CHICAGO - Illinois' cash flow position grows more dire by the day with the state on pace to rack up an $8.5 billion bill backlog by the start of the new year, Comptroller Leslie Geissler Munger warned Wednesday.
Even without a fiscal 2016 budget in place, the comptroller's office is paying about 90% of state obligations under more than a dozen court orders and consent decrees as well as continuing appropriations for items like debt service and retirement payments, Munger said.
The problem is those payments are based on fiscal 2015 levels and the state expects a drop in revenue this year due to the partial expiration last Jan. 1 of a temporary income tax hike.
"The state's cash flow becomes tighter with each passing day…this is clearly a recipe for disaster," Munger warned during a news conference to discuss her office's cash flow management given the ongoing budget impasse.
The current backlog is up to $6 billion from $5.5 billion last month. If a budget is not soon adopted that either dramatically cuts spending and/or identifies new revenues, the state is on pace to carry an $8.5 billion backlog into the next calendar year and as much as a $12 billion backlog by the end of the fiscal year on June 30, Munger warned.
"This is an unsustainable situation," she said.
The state's bill backlog topped $9 billion just a few years ago but the state was able to bring it down to the $4 billion to $5 billion range with the infusion of new income tax revenues following the 2011 income tax hike.
After its operating deficit and unfunded pension obligations, the state's overdue bill backlog is a key factor followed by rating agencies, providing an indication of the severity of the state' fiscal stress.
First-year Republican Gov. Bruce Rauner and the General Assembly's Democratic majority remain mired in political gridlock over the budget and policy initiatives and the state is now in the third month of the new fiscal year with no resolution in sight. Rauner initially offered a $32 billion plan while Democrats want a $36 billion general fund.
The unpaid bill estimate does not include payments for higher education, employee-retiree health insurance, college grants, some Lottery winnings, commercial spending, and some other bills, which all totaled would add $4.3 billion in spending annually.
Munger called on the governor, who appointed her to the post earlier this year, and lawmakers to sit down, resolve their differences and adopt a balanced budget immediately. In past news conferences, Munger has more pointedly called on lawmakers to consider Rauner's policy proposals to end the impasse.
Munger's warning on state spending and revenues echoes concerns raised in a recent Moody's Investors Service report: "Late Budget Matters Less Than Solving Pension and Revenue Problems."
Illinois still has time and options left to address its current-year shortfall but the clock is ticking, Moody's analyst Ted Hampton said.
"Addressing this projected deficit becomes increasingly challenging as time remains in the fiscal year elapses," Hampton said. "Continued political gridlock and the inability to reach an agreement by late September, the end of the state's first fiscal quarter, will greatly increase the likelihood of the deficit moving from projected to actual."
The state's A-minus level ratings from all three ratings agencies are the lowest of any state. Fitch Ratings and Moody's assign the state a negative outlook and Standard & Poor's has its rating on CreditWatch with negative implications.
