“LAST YEAR WE GAMBLED TO GET RICH; THIS YEAR, WE’RE PUTTING OUR MONEY IN BONDS!”

1/6/10

A front page article in the Chicago Tribune today informs its readers that the University of Illinois (not Harvard, commonly known as the “U of I of the east,” but, rather, the U of I with campuses in Champaign-Urbana, Springfield, and Chicago) is owed $436 mm by the state of Illinois and thus will ask faculty and administrators to take unpaid furlough days “by mid-June.” The amount of time from now until “mid-June” indicates to the insightful reader that U of I President Stan Ickenberry is playing a game of chicken with the state, and a very wise one at that; given Governor Quinn’s (no relation) propensity to fold at the nearest sign of distress, real or feigned, on anyone’s (but taxpayers’) part virtually guarantees that the yours truly’s alma mater will get its money one way or the other. Northern Illinois University (NIU), which occasionally employs me, and Southern Illinois University (SIU) are experiencing similar difficulties with money owed them by the state.

Governor Quinn (no relation) acknowledges, according to the Trib, the cash flow “crisis” but promises that money will be winging its way across the prairie after the state finishes this week’s round of bond issuance. This is where this episode gets especially interesting.

The state is going to sell $3.5 billion face amount of bonds this week. $800 million to $1 billion of that will be available to pay overdue bills to vendors, universities, and others who are waiting for their money. The first question that comes to mind is where the other $2.5 to $2.7 billion will go when the state already has a $6 billion pile of unpaid bills. If the additional spondulicks are going to fund operations, shouldn’t vendors and others who have been stiffed get paid before new vendors are paid? If the money is going for capital projects, one has to ask why the state is embarking on $2.5 to $2.7 billion of capital projects when it owes vendors, universities, and other service providers $6 billion. If it’s going to refinance short term borrowing (See the next paragraph.), this might make financial sense but is just a symptom of fiscal irresponsibility. Doubtless Governor Quinn (no relation) will work up some figurative tears over those who “have been hurt by this terrible economy,” his usual justification for ignoring the fiscal peril in which the state finds itself, but, whether this money is being spent for operations, for capital projects, or to paper over some short term borrowing, it is yet one more manifestation of the fiscal mismanagement that Governor Quinn (no relation) continues under the guise of “compassion”…for everyone but the people who pay the bills.

That having been said, at least part of Illinois Comptroller Dan Hynes’ assertion that “We’ve had $6 billion of short term borrowing (MQ—by definition, this “short term borrowing” which Mr. Hynes cites is separate and distinct from this week’s bond issue.) under Pat Quinn, and he wants to borrow more. We are over-leveraged. We can’t borrow our way out of this problem.” is disingenuous, and not only because Mr. Hynes signed off on every round of that short term borrowing until the latest, which was proposed after Mr. Hynes began his quixotic primary campaign against Mr. Quinn (no relation) for the governor’s job. It is not a question of being “over-leveraged” or “borrow(ing) our way out of the problem.” The state already owes the money. It is merely a question of whether the state owes it to vendors, universities, and the like or whether we owe it to short term debt, and, presumably, after this bond issue, long term bond, holders. So do we finance state government at no interest by stiffing service providers or do we finance state government honestly by actually borrowing the money we use to run the state and paying interest on it?

One can argue, and I certainly would, that fundamental problems and approaches need to be addressed, that the way, or at least the rate at which, the state spends money has to change. That may even involve reexamining the amount by which the state subsidizes higher education. But we are talking here about money that has already been spent and is already owed, not a basic reexamination of the state’s wastrel ways.