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Are vendors and nonprofits de facto creditors to Illinois?

April 20, 2016

During my May 18, 2016 appearance on WTTW's Chicago Tonight, journalist Carol Marin, Lawrence Msall, President of the Civic Federation, and I discussed Illinois Comptroller Leslie Munger's action to delay the paying state officials, including legislators. The Comptroller plans to include the officials' paychecks in the state's backlog of unpaid bills. This will put the state officials in a $7.6 billion line of vendors and nonprofit organizations waiting to get paid.

Unfortunately, the vendors and nonprofit organizations are used to this game.

The Illinois constitution has a balanced budget requirement, but this doesn't mean its revenues must equal its expenses. The wording of the constitution only requires funds available to equal expenditures, meaning only the checks written are included in the balanced budget determination. So for years, one of the many tricks governors and legislators have used to "balance" the budget is to just not pay the state's bills on time. This reduces expenditures in one budget year, and moves them to the next year when the checks are written.

This practice has turned Illinois' vendors and nonprofit organizations into the state's lenders, just like the bondholders. The difference is the bondholders agreed to lend money to the state and know when they will get paid. Illinois vendors and nonprofit organizations wait anywhere from 6 to 18 months to get their checks.

Now state legislators and other office holders have joined the ranks of de facto creditors.

 
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