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* Press release…
An innovative proposal from State Senator Heather Steans could help businesses and state government at the same time by paying down Illinois’ backlog of bills more quickly.
Steans’ measure would allow the state treasurer to take over debts more than 90 days old, pay the vendors and clear the bills from the state’s ledgers. The approach would enable Illinois to pay off old debts more quickly, slow the accrual of interest penalties and inject money into local economies where businesses have been harmed by the state’s ongoing budget difficulties.
“This is a winning strategy to make more headway on the bill backlog. Every taxpayer benefits,” said Steans, a Chicago Democrat and a Senate point person on budget matters.
“If the treasurer has funds sitting there unused, why shouldn’t that money logically be available for this need? It won’t solve the entire bill backlog problem, but it will get us to a resolution more quickly.”
The proposal, Senate Bill 2858, would allow the state treasurer to pay bills more than 90 days old if the vouchers in the comptroller’s office exceed funds available by $1 billion. It would save the state additional money by implementing a 0.3 percent monthly late payment interest penalty – rather than the 1 percent under current law – on balances paid off by the treasurer’s office through the Vendor Payment Program.
Last year, Illinois paid more than $1 billion in late interest penalties – an outrageous and inefficient use of taxpayer dollars that could have been directed to other needs, Steans said.
“This legislation will help stop the accrual of interest on late payments and enable us to turn around payments to companies that do business with the state in a more reasonable amount of time,” Steans said.
Senate Bill 2858 passed the Senate today and now advances to the House for further consideration.
* Treasurer’s website…
The Treasurer’s Office manages the State Investment Portfolio, with assets of approximately $12-$15 billion, providing the necessary liquidity to meet the state’s daily obligations while investing remaining funds in authorized short/long-term investment opportunities.
* The Question: What do you think of Sen. Steans’ proposal?
posted by Rich Miller
Wednesday, Apr 25, 18 @ 2:26 pm
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Makes sense to pay the old bills with high interest. Does that mean that new bills wait longer? That could bring on other problems.
Comment by Retired Educator Wednesday, Apr 25, 18 @ 2:38 pm
I like the idea of the State paying interest to the State rather than banks, and the providers would like their payments now rather than later I’m sure. With the (fairly safe) assumption that IL will not be defaulting, there isn’t really a downside. I doubt the Treasurer is going to find better than 12% interest.
Comment by Perrid Wednesday, Apr 25, 18 @ 2:44 pm
Senator Steans’ idea does show innovation, and I’m glad that she is “a Senate point person on budget matters.” I’m all for making headway on the backlog and, now that the Senate has passed it, I hope that the IL House will do the same.
Comment by christopher Wednesday, Apr 25, 18 @ 2:50 pm
My mistake, missed the special interest rate for this plan. 3.6% interest might not be that appealing to the Treasurer.
Comment by Perrid Wednesday, Apr 25, 18 @ 2:57 pm
Sounds like they really want to raid the road fund.
Comment by phocion Wednesday, Apr 25, 18 @ 3:09 pm
3.6% no risk beats a lot of what the Treasurer has in the portfolio right now.
Comment by Arthur Andersen Wednesday, Apr 25, 18 @ 3:13 pm
Instead of having the Treasurer take over the bills, why aren’t we talking about combining the offices? Just cut out the middleman. Problem solved.
I was at an event for JBT where she campaigned on just that.
Comment by ChrisB Wednesday, Apr 25, 18 @ 3:14 pm
On first glance, seems like a smart move. Why pay hefty penalties to vendors if you have excess liquidity sitting in an otherwise unencumbered checking account? The only additional credit risk they appear to take on is their own (General Assembly) appropriation risk.
Comment by Bond market guy Wednesday, Apr 25, 18 @ 3:22 pm
Great,so we can add the debt to Treasurer to the pension fund as a “Ehh… We’ll just pay it next year…” list. Personally, I’d rather keep the pressure on and actually pay our debts, even at the higher cost.
Also, to the point of combining offices, Google “Rita Crundwell”; as luck would have it she was just in the news again today. To anyone that would say that couldn’t happen on the State level, I wonder if anyone in Dixon would have thought the same… /s
Comment by Anonymous Wednesday, Apr 25, 18 @ 3:27 pm
I think it’s good and that every bit helps… but I’d sure like to start seeing some serious proposals about getting rid of the underlying debt.
Comment by Boone's is Back Wednesday, Apr 25, 18 @ 3:33 pm
I think it is a good idea and would go a step further and give the Comptroller access to surplus balances in our special state funds year around with an option for repayment. The two initiatives would give the state vast liquidity available to pay down these balances.
Comment by Captain Ed Smith Wednesday, Apr 25, 18 @ 3:35 pm
There are remaining funds to invest. Seriously?
Comment by Mama Wednesday, Apr 25, 18 @ 3:37 pm
Need to see more than the press release. I take it this is some sort of GRF/dedicated funds transfer-back-and-forth mechanism?
Comment by wordslinger Wednesday, Apr 25, 18 @ 3:51 pm
This was an early step in how NYC averted bankruptcy. This will be all well and good until the state actually is unable to repay the loan the Treasurer made and then the Comptroller is no longer to spend money appropriated by the GA because none exists in the Treasury (because it was loaned and not paid back). Will Frerichs support this legislation?
Comment by Interesting Wednesday, Apr 25, 18 @ 4:12 pm
Over a billion in just late payment interest…sickening. So much waste that could have gone to critically needed services.
Comment by Liandro Wednesday, Apr 25, 18 @ 4:15 pm
Apparently a press release is all we have. I can’t pull up the bill on the GA’s website.
Comment by Arthur Andersen Wednesday, Apr 25, 18 @ 4:33 pm
Strike that. I tried again and got the bill after re-reading the Post and realizing a press release couldn’t pass the Senate, duh. The bill language is very straightforward and won’t tell you much more than the release.
word is nailing it, though, that the bottom line here is that other state funds could be loaned out to prop up GRF with only the approval of the Treasurer. I think that’s a bad idea and would oppose the bill as written.
Comment by Arthur Andersen Wednesday, Apr 25, 18 @ 4:42 pm
AA, it leaves sole discretion for participating to the Treasurer.
If I were the Treasurer, I’d have nothing to do with it. Takes the heat off the GA and governor to get their acts together.
More heat should be on them, not less.
Comment by wordslinger Wednesday, Apr 25, 18 @ 4:49 pm
===If I were the Treasurer, I’d have nothing to do with it. Takes the heat off the GA and governor to get their acts together.===
Ball Game.
Good pickup, - Wordslinger -.
===other state funds could be loaned out to prop up GRF with only the approval of the Treasurer. I think that’s a bad idea and would oppose the bill as written.===
Agreed.
To that, and both the points being made by - AA - and - Wordslinger -,
Any Treasurer of Illinois wanting to manage the crisis type budgeting Rauner (and arguably Quinn for a time until bills were getting paid) has put Illinois thru purposely (Quinn was inept), the weight of taking on what the GA and Governor won’t, and by discretion, “raiding” monies by the Treasurer’s own juggling… it not the fear of owning that heavy burden, it’s relieving two branches of government of their actual responsibilities.
Not good as written.
Not great unintended consequences.
Comment by Oswego Willy Wednesday, Apr 25, 18 @ 4:58 pm
1) this is just interfund borrowing under another name, which may be a workaround to get past the transportation lockbox.
2) this is a bit of a fund accounting nightmare.
3) often there are surplus funds for a reason, for example there may be upcoming GO bond payments coming due, the Comptroller & Treasurer’s office will make sure there’s sufficient funds available to make that payment. Additionally other funds will be held in reserve to protect our already low bond rating because the rating agencies want to see contingency funds too.
Versions of this idea have been around for a while, it wasn’t that long ago someone proposed selling bonds to reduce state debt but instead of sending the bonds to market having the State Treasurer buy the bonds. It didn’t get very far.
Comment by The Captain Wednesday, Apr 25, 18 @ 5:00 pm
–for example there may be upcoming GO bond payments coming due,–
Set-aside bond funds are off-limits, according to the bill.
But it certainly is a kind of running inter-fund borrowing system. I don’t think any governor or GA needs another kick-the-can mechanism.
Nice try to put it all on the treasurer, though. If I were him, I’d insist that the comptroller and governor have to sign off as well, like with short-term borrowing.
Comment by wordslinger Wednesday, Apr 25, 18 @ 5:13 pm
The Captain, the “lockbox” was a thought of mine as well.
This bill deserves to die in House Rules.
Comment by Arthur Andersen Wednesday, Apr 25, 18 @ 5:20 pm
Liandro, what are these critically needed services?
Sounds like a good idea from the senator. Stop paying usury interest rates.
Comment by Ron Wednesday, Apr 25, 18 @ 5:33 pm
The transportation lockbox is a disaster. Proves why direct democracy is a terrible idea.
Comment by Ron Wednesday, Apr 25, 18 @ 5:34 pm
Yes. Make it so.
Comment by Cheryl44 Wednesday, Apr 25, 18 @ 5:40 pm
This is a little preview of the type of legislation that the state and many municipalities will be cooking up for the next 11 years to stave off the total meltdown.
Comment by Here's a hint Wednesday, Apr 25, 18 @ 5:55 pm
I would rather legislators focus on the underlying problem.
Comment by Not It Wednesday, Apr 25, 18 @ 6:12 pm
What could possibly go wrong? Illinois pols have lied and cheated for decades.
On the other hand this would crash the system faster and more completely. Let’s do it.
Comment by Plutocrat03 Wednesday, Apr 25, 18 @ 6:58 pm
This Comptroller is more worried abput cheap political tricks than being part of the solution. Sorry. This is my take. But she wasnt responsible for our plight, so let the bigshots make the tpugh calls
Comment by Anonymous Wednesday, Apr 25, 18 @ 7:15 pm
Ron
Aren’t you the guy that wants to use that direct democracy to take pensions away?
Pick a lane.
Comment by Demoralized Wednesday, Apr 25, 18 @ 7:39 pm
Not as good as Rep. Mary Flowers’proposal to start a state bank and borrow from the FED, but not bad.
Comment by Anonymous Wednesday, Apr 25, 18 @ 7:44 pm
I would rather see these state treasurer controlled funds pick up student loans for Illinois residents at 3.6% interest. That would create a local economic multiplier.
Comment by Biker Wednesday, Apr 25, 18 @ 8:47 pm
Pensions should never, ever be part of a Constitution. As demonstrated all too well be the state of Illinois.
Comment by Ron Wednesday, Apr 25, 18 @ 9:15 pm
Ron, and who helped write the constitution? Mike Madigan.
Comment by Anonymous Wednesday, Apr 25, 18 @ 10:01 pm
Anon 7:15, the Comptroller has nothing to do with this bill or with it if it becomes law. Try to keep up.
Comment by Arthur Andersen Wednesday, Apr 25, 18 @ 10:13 pm
On the face of it, sounds great. Shoot for that matter, why not have the state pension funds buy all the late bills and make the 12%, better to go to retirees than banks. Something tells me this will end badly but at least someone is trying to bring some common sense to this mess so TY Sen Steans. or how about just changing the interest rate to something much lower.
Comment by 44th Thursday, Apr 26, 18 @ 7:57 am
How do the “banks” get this 12% interest? Isn’t it going to vendors?
Comment by Ron Thursday, Apr 26, 18 @ 8:10 am
- Ron 8:10, Vendors can sell their receivables to investors who oftentimes, but not always, are funded by banks. So “banks” is really a sub for investors. Some vendors sit and collect the 1%, others can’t afford to wait for the State to pay so they sell the receivable and an investor sits and collects the 1% a month.
Comment by rrth Thursday, Apr 26, 18 @ 8:15 am
Great that banks are able to help struggling vendors, no?
Comment by Ron Thursday, Apr 26, 18 @ 8:18 am