SPRINGFIELD – Illinois has racked up more in late-payment fees in less than three years than it did in the previous 18 years combined, according to a report The Associated Press obtained Monday, and some major creditors say they’ve waited more than a year to receive the interest they’re owed.
The report by state Comptroller Susana Mendoza found that the $16 billion in past-due debt that piled up during a two-year budget stalemate comes with a steep price. Since July 2015, Mendoza reported, prompt-payment penalties have totaled $1.14 billion, $100 million more than the total from 1998 up to then.
Mendoza, a Democrat, was scheduled to release the report Tuesday, the first accounting of past-due bills and accrued interest since she was successful in getting a law requiring state agencies to report their incurred bills monthly.
Earlier Monday, private companies, which have kept government vendors afloat by paying their bills and relying on state reimbursement with interest, told lawmakers they’ve waited months for late-penalty payments, threatening the program.
Representatives of the four so-called qualified purchasers told the Commission on Government Forecasting and Accountability that banks and other lenders could dry up without timely late-fee payment.
“We essentially get slapped in the face when we’re paid the base invoice amount and none of the $100 million in prompt payment penalty due,” said Gregory Gac, secretary-treasurer of Illinois Financing Partners, a qualified purchaser.
Mendoza spokeswoman Jamey Dunn said Mendoza is “still in triage mode” in paying what ballooned to $15.9 billion in overdue bills last summer after a historic, two-year budget standoff between Republican Gov. Bruce Rauner and Democrats who control the General Assembly.
Additional borrowing – at a lower interest rate – through a $6.5 billion bond issue last fall cut that backlog in half, but Dunn said vendors statewide “are still experiencing payment delays.” Mendoza is prioritizing education and assistance to the “most vulnerable residents,” Dunn said.
The state has paid about $300 million in penalties since the beginning of 2017, Dunn said. With bills paid from the bond issue, interest-payment vouchers have been ticking up. The comptroller held $553 million in penalty vouchers on March 31, up from $116 million at the end of December.
The state must pay 12 percent annual interest on many bills unpaid after 90 days. State law requires those charges be paid “within a reasonable amount of time.” Another law requires penalties on some health insurance bills to be paid within 30 days.
Mendoza’s report indicated that $149 million in penalties fall under the 30-day window, although not all of it had missed the deadline. Gac said some of the $115 million in penalties that Illinois Financing Partners is owed should have been paid within 30 days.
Sen. Heather Steans, a Chicago Democrat and co-chairwoman of the commission, said it seems a reasonable strategy to stop interest from continuing to build by paying the principal.
But Gac said that during the budget stalemate, some lenders nixed further borrowing and others tightened loan terms. Another showdown could “kill the program,” he said.
Vendor Assistance Program, one of the qualified purchasers, began buying overdue vendor invoices even before the program was authorized by state law in 2012. Founder Brian Hynes said that since 2010, his firm has financed $4 billion but received only $65 million in prompt payment penalties and is awaiting $250 million more.
“At some point,” Hynes said, “you have to remember that these qualified purchasers helped sustain the state through a difficult time.”