Vendors: revolt for fiscal accountability
Our state government has not operated with a truly balanced budget for years. They ignore deficit spending by hiding bills and stiffing vendors rather than cutting spending or raising taxes to operate responsibly.
On Jan. 16, Sangamon County resident John Wright was killed when a train struck his vehicle at an unprotected railroad crossing. The Blagojevich administration has swept nearly $22 million out of the railroad grade crossing protection fund and hasn't replenished it.
The governor's office of management and budget routinely dismisses this practice as merely using "surplus revenue" that accumulates in these special funds, ignoring the statutory construct that dedicated certain taxes and fees to special purposes. Two thousand unprotected grade crossings in Illinois have not been serviced. I doubt John Wright's family would agree those funds were somehow "surplus" and unworthy of being spent exclusively on railroad crossing safety.
Modern Care Nursing Home in Jacksonville closed Jan. 25. Sixty-three people lost their jobs. Fifty-three residents scrambled for other arrangements for care. The owners made it clear the primary cause for this decision was that the state was four months behind in payments.
State reimbursement to nursing homes for Medicaid patients has slowed dramatically. St. Patrick's Residence in Naperville got a December payment for services rendered in September, but by January 31, had not received payment for October, November, December or January.
A Jan. 13 editorial in "The Chicago Tribune" titled "Illinois, the Deadbeat State" focused on Knox County's Council for Developmental Disabilities. The state owed KCCDD more than $1.4 million, an amount equaling one-fourth of its annual budget. KCCDD was forced to borrow from capital funds to operate, but those funds are depleted. Without state payment, KCCDD must borrow from commercial lenders and pay interest to meet payroll.
That's what Illinois Chamber member United Service Industries of Jefferson County has done for some time. Last year, 15 percent of company revenues went toward debt service on state receivables.
United Service Industries should be reimbursed from the Leaky Underground Storage Trust (LUST) Fund, but the cash flow from motor fuel sales was deemed "surplus" and applied elsewhere.
The Blagojevich administration swept $55 million from the LUST Fund. The backlog in approved, unpaid claims stands at approximately $45 million. The Illinois Environmental Protection Agency no longer reviews vendors' submitted bills in a timely manner. Everyone knows there are insufficient funds to eliminate the backlog, let alone make current payments.
More than 20 years ago, the state established employment standards for county probation officers. The state committed to reimburse counties for 100 percent of those officers' salaries. The state has not satisfied its obligation, forcing counties to absorb more than $30 million annually in non-reimbursed payroll costs.
Naperville's Oswald Pharmacy sees wholesalers get paid weekly for merchandise, while the pharmacy waits months for state reimbursement for the same outlay. On any given day, this family-owned business is effectively making a $15,000 interest-free loan to the state. Its owners see the irony when they file state tax, payroll or business forms, knowing they could not avoid penalties or interest if they missed deadlines.
State Comptroller Dan Hynes is the only elected official who consistently acknowledges Illinois' lack of fiscal integrity. His mid-year report reveals a record backlog of $l.7 billion in unpaid obligations at calendar year end. The state's current fiscal year could end with a backlog of $1 billion due vendors and another $1.5 billion in accrued liabilities to Medicaid providers.
The state's prompt payment statute is a joke. Administrative rules make it impractical for anyone to receive fair compensation for the state's irresponsible practices. The bureaucracy has great latitude to delay and withhold payments. Vendors are wary of pursuing satisfaction and triggering retaliation. The simple interest penalty the state would pay is not worth most vendors' effort. This statute should be re-written to reflect what is fair for vendors instead of protecting the state.
Corporate income tax, sales tax receipts and investment earnings are softening. Illinois' Commission on Government Forecasting and Accountability's latest report suggests revenue for the current fiscal year may be $600 million less than anticipated.
While a weakening national economy and possible recession are on most peoples' minds, Gov. Blagojevich continues to press for expanded health care spending.
Undoubtedly, revenue shortfalls and fiscal disputes will influence the governor's 2009 budget. He pursues expanded health care, and education spending, yet his administration ignores pension obligations and fails to pay bills on time, stressing vendors, causing businesses to close, forcing vendors to carry the state's debt and incur interest expenses. Cash flow gimmicks and deferred payments only avoid the ugly truth: in a given 12- month period, state government spending far exceeds cash receipts.
The state's fiscal practices are a curse to private sector managers who wouldn't get away with operating like that for long without experiencing the wrath of customers and suppliers.
It is time for vendors and other exploited businesses to take action. I challenge every recipient of state funds and every business adversely affected by the state's fiscal policies to make their experiences known.
Let me know how Illinois' fiscal policies affect your operations; copy your state legislators and the governor's office. We need a vendors' revolt. Legislators should hear about these unacceptable practices. Aggressive constituent opposition may give them resolve to resist more shenanigans in fiscal year 2009. Forward this to every business owner you know who has suffered as a result of the state's irresponsible fiscal policies. Help me encourage them to tell their stories.
We need to demand fiscal integrity by our state. Local chamber members and professional and trade associations should engage in a campaign for fiscal integrity. Legislators and bureaucrats who allow dishonest fiscal practices need to be challenged and exposed for abusing citizens they are supposed to serve. How can an honest businessperson not be infuriated by what state officials are getting away with? We deserve better.
- Doug Whitley is president and CEO of the Illinois Chamber of Commerce. He can be reached at (312) 983-7100 or email@example.com.