State agencies will soon be required to open their books to taxpayers — though much debt will still not be reported.
Despite all of the world’s information available at the tip of their fingertips, taxpayers are still completely in the dark about the sorry state of Illinois’ finances. Overdue bills are rapidly accruing due to processing delays and a lack in appropriation, yet simple month-to-month statistics on interest and penalty payments are held from the public. Illinois’ Debt Transparency Act will keep taxpayers more informed about how much the state’s backlog of bills is costing them.
But a fiscal watchdog says the state can still do more to keep its citizens better aware of the mounting debt.
After the Illinois House’s unanimous override of Republican Gov. Bruce Rauner’s veto, the Illinois Senate sailed the bill into law with its own 52-3 override. Rauner, up for re-election for a second term in 2018, had denounced the bill as “political manipulation” by Democrats.
The act will require that beginning in January state agencies report monthly the amount of bills being held, whereas they previously had to report that information annually. Agencies will also be required to report how much estimated interest will be paid on those bills.
Sen. Andy Manar, the Democrat from Bunker Hill who sponsored the act, celebrated the defeat of the Rauner veto of what many lawmakers on both sides of the aisle call a common-sense proposal.
“The financial pressure on Illinois government has not lifted, as evidenced by the growing bill backlog,” Manar told the Associated Press. “Businesses all over Illinois are patiently waiting to be paid for services and goods they’ve provided. The least we can do is engage in basic, responsible accounting practices and communicate across offices as we try to work through this.”
Fiscal transparency has become a hot-button topic in recent years, as debts pile up across the country. New standards, for example, from the Governmental Accounting Standards Board, require more accurate reporting of pension promises to retirees in state and local governments. GASB is also now rolling out requirements for clearer information about corporate subsidies.
Such transparency has become a bipartisan issue. The left-leaning U.S. Public Interest Research Group Education Fund released a report in April criticizing the lack of transparency in special tax districts.
The Belleville News-Democrat reported in October that Illinois’ bill backlog had reached nearly $16.7 billion, with 740 vendors owed more than $500,000 each. The Comptroller’s office is now using recent bond sales to work on the backlog. After Rauner vetoed the legislation in August, Comptroller Susana Mendoza, a Democrat, crisscrossed the state to advocate for a reversal of that decision.
The Comptroller’s office projected that Illinois would owe $800 million in interest and penalties on the overdue bills by the end of the fiscal year.
“That’s $800 million of taxpayer money we are just throwing away — it’s not helping kids get day care or go to college. It’s not helping seniors get meals on wheels or keep their home health care,” Mendoza said. “Just think how many sick people could get timely health care if we had $800 million to pay our past-due medical bills. Think how many more low-income Illinois students could get scholarships to attend college with that money.”
An estimated one-third of the backlog is held by state agencies due to processing delays or a lack of appropriation.
The state government’s compliance with the Prompt Payment Act of 2002, designed to prevent Illinois from falling behind on its liabilities, is resulting in massive and growing taxpayer debt. That act assigns a one percent per month penalty to bills that are 90 days past due. Other bills, such as debts to health-care providers, can accrue interest as high as 9 percent a year after 30 days. Because timely reporting isn’t required, it’s unclear how many bills are being held at any given time by state agencies, Mendoza said.
The Institute for Illinois’ Fiscal Sustainability posted a chart last year showing how the state’s debt began booming during the Great Recession, and interest penalties peaked in fiscal year 2013 at nearly $318 million due to the pay down of Medicaid bills.
Bill Bergman, director of research for the Chicago-based Truth in Accounting, which pushes for comprehensive and transparent financial reporting from government agencies, said it’s not clear how much information will siphon to the public under the Debt Transparency Act. While the Act lays out detailed monthly information that must be reported to the Comptroller’s office, it doesn’t spell out how much of that must be shared with Illinois residents. Bergman believes that subsequent reforms should require agencies to publish statistics on which vendors benefit the most from interest payments that the public owes them under the Prompt Payment Act.
“We still don’t know what [Mendoza] or future comptrollers will report to the public,” Bergman said.
Although he said the new act is a positive move for financial transparency in Illinois, Bergman noted the Land of Lincoln remains “a laggard compared to most states.” He said the state still isn’t reporting tens of billions of dollars in unfunded retiree health-care obligations.
“Considering that over one hundred billions of dollars of unfunded pension benefits have finally arrived on Illinois’ balance sheet, Illinois has also ‘caught up’ in terms of fiscal transparency. However, whether it was really proactive is another question, given that the state was reacting to new accounting standards,” Bergman said. “We are catching up, but we have a long way to go.”
Johnny Kampis serves as investigative reporter for the Taxpayers Protection Alliance Foundation.