Monday, November 25, 2013

No matter how much you give them they will spend more.

Bill backlog growing again and so are payment delays

For months, many of Illinois’ human-services organizations and vendors have seen improvements in their state payments.
They could thank the cyclical nature of tax collections for the improvement.
But now, according to Comptroller Judy Baar Topinka’s office, the cycle is beginning to shift in the other direction and payment delays are once again getting longer. The backlog of bills waiting to be paid in the comptroller’s office has grown by $3 billion since the spring, when the state was flush with tax revenue.
“As the numbers grow, so too do payment delays to vendors throughout the state,” said Topinka spokesman Brad Hahn.
It is a situation that Topinka’s office has been predicting for months, even as it was making a strong dent in the bill backlog last spring.
“The state’s bill backlog fluctuates throughout the year, with numbers dropping in high-revenue months and rising in leaner seasons,” Hahn said. “Typically, the backlog drops in the spring and summer months as residents and businesses make their income tax payments, and then numbers grow in the fall and winter.”
‘Treading water’
At the start of April, the bill backlog in Topinka’s office stood at $8.5 billion. That number included both bills on hand in the comptroller’s office and the office’s best estimate of bills still being held in state agencies.
In early April, Hahn said, vendors were waiting at least four months for payments from the state, although some bills took longer than that to be paid.
Hahn said that a strong tax season this year allowed the office to “aggressively pay down bills” in April and May. By the end of May, the backlog was down to $5.8 billion and vendors were waiting a minimum of two months to be paid, half what they were waiting at the start of April.
That was, however, the high-water mark in the state’s efforts to pay bills on time. By the end of June, also the end of the state’s fiscal year, the backlog was sitting at $6.1 billion.
By Oct. 1, the backlog was up to $7.5 billion, including bills being held in state agencies prior to being given to Topinka’s office for payment. And as of late last week, the total was at $8.8 billion — an even higher number than at the start of April.
Hahn said the office believes the total will hit $9 billion by the end of December, exactly where Topinka predicted it would be last summer. It is the second year in a row the backlog will sit at about $9 billion at the end of the calendar year.

“Although revenues have been up, we’re still in about the same place as far as bill backlog,” Hahn said. “Essentially the state is treading water.”
No sales tax bump
Nor will things turn around in the near future. Even though the holiday shopping season is about to go into high gear, history shows that it does not provide a spike in state tax revenue.
“The sales tax is not bumped as much as people might think,” said Jim Muschinske, revenue manager for the legislature’s Commission on Government Forecasting and Accountability. “There is a little bit of a bump, but you have to remember the holiday shopping season probably is a lot more spread out now than maybe it was 15 or 20 years ago. I don’t think you get that big rush like you did before.”
COGFA has revised its revenue estimates for this budget year and now believes the state will collect $369 million more than originally anticipated. House Speaker Michael Madigan, among others, believes any unanticipated revenue like that should be applied to old bills, rather than increased state spending.
“Every bit helps. Certainly for the vendors that are waiting, that can make a difference,” Hahn said. “But relative to the overall backlog, it is a drop in the bucket.”

Looking back just a bit to 2011.

Illinois Income Tax Increase: Legislature Approves 66% Tax Hike

"Lawmakers worked overnight to pass the increase to raise the personal income tax rate from 3 percent to 5 percent for four years – a 66 percent increase. Corporate income taxes also will rise, but Quinn rejected the notion that it would decimate businesses."

"The tax increase would temporarily raise the personal tax rate to 5 percent, a two-thirds increase from the current 3 percent rate. Corporate taxes also would climb as part of the effort to close a budget hole that could hit $15 billion this year. Quinn's office said the higher taxes will generate about $6.8 billion a year – a major increase by any measure.
The tax increase will be coupled with strict 2 percent limits on spending growth. If officials spend above those limits, the tax increase will automatically be canceled. The plan's supporters warned that rising pension and health care costs probably will eat up all the spending allowed by the caps, forcing cuts in other areas of government."
"But Republicans noted they were not included in negotiations. They also fundamentally reject the idea of raising taxes after years of spending growth.
"We're saying to the people of Illinois, `For eight years we've overspent, now we're going to make it your problem,'" said Rep. Roger Eddy. "We're making up for our mistakes on your back."
The increase means an Illinois resident who now owes $1,000 in state income taxes will pay $1,666 at the new rate. After four years, the rate drops to 3.75 percent and that same taxpayer will then owe $1,250.
Republicans predict the tax eventually will be made permanent.
"It's a cruel hoax to play on citizens to say this is temporary," said House Minority Leader Tom Cross, R-Oswego."

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