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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.

Our Crain’s article last October

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.

The state’s entire cash management policy still needs a thorough review, as we wrote in our initial article on this and in Crain’s.

Mark Glennon is founder of Wirepoints.

 

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Freddy

Good work Mark. Some other things to address. Changing the 1% per month (after ninety days) the state pays for late payments. This law goes back to the early 80’s when the prime rate was 18% (now 4.5%) and index it to the CPI or any measure of inflation like most other states have. Now it should be about 3-4% max per year not 12%. Would save untold millions. Next pension management fees are very high compared to returns at least $1 billion every three years for just a few of the largest funds (according to Ballotpedia). In Pennsylvania’s governor… Read more »

Rick

Thanks wirepoints. Politicians think they can deny and will inconvenient facts out of existence. And they probably could if nobody was around to do the math.

Isn’t it the duty of the Treasurer to determine the most efficient use of the tax money in control of the office? Shouldn’t this failure to do the job right come under malpractice and be recoverable from D&O insurance coverage. It is past time to make politicians who get elected in all branches of government answerable between elections for their failures. There is a joke of a relatively new constitutional article providing for recall of a Governor. There should be provision for recall of any elected officer, and for removal of any public employee who isn’t doing their job and… Read more »

Illinois Entrepreneur

Nice work, Mark! With a few notable exceptions (Ms. Ives especially) I have a dim view of the talent level of our Illinois legislature. I’ve had the displeasure of attempting a serious conversation with a couple of them, and I’ve viewed their social media posts–which are nothing but meaningless posts about family vacations and holiday naming, while the elephant (or, Squeezy the pension python) stomps (slithers?) around the room, unnoticed. I truly believe that the vast majority of these people are sheep who are happy for the paycheck, the healthcare and the pension. And maybe one day the Boss will… Read more »

James

And, let’s see, where have we heard this tripe before? Drain the swamp, bring in the BEST, show the drudges how its done, etc.? A couple of names spring to mind easily enough–Trump and Rauner. Apparently you like their ilk. I say put your money where your mouth is and run for office. Let’s see how you would “turn things around.” My bet is they’ll turn you around instead

Illinois Entrepreneur

James…I won’t bother with your stretched assumptions about the “ilk” of my choosing. But I will say this: The reason that the Illinois legislature is so unsuccessful is because of the system of how money is doled out at the party level; specifically the Democratic party. Republicans are much more loosely led (if you can even call it that), so they tend to gravitate to loose factions that are issue-specific, rather than top-down party-driven. As such, my point is that these legislators fall in line quite easily, because to not do so results in them losing something that they care… Read more »

James

IL Entrepreneur, I have no complaint as the points you’ve made here and think you stated your case somewhat more clearly and politely here. Where I tend to take umbrage at is the broad-stroke characterizations some make of people who fit easily-defined categories otherwise, sort of stating or at least implying they are alike in numerous other ways as well to fit the writer’s set of preferences. So, some might say Democrats are such-and-such, government workers are such-and-such, downstaters are such-and-such, etc. That kind of broad-stroke characterization upsets me since any given invidual may be like others in some respects… Read more »

Illinois Entrepreneur

That’s fair, and I’m all for civil discussion that’s based on facts, so I absolutely support what you are saying. I did say in my original post, “with a few notable exceptions…” which captures the thought that not EVERYONE is like this. But beyond that, yes it is a broad stroke, and I can agree with that. And I can agree that I don’t definitively know each and every legislator and the reasons for their success or lack thereof. I’m not usually prone to hyperbole, but the Illinois legislature possesses a special place in my heart! It’s nice to talk… Read more »

Bross

Thanks Mark.

Jeanne Ives

I know for a fact Wirepoints’ articles led to this savings. I have mentioned Wirepoints work many times and passed their information around in Springfield. Democrats have commented to me on it. Mark was the only one who mentioned using this money for back bills 2 years before this law was passed. And, because he had already laid out the case for it, the bill passed easily.

P M

Thank you.

Della Deme

Illinois needs more Wirepoints and we need you to help us get Darlene Senger and Joan Lasonde.