS of dollars in past-due bills. The problem of cash flow at a number of hospitals is now so dire, that even though state workers have a “Cadillac” healthcare insurance policy, many doctors are now requiring state workers to pay as much as half the cost of a procedure, upfront out of their own pocket, as the healthcare providers are not being paid by the state when healthcare providers bill the state.

Treasurer Frerichs told reporters the state has had six credit downgrades since Gov Rauner took office.  In addition to the state having to pay between 9 to 12% interest on that growing debt, Frerichs said the credit agencies have said they will lower Illinois’ credit rating to junk bond status if the state fails to have a state budget.   THIS, he noted would violate previous lending agreements and could result in a default that would require millions in additional fees to the state’s taxpayers.

On May 8, State Treasurer Mike Frerichs (D), warned the state will face junk bond status if a budget is not passed.

“As the Chief Investment Officer, it’s my duty to sound the alarm.  The credit agencies have told us we risk junk bond status if we do not form a budget. We will pay higher rates on interest rates going forward.”  said Frerichs

Reporters asked why the State Treasurer wasn’t also criticizing the legislature for a failure to have a budget.

Frerichs said that Illinois Senate was in the process of voting on a state budget that had been negotiated in good faith, when the Governor called Republican senators and urged them to vote against the “Grand Bargain” budget deal, when Democrats had been told the Republicans were going to vote to pass the legislative package.

“But for the actions of the governor, we might now be debating a Grand Bargain budget in the House.” he said

Under the Illinois constitution, the legislature is to pass a budget by the end of May.  If they fail to do so, they need a 2/3rds majority for passage, instead of a simple majority.  Also, without a passed budget, lawmakers are not paid a per diem for travel to the State Capitol.

But in recent conversations the Illinois Channel’s had with state lawmakers, few believe the legislature will have a budget passed before the constitutional deadline of May 31.  With the new fiscal year starting on July 1, some legislators privately told us, they think the legislature will be called back into session during June, and there COULD BE a deal struck around the end of June, in time to have some spending authority in place before the start of Fiscal Year 2018, which starts the first day of July.

This means in part, that K-12 school administrators, who are at work over the summer of the opening of the new school year in August, will have no idea of whether there will be a budget in place to open the schools on time, or how much they will have to fund their operations, until a spending bill is approved.

If one is approved.