By: Mark Glennon*
From all available evidence, we think we played an essential role saving Illinois taxpayers a ton of money through the Investing in State Receivables Program now being implemented.
Starting over two years ago, we began pounding the table asking why the Illinois Treasurer sits permanently on some $12 to $15 billion in cash and very short term, low yield investments, while billions of dollars of in unpaid invoices rack up a fortune in interest and late penalties. We followed up with many more articles here.
We wrote in Crain’s last October, specifically asking “Why is at least $11.5 billion of state money sitting around month after month, year after year, earning less than 1.3 percent a year, when the state is paying 9 to 12 percent late-payment interest on billions in unpaid bills?”
We found nobody in Illinois government who even knew such a large cash balance was maintained, much less had an explanation for why. That goes for leading people in both parties in the legislature and the administrative branches — people who should have known. Their unawareness was scandal in itself.
The sole exception was the office of the Illinois Treasurer, Michael Frerichs, because that’s where the money sits. But when I challenged that office to justify why the state was misusing so much cash wrong answers came back. The money was locked up in the 750 separate accounts maintained by the Treasurer, they said, and the budget impasse at the time had curtailed spending, artificially running up the cash balances.
In truth, however, the senseless cash balance policy existed before and after the budget impasse, and most of those 750 funds can easily be repurposed by statute. The missed opportunity to use Treasurer cash on delinquent bills existed long before Frerichs became Treasurer — at least ten years — and it was not his making.
However, no officeholder, media or watchdog, to our knowledge, ever questioned why such large cash balances made sense in the face of a huge bill backlog, until we did.
A bill to authorize use of some of the Treasurer’s cash to pay down the state’s overdue bills finally was introduced this February. Many from both parties joined as cosponsors and, after amendments (which we are told our articles also influenced), it became law in August, authorizing up to $2 billion of the Treasurer’s cash (currently $15.5 billion). It’s expected to save about $70 million annually in interest and late fees.
Those taking credit for the savings now include Treasurer Frerichs and Comptroller Susanna Mendoza, typified in a press release linked here. It’s a “commonsense approach” he proposed earlier this year, Frerichs said in a blast email last week from the Treasurer’s office. It’s indeed commonsense, but it sure looks like our work brought the opportunity to light
And from Mendoza, “This innovative approach will save Illinois taxpayers millions of dollars the state would otherwise be wasting on 12 year late payment interest penalties.”
Senator David Harris (R-Arlington Heights) is another one. The new law, he says, is “one of the most creative and innovate programs to save money that has ever come before the House.”
It’s like Ty (ChevyChase) said in Caddyshack. “A flute with no holes is not a flute.” Well, it’s not innovative if somebody else showed it to you and pushed you to get it done. We did that.
–Mark Glennon is founder of Wirepoints.