As fiscal year ended, state carried over billions in unpaid obligations

By Jamey Dunn 

When Fiscal Year 2012 ended on the last day of June, Illinois continued to face billions in unpaid bills. And according to Comptroller Judy Barr Topinka, the recently passed budget may not cover some costs through the end of the current fiscal year.

Topinka estimates that at the end of FY2012, the state had $7.5 billion to $8 billion in unpaid obligations, including bills, employee health care costs and unpaid corporate tax returns. That is an improvement over the same time last year, when the state had $8.5 billion in obligations it had not paid.

The stack of bills at the comptroller’s office at the end of June to be paid out of the General Revenue Fund was $3.656 billion, down from $3.798 billion last year. In addition to unpaid General Revenue bills, this year Illinois owed $830 million in bills to be paid out of education funds. Topinka estimates that about $3.5 billion worth of unpaid bills, predominantly Medicaid costs, have yet to be sent to her office. She said the state also has to pay back about $100 million to funds outside the General Revenue Fund from which Gov. Pat Quinn and the General Assembly have agreed to borrow in recent budget plans.

While the large backlog of unpaid liabilities shrank slightly, the state’s revenues increased last year. Topinka said that the FY 2012 revenues increased by $2.3 billion. She said much of the new revenue was spent on pension costs because the state used General Revenue Funds instead of borrowing to make its annual pension payment. According to the comptroller’s quarterly report, the recent income tax hike and increased consumer spending helped to increase revenues last fiscal year.

General Fund spending increased in FY2012 by $2 billion from FY2011. Under the FY 2013 budget, such spending would decrease by more than $500 million. However, most of the savings are expected to be used to help address the backlog of Medicaid bills. According Quinn, a total of $1.3 billion in old bills will be paid off under the FY2013 budget “Positive steps were taken this year toward getting our financial house in order, but we clearly still have a long way to go to fully clean up this colossal mess,” Topinka said in a prepared statement.

Topinka predicts continued budget woes for the state. “Serious fiscal challenges and payment delays are expected to continue in fiscal year 2013,” the report said. Money for state retiree benefits was cut in half under the FY 2013 budget, and the comptroller said it would likely run out during the first six months of the fiscal year. She said a new law, which would require retirees to pay premiums for their health care coverage, would help address the underfunding of the program but would not solve the problem. “While there may be state cost reductions through the implementation of P.A. 97-695, which allows the state to charge retirees additional amounts for their health insurance coverage, it seems unlikely that this would be enough to eliminate funding pressure for this area.”

She also predicts that a Department of Human Services program that provides child care for low-income families would likely run out of money in the spring, before the end of FY2013. Lawmakers scrambled last spring to find the money needed to fund the program through the end of FY2012. The report also said that the state might not have enough money to pay FY 2012 bills for the Department of Aging and still fully fund the department's programs for FY 2013. The report notes that General State Aid to schools was cut by $161 million in the FY 2013 budget and says that making “timely” payments to public universities and the State University Retirement System “will be challenging this year.”

Topinka’s report contained little good news for those waiting on overdue payment from the state. “While Illinois has made gains by making its pension payments and addressing spending growth, there remains a long way to go. As a result, longstanding delays for providers of state services will continue into fiscal year 2013,” it says.