Sun-Times on the budget:
The governor’s office wants to pay back the $15 billion plus interest over time with new revenue generated by increasing income, cigarette and gas taxes.
We say some of that new re-venue should be used to pay the state’s bills directly over time. Skip the borrowing.
Proponents of the $15 billion borrowing plan say it would be cheaper for the state than the alternative — continuing to be a deadbeat. That’s because the state, by law, must pay 12 percent interest when it’s chronically late paying its vendors. Alternatively, if the state sells its debt, it may be or 5 percent.
We’re not convinced that those savings will materialize. Borrowing would be cheaper only if Illinois continued to pay its bills late for the next decade or more.
We hope the state ends that shameful practice far sooner than that. Borrowing would work only if legislators passed a permanent income tax increase. We urge them to do so, but a temporary one may be in the cards.
Finally, borrowing would do nothing to encourage the state to spend less, as it must.
The good of catching up isn’t only in saving money–which their estimate is questionable, but also getting vendors caught up and under 60 days as it should be. Right now, the state is months behind in payments to almost all of their vendors and that means social service providers. Remember, the State of Illinois has a fairly small number of state employees with many services provided by private providers and they are all in significant trouble because of the state’s inability to pay on time.
The Sun-Times is suggesting that state vendors, already cash strapped, loan money to the State of Illinois and continue to do so for years ahead. The state is still borrowing money, but instead of doing it from a bank and having set terms, it’s from hospitals, non-profit service providers, local governments, and schools. Given these entities seldom have enough extra cash to be floating the state government a loan, this means they often have to get loans to cover the shortfall where possible raising the costs for vendors.
Stateline writer Dan Vock did a great piece on this:
It’s a safe place in a neighborhood troubled by gang violence. Two years ago, two participants at the Youth Service Project were killed, and two more were injured, in the fighting. The youth at the center, which runs an arts education program, responded to the deaths by painting an indoor mural of their memories of that summer’s events. It shows a SWAT team van, a church cross against a blue sky and a funeral home — although the center’s staff, fearing that the funeral home would be a distressing image for the kids to see every day, have moved a bookshelf in front of it.
The center plays an important role in the life of Humboldt Park. Indeed, the state of Illinois, which provides 95 percent of the Youth Service Project’s funding, expects the center to provide all of the services under its contract. The catch is that, with all the state’s fiscal troubles lately, no one knows when the state will actually hand over that money.
In the past, the center has had to wait a month or two to get paid. This year, the center went six months without receiving a single check from the state. To get by, the center exhausted its line of credit, cut back on services and laid off seven of its 32 staff members. Only half as many children were able to take advantage of the Youth Service Project’s programs as did two years ago.
This summer, gang violence picked up once again. Three police officers were killed, including one who guarded the mayor’s house. While overall homicide rates are down in Chicago, the brazenness of the attacks prompted two state legislators to propose calling in the National Guard. The adults who work at the Youth Service Project have noticed more aggressive behaviors among the teens they serve, making them more difficult to work with.
There’s a good sidebar on a pharmacist as well. But why should the state be borrowing from vendors and not banks? Has Illinois gotten so weird that people just expect it to operate this poorly now?