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Illinois hit with more than $900 million in late-payment penalties

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Illinois hit with more than $900 million in late-payment penalties

By Kevin Hoffman, Reboot Illinois

Illinois has been penalized more than $900 million over the past six years for failing to pay its bills on time, reports the State Journal-Register.

The state began racking up millions of dollars in interest penalties on late payments when the recession hit and the bill backlog started to grow, the Civic Federation told Journal-Register’s Doug Finke.

Illinois spent just $5 million in late-payment penalties during fiscal year 2006, but by 2008 the total had risen to $30 million before hitting a peak of $318 million in 2013, according to the federation, which tracks interest penalties under the Prompt Payment Act.

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Figures for the current fiscal year — for which there has been no budget — are not yet available, but as Finke writes, nearly $140 million in interest penalties was paid out in 2014 — the same amount Gov. Bruce Rauner wants to take from the state’s special funds to help keep public universities running through June 30.

Here’s more from the Journal-Register:

“These penalties are money that is wasted. It is not money that serves the state well or makes it more efficient in how it delivers services,” said Laurence Msall, president of the Civic Federation, a tax policy and government research organization.

“There is no justification for operation of our government with such fiscal irresponsibility,” he said. “It’s not beneficial to the vendors who have to wait. It’s money that could have otherwise gone into programs that is just adding to the cost of government.”

While the recession exacerbated Illinois’ inability to pay its bills on time, Msall told Finke the root of the problem is a decade’s worth of insufficient budgets that failed “to address either unforeseen developments or under-appropriating areas of known expenditures.” Most recently was when former Gov. Pat Quinn approved the budget for fiscal year 2015 despite acknowledging it couldn’t cover the state’s expenditures.

The failure to pay state employee health insurance claims on time has accounted for the majority of interest penalties, according to the Civic Federation. The Department of Central Management Services estimates the interest on $2.8 billion bill backlog for employee health care is $176 million.

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(c)2016 Reboot Illinois

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