Pass bill to speed payments, give realistic budget picture

Sunday, March 9, 2008 12:14 AM CST

The state is fooling no one by claiming to have a balanced budget while shoving the payment of current year obligations into the next fiscal year.

It is time to stop this charade in Illinois.

Having a bill come in after the end of the fiscal year is not unusual — for private business or government. Under standard accounting procedures, you pay the bill promptly and charge it to the budget year in which the expense was incurred.

However, under Section 25 of the State Finance Act, Illinois carves out exceptions in a number of categories, the largest of which is Medicaid and other health care payments.

When payment of these so-called “Section 25 liabilities” is made after the start of new fiscal year, it is charged to the current fiscal year’s budget, no matter when the service was actually provided.

This provides little incentive for timely payment of bills. The effect is quite the opposite. If an agency with a “Section 25” bill is about to go beyond its spending limit for the fiscal year, it can just postpone payment until the new appropriation kicks in.

The size of the problem has grown enormously.

At the end of fiscal year 1997, the amount of deferred Medicaid liabilities was about $560 million. By the end of FY 2003, Medicaid and other health care bills carried into the next year had more than tripled to $1.8 billion.

At the end of FY 2007, preliminary estimates from the Illinois comptroller’s office put the Section 25 liabilities at more than $3.3 billion.

State Comptroller Dan Hynes has been sounding the alarm about this practice for a long time.

In a letter printed in The Pantagraph on Dec. 16, Hynes wrote, “For years I have urged the elimination of this loophole, arguing that its existence allows state leaders to deny the true costs of state-provided health care and to sidestep requirements that the state maintain a balanced budget. But lawmakers and the governor rebuffed my efforts.”

This isn’t a problem that started with Gov. Rod Blagojevich, but it has grown under his watch.

A bill introduced last year by state Sen. Pamela Althoff, R-Crystal Lake, would end this practice. Its cosponsors include two Pantagraph-area lawmakers, Sens. Bill Brady, R-Bloomington, and Dan Rutherford, R-Chenoa.

Recognizing that the problem can’t be fixed overnight, it would be phased in, setting limits on what could be spent on such delayed payments per fiscal year through Oct. 1, 2017.

After that date, payments for such bills could only be made within the two months following the end of the fiscal year.

Senate Bill 1533 is a reasonable approach that would paint a more realistic picture of our state’s finances and get payments to Medicaid providers more promptly. It deserves bipartisan support.

Instead, the bill has been stuck in that Never-Never Land of the Senate Rules Committee for over a year.

This legislation should receive a full hearing and prompt passage.