Tuesday, February 15, 2011

Quinn's budget plan relies on borrowing

By Jamey Dunn with Lauren N. Johnson contributing

Gov. Pat Quinn’s budget does not include a plan to pay down the state’s backlog of unpaid bills outside of a borrowing proposal Republicans shot down earlier today.

Near the end of the previous legislative session, Democrats proposed $8.75 billion in borrowing to pay down the state’s growing stack of unpaid bills to vendors, social service providers and schools. Revenues from the recent income tax increase were earmarked to repay the borrowed funds over the next 14 years, but the plan did not receive the needed support. At the time, some Republicans said they were willing to work out a compromise version of the bill in the new legislative session.

The same plan was introduced this session as Senate Bill 3, and Senate Republicans voiced their opposition today. Senate Minority Leader Christine Radogno said Senate Republicans made their opposition to the proposed $8.75 billion borrowing plan—referred to by Quinn as a “debt restructuring” plan—clear to the governor. She said if, in fact, Quinn forms his budget address around the plan, it would show the Republican caucus his resistance “to work together and come up with a plan.”

However, members of Quinn’s staff say that the plan is necessary to build a responsible budget for the next fiscal year. “We spent the first half of this year paying [fiscal year 2010] bills. If we don’t do debt restructuring, we’ll be doing the same thing next year,” said Jack Lavin, Quinn’s chief of staff.

Lavin said the backlog of unpaid bills to vendors has narrowed the pool of contractors that the state can choose from because some businesses cannot afford to wait for the late payments. He said the result has been a 6 to 10 percent increase in procurement costs, which he estimated at $700 million. “[Republicans] are saying we can’t afford to pay the interest [on the borrowing plan]. We can’t afford not to. … We can’t afford to have these procurement costs go up. We can’t afford to continue to have these big deficits — have vendors who can’t pay their employees stop serving the state, so we have less vendors to choose from, [so] procurement continues to go up.”

He said some Republicans are “out playing politics and using rhetoric, but we need to sit down and look at the numbers and look at what fiscal stability means.”

Lavin added: “It’s a prerequisite. We have to have a debt restructuring in order to have fiscal stability and to keep our economy moving forward.”

He said Quinn still plans to work with Republicans to figure out a way to pay off the backlog. “We’re waiting for Republicans to give us a counter offer. … They have not done that. They simply say no. We’ve asked them to stop playing rope-a-dope and give us a counter proposal.”

Lavin said he thinks the Republicans are working on their own proposal, but he said they likely want to hear Quinn’s budget address before they present it. He said Republicans could identify more cuts to free up funds for paying off old bills.

“We are fundamentally changing the way we spend taxpayer dollars by mandating that decisions be based on performance and impact rather than politics or habit. … It’s a lean budget that focuses the burden across all areas of state budget,” Quinn spokesperson Mica Matsoff said of the governor’s budget proposal, which he will present to the General Assembly at noon tomorrow.

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