[Illinois State] Comptroller Mendoza Reaches Out to State Leadership (We're broke and going down!)

Illinois State Comptroller ^ | June 20, 2017 | Susana A. Mendoza

[Zakeet]

OFFICE OF THE COMPTROLLER FORECASTS SEVERE FINANCIAL STRAIN BEGINNING IN JULY

As Illinois' Chief Fiscal and Accountability Officer, my Office is responsible for managing the state's financial accounts as well as providing the public and the state's elected leadership with objective and timely data concerning the state’s difficult fiscal condition. As you are quite aware, I have been very vocal regarding these issues and the budgetary impasse since assuming office six months ago; however we are now reaching a new phase of crisis.

Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year. My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.

We are effectively hemorrhaging money as the state's spending obligations have exceeded receipts by an average of over $600 million per month over the past year.

My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state's Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state's financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.

For the record, however, and as a message to the financial markets, please know that debt service payments will not be delayed or diminished going forward and I will use every statutory avenue or available resource to meet that commitment. It is a necessary pledge in order to attempt to avoid further damage to our already stressed credit ratings and to make possible the additional debt financing that we all know will be required to achieve some measure of stability going forward.

Ultimately it is the only way that we can preserve what remains of our ability to provide vital services to our state's most at risk populations.

Currently, more than 90 percent of Illinois' monthly spending is directed toward core functions of state government mandated by court orders, consent decrees, or state law including continuing appropriations. These include certain Medicaid programs, debt service, payroll, K-12 General State Aid and state pension contributions. With the inevitable cash management impact related to the outcome of the MCO lawsuit, this Office will soon be facing the prospect of deciding which court order or statutory mandate the state can accommodate. I hope we can all agree that this is more than an unprecedented situation; it is simply unacceptable.

Even absent pressure from additional court orders, we still foresee unmanageable financial strains, beginning in July, that will severely limit any payments in core areas not under court mandate or consent decree that provide essential services to the state's most vulnerable individuals, including but not limited to, long-term care, hospice, and community care and supportive living centers serving the senior community, and ambulatory and other critical medical supplies for the poor and disabled.

In large part, through careful cash management and effective stewardship of the state’s General Revenue Fund, our Office has made every effort to triage this crisis in a way that has prioritized and enabled some hardship payments to the state's most vulnerable citizens and the programs that serve them while still meeting core obligations. That ability will eventually cease.

It is critical that the state's fiscal situation be addressed immediately before the cash shortages this summer cause further deterioration. I am available to discuss this situation, and possible remedies, with you personally, as a group in a leaders meeting or individually at your earliest convenience.

In the meantime, I will be meeting and communicating with other public stakeholder groups to share these same warnings.

My closing message is simple: The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state's most in need citizens. We must put our fiscal house in order. It is already too late. Action is needed now.

I eagerly await your response as to next steps for furthering this discussion.

[Zakeet]

The problem with socialism is that eventually you run out of other people's money. -- Margaret Thatcher

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I have highlighted the most important parts of Ms. Mendoza's letter.

To make matters worse, Moody's and S&P have announced that they will downgrade the state's debt to junk status in 10 days. That will trigger a large increase in interest rates (hence interest expense), will require many pension plans and insurance companies to dump the State's obligations, will cause their bond prices to plunge, and will make it virtually impossible for the state, or its cities for that matter, to issue new debt.

[moovova]

[moovova]

You knew that was coming dint’ya?

[Dilbert San Diego]

Geez. Illinois is in big trouble. I wonder how they will solve their problems???

[Extremely Extreme Extremist]

https://westernrifleshooters.wordpress.com/2012/09/03/bracken-when-the-music-stops-how-americas-cities-may-explode-in-violence/

[mrsmith]

It's great to be a politician in Illinois...

[Bernard]

Only a $7 Billion per year shortfall? Simple solution - put ICE on speed-dial, get the ILLEGALS out of Illinois and the spending drops. Medicaid, law enforcement, education, and the list goes on.

Longer term, call another state constitution convention and fix the public employee pension MOAB that also bleeds the state dry. But that would require leadership and courage. Maybe after 8 years as POTUS, Donald Trump could move to Illinois and run for Governor.

[heshtesh]

Are they still allowed to sell lottery tickets in Illinois??

[Enterprise]

"Well I'm going down
Down, down, down, down, down
I'm going down
Down, down, down, down, down
I've got my head out the window
And my big feet on the ground"

[umgud]

At this point, why would anybody but anymore of their debt? Promises of high returns can’t be paid.

Taxpayers and bond holders will be hit hard. Retirees not so much.

[Zakeet]

Geez. Illinois is in big trouble. I wonder how they will solve their problems???

In a true Biblical manner ... with weeping, wailing and gnashing of teeth ... by people dressed in sackcloth and ashes ... expect the loudest and most passionate response from civil service unions, welfare recipients, college students and professors.

Expect a run on Play Doh, Crayons, crying towels, comfort dogs, and Binkeys ... along with mass demonstrations and demands for a Federal bailout.

[vette6387]

“Maybe after 8 years as POTUS, Donald Trump could move to Illinois and run for Governor. “

In 8 years Trump will be nearing 80 years of age! I think he will want to pass on the offer. If he is able to continue at his current pace, and fulfill his commitments to this country, he will go down as the man who saved the United States of America. Only when the “good citizens of Illinois” shed their RAT/Union chains, will there ever be a future there. To be sure, California has massive fiscal problems, but they are still in the realm of “fixable,” owing to the state’s GDP. But that will not be the case for much longer.

[HombreSecreto]

Am I the only FReeper smiling at this news?

BWAHAHAHAHAHAHAHAHAHAHAHA

[dowcaet]

I think we’re about to see rat on rat combat on this one.

[Moonman62]

Maybe they can raise money by selling their illegal aliens to California.

[Moonman62]

Geez. Illinois is in big trouble. I wonder how they will solve their problems???

...

Why doesn’t Barry move back and solve their problems?

[Presbyterian Reporter]

Illinois needs to privatize all aspects of government and the problem is solved.

[BilLies]

You don’t think Illinois’ financial situation had anything to do with the Obamas, all of them, choosing to remain anywhere but Chicago and Illinois, do you?

[Moonman62]

Would the state version of bankruptcy allow them to break their contracts?

[Enterprise]

I read that POWERBALL gave Illinois until the end of June to come up with a budget or they will stop selling tickets in Illinois.