Senate Committee advances controversial borrowing bill

From press release

The Illinois Senate Executive Committee approved legislation Feb. 17 that would authorize two types of short-term borrowing, despite Republican concerns that the state continues to defer making tough decisions about how to fix the its fiscal problems.

Senate Bill 416 would allow most public universities, except the University of Illinois at Urbana-Champaign and Northeastern, to short-term borrow up to 75 percent of the money owed to them by the state. The universities would then repay the borrowing when they receive the money they are owed by the state.

Republicans primarily objected to a second borrowing component contained in the bill that would allow Gov. Quinn to short-term borrow $250 million for Medicaid expenses without approval from the Comptroller and Treasurer. Currently, the governor must receive authorization from the Comptroller and Treasurer to commence short-term borrowing.

Proponents of the legislation argued that the state should allow universities to borrow money since the state’s delayed payments have created their money woes. Currently, the state owes all public universities approximately $735 million. They also say the Medicaid borrowing will free up the revenue to pay Illinois’ health care providers, who have suffered for years, waiting months to receive the reimbursements they are owed from the state.

However, opponents question why Democrat lawmakers tied the money for higher education to the Medicaid funding, and expressed concern that the measure simply “kicks the can down the road” with another short-term budget fix. Since 2003, Illinois Democrats have short-term borrowed $11 billion, with interest topping $100 million. Senate Republicans believe that instead of pushing off the state’s problems and paying so much interest, Illinois should confront its budget woes head-on.

Additionally, critics noted that there are no provisions outlining how the governor would pay back the money, and questioned why—if the governor has such a good financing plan—there is a need to bypass the Comptroller and the Treasurer and borrow more money without their approval.

However, it’s speculated that the legislation is necessary because it’s unlikely that Comptroller Dan Hynes will approve additional borrowing. In late 2009, Hynes refused to authorize a short-term borrowing measure being pushed by Quinn, saying Illinois already has to repay more than $2 billion in short-term borrowing that was undertaken earlier that year, and that it would be difficult for the state to repay any additional borrowing.

Having been approved by the Senate Executive Committee, Senate Bill 416 now progresses to the full Senate for consideration. Because the measure authorizes a general obligation bond, the bill requires three-fifths approval of the Senate before it can move to the House for further debate.