* 12:48 pm - Comptroller Dan Hynes will announce his decision on whether to sign off on a $500 million short term state loan at 1 o’clock this afternoon. I’ll update this post shortly thereafter.
While we wait, take a look at this Trib story which I missed earlier today…
When Gov. Pat Quinn accused Comptroller Dan Hynes of playing politics on a plan to use short-term borrowing to pay a backlog of state bills, the governor said that when he was state treasurer he “worked together” with a Republican governor and a Democratic comptroller on borrowing plans “on behalf of the common good.”
What Quinn didn’t mention is that as state treasurer in 1992, he single-handedly blocked an effort by then-Gov. Jim Edgar to borrow money to pay overdue bills to state vendors in a failed effort to leverage money for the Chicago Public Schools.
Quinn’s move so enraged then-Comptroller Dawn Clark Netsch, she accused fellow Democrat Quinn of trying to playing a “political chess game” at the expense of state vendors who were owed money.
Just one more strike against the governor. Man, did he ever blow this one. Thoroughly.
*** UPDATE 1 - 1:07 PM *** From ABC7’s Twitter page…
Just in: Comptroller Dan Hynes says no to Gov. Quinn’s plan to borrow $500 million to pay state’s bills
If you’re a subscriber, that was expected.
*** UPDATE 2 - 1:15 PM *** Hynes has sent the governor a letter announcing his decision. Click here to read it. Page 2 is here. [Fixed links.]
Hynes points out that he has already signed off on $2.25 billion in borrowing over the past seven months…
“That is a historic amount of short term debt and the state will risk default if that money is not repaid by June 10, 2010. Any additional short-term borrowing such as you now propose would further strain a state budget that can barely accommodate the currently scheduled debt service and critical on-going payments our office must make, especially given the $900 million revenue failure you office has now projected.
“The expected ‘federal and state revenues in excess of $600 milliion’ you refer to has already been incorporated in the existing cash managment plan. My office must prepare this month to reserve funds for the first installment of the $2.25 billion to be repaid beginning in March. Absent an additional revenue source dedicated to the repayment of any new notes, there is insufficient flexibility in the latter half of the year for additional debt service payments. In essence, the proceeds from the short-term borrowing you request would need to be set aside immediately in order to pay it back. For this reason alone, I would have problems supporting your plan as presented.” [Emphasis added]
Hynes goes on to say that if the governor had, as promised, sold $3.5 billion in bonds to make the pension payment in September, things would be different. If the bonds were sold as late as the end of October, Hynes claimed, it “would have allowed the state’s General Funds including the Common School Fund to receive $700 million in cash reimbursements… and would reduce our current payment backlog by $667 million.”
Hynes also quotes “a former State Treasurer”…
“Rollover borrowing always digs government deeper into holes.”
That former treasurer was none other than Pat Quinn. Quinn made that statement when he was fighting with Jim Edgar in 1992 (see above). “Your current proposal is not dissimilar in that it effectively constitutes rollover borrowing,” Hynes wrote.
Hynes concludes by saying he is willing to work on a “comprehensive” plan, but one that “addresses less than 5% of the backlog” of state bills is “neither comprehensive nor is it fair to the very state service providers we both wish to assist.”
*** UPDATE 3 - 1:37 PM *** The treasurer’s office just said that they still have not seen any documents on the governor’s short-term borrowing plan. Quinn’s budget office promised them by this afternoon, according to Giannoulias’ spokesperson.
Breath-taking, ain’t it?
*** UPDATE 4 - 3:27 PM *** From Comptroller Hynes’ office…
An Open Letter to Illinois Service Providers,
I would like to begin by thanking you for your outstanding efforts in providing critical services to the people of Illinois. I remain impressed as always by the important work you do to ensure that our most vulnerable citizens are cared for and protected. Moreover, your ongoing commitment to continue working in good faith as business partners with the State of Illinois is truly commendable given the fact that the State has been anything but a good business partner in return. I know that the current payment situation has caused many of you personal anguish as well as professional difficulties as you struggle to maintain viable service levels.
Your commitment and perseverance stands in stark contrast to the state’s actions over the past few years. Providers have been placed in an extremely vulnerable situation as you were subjected to needless anxiety during budgetary stalemates that did not allow you to develop your own budgets and left you wondering what program levels would be funded and whether service terminations and staff reductions would be necessary. Now after too many of you have made painful decisions and sacrifices, the state is months behind in meeting its financial obligations to you, so I don’t blame you for being angry. You have every right to be.
The level of unpaid obligations in my office stands at $4.4 billion and will continue to grow as there is simply insufficient revenues to meet all the demands. The state has borrowed $2.25 billion that must be paid back within the next six months. There is a new proposal to borrow $500 million more, a sum that I believe will simply exacerbate the existing problem of paying back the money we already owe, and more seriously, give false hope to all of you awaiting payments from the state. I refuse to agree to a “solution” that addresses only 5% of the problem and even then only for the very short term at the risk of creating a bigger problem No matter what else you may hear about the benefits of more borrowing, that is my honest assessment.
Like you, I am disappointed as well as deeply concerned that you have been placed in this situation. You deserve better, and the people that you work with and care for deserve better as well. Instead of the non-stop cycle of extended payment delays, we need a comprehensive plan that will eliminate the deficit and restore fiscal stability to Illinois for the long term. Most importantly, it is time for our leaders to recognize that the public service community and its hundreds of thousands of employees is not just an essential purveyor of critically needed services to our most at risk population but is a significant element of our state’s economy. I not only recognize that fact but will continue to seek meaningful ways to address the problems confronting the service community and to maintain what is in many ways is one of Illinois most important infrastructure components.
In the meantime, going forward, I will work with you to the best of my ability, as I always have, and be honest with you, as I always have, to address the day to day problems that confront us.
Sincerely,
Daniel W. Hynes
Comptroller
*** UPDATE 5 - 4:13 PM *** Treasurer Giannoulias told reporters this afternoon that he is leaning in favor of supporting the plan. That would put Hynes out on a limb all by himself. Giannoulias apparently stressed that the federal Medicaid match would more than make up for interest and fees and that the money could be repaid.
This could turn around pretty fast. Stay tuned.
*** UPDATE 6 - 4:28 PM *** This ain’t gonna happen…
Gov. Pat Quinn says Illinois Comptroller Dan Hynes must reconsider his decision to oppose borrowing $500 million to help pay the state’s bills.
Quinn said Friday that “nope” was not an option when social services are at risk because agencies can’t pay their employees. They can’t meet payroll because they aren’t getting the money the state owes them.
*** UPDATE 7 - 4:32 PM *** I just got off the phone with the comptroller’s office. They were pretty surprised to learn that the treasurer’s people think there’s enough liquidity to pay off these short-term loans, even with the Medicaid match.
*** UPDATE 8 - 4:58 PM *** Quinn shoots back…
At a Chicago news conference, Quinn shot back with the kind of shaming, populist attacks that he’s gotten so good at. He chided Hynes for letting struggling social service entities to go unpaid, warning of “a human toll” if those agencies end up laying off their workers because they aren’t getting the money they’re owed from the state. He even invoked Christmas.
Quinn also pointed out that the state has previously engaged in short-term borrowing to pay bills 11 times during Hynes’ tenure as comptroller, and that Hynes didn’t refuse to sign off on those plans.
“We have a campaign going on; everybody knows that,” said Quinn — more or less openly accusing Hynes of holding up the money as a campaign strategy. “ . . . A policy of `no, no, no’ is not a good policy for the people of Illinois.”
*** UPDATE 9 - 5:00 PM *** Raw audio of Quinn’s Q&A with Chicago reporters can be heard by clicking here.
*** UPDATE 10 - 5:23 PM *** I just listened to the audio of the governor’s press conference. Quinn repeatedly went after Hynes for approving short-term borrowing for Rod Blagojevich even after he was arrested. Score on political point for Quinn. (On the other hand, Quinn could be pegged as even more of a bumbler than Rod). The governor also stressed a new AA rating from Fitch to say that the government was doing better than expected.
Overall, he did a good job handling the Chicago media and that’ll probably be reflected in their usual scant coverage.