Illinois owes billions of dollars in unpaid bills

SPRINGFIELD, Ill. -- Drowning in deficits, Illinois has turned to a deliberate policy of not paying billions of dollars in bills for months at a time, creating a cycle of hardship and sacrifice for residents and businesses helping the state carry out some of the most important government tasks.

Once intended as a stopgap, the months-long delay in paying bills has now become a regular part of the state's budget management, forcing businesses and charity groups to borrow money, cut jobs and services and take on personal debt. Getting paid can be such a confusing process that it requires begging the state for money and sometimes has more to do with knowing the right people than being next in line.

As of early last month, the state owed on 166,000 unpaid bills worth $5 billion, with nearly half of that amount more than a month overdue and hundreds of bills dating back to 2010, according to an Associated Press analysis of state documents.

The true backlog is even higher because some bills have not yet been approved for payment and officially added to the tally. This includes the Illinois health care agency, which says it is sitting on about $1.9 billion in bills from Medicaid providers because there's no money to pay it.

While other states with budget problems have delayed paying their bills, the backlog in Illinois is unmatched, experts say. Year after year, Illinois builds its budget on the assumption that it will pay its bills months late -- essentially borrowing money from businesses and nonprofits that have little choice but to suffer the financial hardship.

Illinois Gov. Pat Quinn speaks June 1 with reporters while in his office at the Illinois State Capitol in Springfield, Ill. With the state billions of dollars behind in paying its debt, collecting on unpaid bills can be a confusing process. Quinn's budget office encourages people to go to a website and fill out the form if they want to claim a financial hardship, but businesses can also call or write directly. Budget spokeswoman Kelly Kraft said Quinn doesn't believe that someone should get paid more quickly if a politician is intervening. (Associated Press file)

The unpaid bills range from a few pennies to nearly $25 million. In early September, for example, Illinois owed $55,000 to a small-town farm supply business for gasoline, $1,000 to a charity that provides used clothing to the poor, $810,000 to a child-nutrition program.

Even death involves delays in Illinois. Funeral homes were waiting for $2.8 million in overdue reimbursement for burying indigent people.

Leigh Ann Stephens wrote a letter in August "asking, pleading" for $50,000 the state owed to the DuPage Center for Independent Living, where she is executive director. It was the third time in two years that she had sent a hardship letter warning the center, which helps people with disabilities live outside of costly nursing homes, would close if it wasn't paid.

The letter got results, for now, but it hasn't reversed cuts. Stephens has laid off one of eight employees, stopped opening on Fridays, cut back hours for part-time workers and reduced salaries 7.5 percent for herself and the other full-time worker. Like their clients, most of the employees are disabled, coping with blindness, loss of hearing, cerebral palsy and more.

"This is not just a job for me. It's a way of life," Stephens said. "I can be angry. I can be sad. I can be so mad that I cry. I have thrown things across the room."

'Accustomed to it'

The delays have prompted relatively little public outcry, perhaps because so much attention has been focused on other budget battles or there is no one politician or agency to blame. It also reflects resignation from some vendors who no longer expect the corruption-plagued Illinois government to function properly.

"We've become accustomed to it. Being angry is not going to change it," said Suzanne Young, who has had a hard time getting the state to pay her business, Rockford Map Publishers.

Illinois leaders join in bemoaning the crisis but haven't been able to find a solution.

"God, how much more can our people take?" said Comptroller Judy Baar Topinka, a veteran politician responsible for trying to pay a seemingly infinite stack of bills with the finite amount of money approved by legislators and the governor.

"I really feel terrible every day that we can't pay these bills and people are going to be hanging out there for six months, seven months," Topinka said.

Delaying payments during tough times is nothing new for Illinois, though past delays were shorter and more limited. Under Gov. Rod Blagojevich, big spending collided with a recession that sent state revenue spiraling downward. Illinois could no longer afford to pay its bills and the backlog exploded.

Blagojevich's replacement, Democrat Pat Quinn, raised income taxes and trimmed spending, but that money was gobbled up by other needs, primarily rising pension costs. Under budget agreements with legislative leaders, all Democrats, bills continued to go unpaid.

As recently as June 2008, Illinois paid its bills seven days after state agencies finished the paperwork. A year later the delay had reached 99 days. It stood at 118 days in June of this year, the comptroller's office said.

The General Assembly has accepted the unpaid bills as an unpleasant necessity while Illinois claws its way out of deficits that once topped $13 billion. Lawmakers of both parties rejected Quinn's proposal to borrow money so the state can pay its overdue bills, although he says he'll try again when lawmakers meet later this month.

Instead, Illinois has turned businesses, charities and local governments into unwilling short-term lenders, using their money to operate government and disguise the depth of the state's financial problems.

Who gets paid sometimes depends on who complains the loudest or can get a politician to step in.

Illinois grants "expedited payment" to vendors who say they're on the verge of shutting down if they don't get their money, but the process lacks clear rules. The Illinois governor and comptroller each say the other makes the final decision on payments, and documents show a letter of support from a legislator -- Republican or Democrat -- can often shake loose money for vendors.

Many states use the budget gimmick of delaying payments when money is tight, but Illinois is seen as the worst.

"I think you win the championship," agreed Elizabeth Boris, an expert on not-for-profit groups at the Urban Institute think tank.

California, another state notorious for budget troubles, had to issue IOUs to vendors at one point. But that was a temporary problem, not the way of life it has become in Illinois. California groups and businesses could get by with short-term loans. But many Illinois groups have maxed out their lines of credit and still don't know when state money will start flowing smoothly again or how much to count on as they plan their financial year.

Illinois ranked No. 1 in the country in the percentage of not-for-profit groups facing payment delays, an Urban Institute survey found. Eighty-three percent said late payments from state and local government were a problem in Illinois, compared to a nationwide average of 53 percent. That survey was conducted in 2009, when Illinois' backlog was still in the middle of its dramatic rise.

"We are basically bankrolling the state. It's a ridiculous situation," said Abha Pandya, CEO of Asian Human Services, a Chicago organization awaiting payment on $609,000 in bills, some of them stretching back to November of last year. "It's just absolutely awful and there seems to be no end in sight."