(upbeat music) - Welcome to At Issue.

I'm H Wayne Wilson.

And thank you as always for being with us here on WTVP and we have a special guest today.

We're going to be talking about the finances of Illinois or at least part of the finances of the state of Illinois with the comptroller of the state of Illinois, Susana Mendoza.

Welcome to At Issue.

- Oh, thank you for having me H, it's a pleasure.

- The issue that has been prevalent for the last, oh say four years or so is the backlog of unpaid bills in the state of Illinois, the budget stalemate that was almost two years long and then complicated by the COVID-19 pandemic.

The state of Illinois fell behind in paying his bills.

It was almost $17 billion if I recall correctly and you've whittled it down.

So what is the status of the backlog of unpaid bills?

- Well, today we have wonderful news to report and that's that you started off by mentioning that the bill backlog had gotten as bad as $16.7 billion.

That's almost 17 billion.

And it happened actually before the pandemic hit right around the time that I had taken office I inherited just a nightmare of the bill backlog and I made it my mission to pay that backlog down as quickly as possible.

Of course we had, I feel that my administration had done a really good job of navigating us through this.

Well, at that time was the worst financial crisis in the history of Illinois.

And we were coming out of it.

When, of course, then the pandemic hit and we had paid down our bill backlog from about 16.7 to about five prior to the pandemic hitting, and then the pandemic hit.

And of course threw us on heels again.

But nonetheless, we have now just last week announced that our bill backlog for the first time in many years is now under control.

We are paying our bills as they come due.

And our backlog is now, it was last week about three and a half billion today.

It's about 4.2, but that's just because we got a bunch of bills in we're about to pay our general state aid to education payments which are hundreds of millions of dollars.

And of course we continuously get healthcare bills that come in and pension payments that we're saving up to make a big payment probably the next week or so.

So you'll see the bill backlog go anywhere between I don't know, three and a half to four and a half but that's all the normal course of operating the state of Illinois.

And those billions that still exist in the backlog are essentially inter fund transfers and understate payments, but we are completely up to date on our payments to outside vendors which is just an incredible statement to say, to make.

And we hope that the markets respond favorably when they're considering whether or not to upgrade our credit.

I certainly hope they consider to upgrade us or at least move us in a positive direction given the remarkable progress that we've done in paying on that bill backlog and by the way without using federal stimulus dollars to do so.

- Let me talk about that inter fund transfer you and if I recall it's about three and a half billion dollars somewhere in that range.

And then also, could you address the issue of the loan from the federal government?

- Yes.

Excellent.

So we do have, as I said, we have today, we actually have about $4.2 billion in that bill backlog that is dealing with inter-fund transfers between government entities for example, like the RTA or, you know other government agencies that just generally have their budgets that we utilize it and control those, right.

Make sure that we're putting the money in when they need it and so forth.

But the other part what was the other part of your question?

I'm sorry.

- There's loan from the liquidity fund of the federal government.

- Thank you.

Yes.

So the loan from the federal government we had to take out during the pandemic about $3.6 billion, 3.2 of which were loans from the federal government.

The first one was for $1.2 billion that was in the middle of the crisis.

When so many people were out of work, people there was no federal stimulus money at that time coming in or federal aid coming in directly to taxpayers.

And our revenues were about $2.7 billion short in that April in the middle of the pandemic when we had the shutdown.

So we had to in order to make our core state obligations rely on a loan of $1.2 billion.

And then we took that 1.2 billion and we leveraged every dollar that we could to pay down medical bills that would allow us to get a federal matching reimbursement.

So for every dollar in a Medicaid bill that I spent we would actually get 56 cents back.

So we were able to stretch the value of that 1.2 billion into, well over $2 billion.

And then a little bit later we did take advantage of another below market rate loan for us from the federal government the Federal Reserve of $2 billion, and that $2 billion.

We again, leveraged for every single matching dollar that we could.

And we turned that 2 billion into closer to three and a half billion dollars.

And that allowed us to, again, put money back into the market to pay down our healthcare bills in the middle of a global pandemic.

And then we I've made it very clear that as we get federal stimulus dollars you may have heard that Illinois in line to get about seven and a half billion from the Federal Reserve.

I should say nothing the Federal Reserve from the Relief Act that President Biden, I just finished authorizing.

And when that money comes in that money is essentially spoken for because that the first half of it which we should be getting sometime this month at the latest in June, but we're really hopeful that it's in May.

We're going to put every dollar that we can of that towards paying back the $3.2 billion that we borrowed from the federal government.

If we pay that off early, in other words instead of over a three-year period, we will save taxpayers about $108 million in late, I should say in interest payments that we would have been on the hook for over the next three years.

And we'll also be able to pay off the entirety of that loan which is the responsible approach.

And that will also help the governor as he tries to craft a balanced budget which will be absolutely critical to maintaining the bill backlog under control.

- The couple of issues.

One you talked about the budget.

In the past Illinois has had balanced budgets because that's required by the state constitution but sometimes those budgets were predicated upon not actual money, but maybe maybe money.

For instance, the sale of the Thompson Center in Chicago was in the part of the budget.

If the budget, if the Thompson Center was sold then it was a balanced budget but the Thompson Center wasn't sold.

How critical is it to the state of Illinois financial solvency?

If I may use the term is a balanced budget.

- It's the most critical thing for us, because in the past to your point, H, you had governors who were literally bouncing the budget using magic beans and pixie dust, and that's no way to do it.

It flies into content right in the face of the constitutional mandate of balancing the budget.

What we have seen is year after year that Thompson Center being put up for sale when it was actually never even put up for sale at least this year, even though the governor is not including it in his budget.

And he did not last year either.

So that was a very positive, you know movement forward and transparency and honesty.

Nonetheless, at least this year, the governor has now officially placed the Thompson Center for sale.

So it's more realistic that, you know maybe a year from now, you can go ahead and include the sale price in a savings for us.

Right.

But right now the most important thing is to just be honest with the people of Illinois, our revenues are, they are what they are and our expenditures should not exceed what our revenues are coming in this next fiscal year.

And once we learn to be disciplined and make sure that we're not overspending, the revenues that are coming into the state then I think Illinois will be an even better fiscal footing.

So I believe that governor Pritzker is doing his best to craft a budget that does not take into account these fake money that, I mean we had things Governor Rauner, if you might recall H one of the line items that he put I think it was about $5 billion.

And it said working with the Senate, I mean that's the furthest thing from the spirit of the constitutional obligation to introduce a balanced budget debt that does not account for imaginary thing.

So we're in a better position today, and we're definitely in a better position going into this budget seasoned by paying off the borrowing that we did, because then we don't need to carry it over into the next year.

And the legislature will not have to come up with a $2 billion worth of cuts, for example in critical programs, to make sure that we meet our obligation to repay that debt.

So we're paying it off early.

That's a responsible approach.

And hopefully that gives the legislature a little bit of breathing room in being able to introduce to impasse a balanced budget.

- Let's talk about revenues, because for example the tourism area, the state of Illinois over the past year or so give or take had reduction in revenues from tourism of $500 million.

And there were other examples of where in primarily from COVID-19 the lack of travel, how does the, how do you handle this budget that you've been talking about when you have those kinds of reductions in income?

- Well, it's very difficult.

I mean, I think that the comptroller's office is probably the most important office that no one knows about, right.

They just ask the general public, what's the comptroller.

They might have no idea every now and then you get people who know what we do or what the comptroller is, period.

Whether it's a state comptroller or a comptroller in a business, but, we're the chief fiscal officers for the state of Illinois.

And it's my job to navigate us through, the finances of the state.

In my tenure as your comptroller it's been my job to navigate us through the fiscal crisis.

First, the one caused by the impasse and now the one caused by the pandemic.

But I'm very proud to say that I think we've done a pretty masterful job getting us through this.

And for the first time in many years actually are able to pay our bills on time because of the diligency that we've exhibited over the last four years.

But having said that look any time you see a drop in revenue, and in terms of tourism it's been a brutal drop in revenue.

I mean, I will tell you that tourism has expanded every year until recently because of the pandemic and this, economic activity is something that we need to nurture and sustain to the best of our abilities while we combat the pandemic, but state hotel tax revenues, for example, they plunged from $300 million in fiscal year 2019 to 250 million in fiscal year 2020 down to 42 and a half million for the first six months of fiscal year 2021.

That's now, right?

So I don't see how, no matter how great things get we can catch up to that loss of revenue again from 300 million, just a couple of years ago to 42 and a half million for the first six months of this fiscal year.

So, this is not promising.

It certainly is an area that we need to focus on especially now as we're getting the pandemic under control here in Illinois because you're talking about a critical component of our finances coming from tourism.

Tourists spent $43 billion a year in Illinois before COVID-19 struck.

And that generated about three and a half billion dollars in state and local tax revenues.

So it definitely hurts us to see the conventions not up and running yet.

And, you know, I'm sure the people in Peoria feel it with the civic center in Peoria and the restaurants and the hotels are no exception.

So it's definitely an area where I think there is bipartisan consensus to try to get us up and working as quickly as possible, get people employed again who are the backbone of this industry.

And hopefully Illinois will, once again in the very near future as we continue to get this pandemic under control be generating the revenues and people will be enjoying their visits to Illinois.

- You've been throwing around a lot of numbers.

So let's get away from numbers for just a little bit and talk about what the comptroller's office is.

Maybe a little bit of history, because as I talked to people, the comptroller and you even referenced it many people don't know what the comptroller's office is.

There used to be a single office to handle money.

Back in the days of Orville Hodge.

Orville Hodge was found guilty of embezzling money.

It would have been about $56 million in today's dollars.

So the government said, we need two offices.

Explain that, please.

- Yeah.

So Orville Hodge back in 1952 is when he served to 1956 and he was the auditor of public accounts.

So he had, he essentially did the functions of the treasurer, the comptroller and the auditor all in one.

And the fact that you have the treasurer who is the person who invests the state's money and the comptroller, the person who pays the state's bills and manages the checkbook, having access to both as the same person is a recipe for disaster.

And so, you go, let's rewind to 1970.

Obviously this person was convicted of embezzling.

He took about 6 million but that would have been worth about 56 or almost 60 million.

And it actually present value today.

So is there outrageous amount of money and the legislature in 1970 when they had their constitutional convention decided that in order to protect taxpayer dollars and make sure that this type of scandal would never occur again in Illinois they created the office of comptroller to manage the checkbook and pay the state's bills and another office of the treasurer.

And in order for a check to go out the door, you'll see, like, if you ever get a check from me from the comptroller's office you'll see that it has two signatures.

It has the comptroller and the treasurer, two separate people that creates a very strong internal control a check and balance which is very important to safeguarding taxpayer dollars.

And it also is important to the markets that could determine our rating.

You know, they've already intimated that if we were to for example, consolidate the two offices again because people have short memories and most people you talk to on the street might not even remember the name Orville Hodge.

And they just think, well, why not consolidate both offices?

Well, there was a reason why both offices were created in the first place as separate and distinct checks and balances on each other to protect you from these types of embezzlement.

And so just one last fun factoid, although it's really more of a depressing factoid is that if people think that this type of embezzlement can't happen again, that it's the modern days there's ways to consolidate offices in these duties amongst the same people.

It happened just not that long ago, back in 2012 with Rita Cromwell out in Dixon, Illinois who also embezzled about $54 million when she was both the treasurer and the comptroller combined.

So that's in our very recent history back in 2012.

And so there's a very important reason why having these strong internal controls are there and they're important.

And they safeguard taxpayers from these types of scandals.

And again, unfortunately, Illinois has, earned this reputation of scandal after scandal, after scandal.

And I really take my role as being a strong fiscal watchdog very seriously.

And I do believe that it's important to have these checks and balances and that there should be two signatures on those checks to make sure that we're making sure that tax payers aren't being cheated.

- Let's talk about restraint in spending because you have been a proponent of what's called the controlling exit bonus paid when speaker Madigan retired from his district.

He stepped aside and I believe that was in February and his replacement resigned three days after that.

And that replacement was at the tail end of the month.

So by state law, those three individuals for that month each got about $5,800.

That would have been a monthly pay.

What's the status because you actually had proposed the idea when Senator Sandoval a year ago had been found that he had been less than honest you had proposed a bill, what's the status of that?

- Okay.

So yeah, I actually a year and a half or so ago I introduced that legislation that we at the time called our note exit bonus bill, and it was looking to move forward.

We did it because of not just Senator Sandoval who we actually had to pay for three months, even though he announced his formal resignation in November I think it was November 26, but on his letter of resignation did not make it official until January 1st of that following year.

So by statute state law, we were obligated to pay him for the month of November, even though he checked out like November 26, we never saw him again.

Right.

So November, December and the full month of January because he was just scamming the system essentially.

Right.

So it was very infuriating.

And then Senator, I should say, representative Louisa Royal also resigned in disgrace under federal investigation criminal charges.

And then also there was a representative Nick Sauer and all of these individuals went ahead and (converses quietly) - [H] Let me just interject for just a moment comptroller because I think someone's getting the kitchen ready and I know you're a good cook so we'll excuse that.

(converses quietly) While she's checking on that I want to remind everybody that we're going to continue the conversation with the comptroller with regard to some of the bills that she's proposing in the state legislature.

So we will be talking about a couple of individuals who will be getting some back pay, even though they voted against some legislation.

And comptroller.

Are you all squared away there?

- I am all squared away.

Thank you.

Yes.

Sorry.

- Briefly finished that because we have another issue we want to talk about here.

- What was I talking about before I got-- - You're talking about the three-- - Oh yeah it's okay I remember.

So we had a situation where Senator Sandoval had to be paid for three months which is outrageous then representative Louisa Royal who resigned under federal investigation representative Nick Sauer, who was accused of sex crimes on the internet, or I should say digital sex crimes.

Regardless the point is all of these representatives timed their resignations for the first of subsequent month, entitling them to an entire month's pay for just one day of work.

And that's outrageous I don't know any other business where people are lucky enough that if they only work one day, they get paid for 30 and especially not when it comes to public service.

So we call this our no exit bonus bill.

And to your point, or I should say, we did introduce it but then the COVID-19 pandemic hit.

And as you may recall, all of those types of bills, unless if it was related to an immediate budget move had to wait until the legislature reconvened post COVID or at least when things were more under control.

So right now we're back in a legislative session.

And since then we had this trifecta of the former speaker and then his replacement representative Kodak who literally served for about two and a half days, and then his replacement which happened at the end of the month.

So she took office that was representative Kwayer and she took office on a Thursday and then at the end of the month, right?

And so she served like say half of Thursday and Friday and then Monday was the new pay period that she was also eligible for the full month pay.

Now to his credit, we did ask both representative Kwayer and representative Kodak to not accept the pay that they could sign an official waiver from our office, refusing the pay.

I thought that was the right thing to do because two days does not deserve almost $6,000 of taxpayer funds.

I, and to his credit representative, Kodak did in fact sign that waiver and refuse the pay.

So taxpayers were only on the hook, I shouldn't say only but they were on the hook for two instead of three of those checks.

But I was disappointed to see that the new representative on did not agree to sign the waiver.

- So is there a bill to control this in the future?

- There is and our legislation has now been made part of the larger ethics package that the house and Senate are both passing.

It is a priority for them in the session.

So I'm not worried that our bill isn't passing as a standalone, but instead has been incorporated the exact language that we had on our individual piece of legislation.

So they didn't change it in any kind of a way.

The only thing I said is that instead of calling it the no exit bonus, we now call it the no exit or signing bonus because we really weren't expecting someone who signed on for a day or two to one, except a whole month's worth of pay and still serve.

But, you know, I guess it's you get surprised every day, even though you think nothing will surprise you, but that's where we're at (converses quietly) - Speaking of surprises, a judge back in 2019 ruled that two senators, Nolan, and Senator Nolan from Elgin and Senator Claiborne from Bellville and they had voted against, or I should say they had voted in favor of controlling their income while senators then afterward they went into private practice.

One became a judge and they said, well, we're going to sue the state for that pay.

A judge in 2019 ruled they could get the back pay.

And now just last month, a judge ruled that they could get the back page, although that back pay.

But it was only for those two individuals.

It wouldn't be a class action move.

What are you going to pay that money now?

- Well, I'm appealing the case because I think it's just absolutely outrageous that you would have to shameless in my mind Grifters who served in the legislature before and time after time voted, to not accept their cost of living adjustment, which made people see as a raise.

But, you know, they said it is not fair for us to take raises when people are struggling right now.

And it's the honorable thing to do.

And they some third chest about how honorable they were.

And not only that after, pontificating on the Senate floor, both of them they went on to put out press releases.

They were the two Democrats that the Senate Democrats touted as in their press releases about what an honorable move this was.

And I say this as a Democrat that I'm embarrassed by people like that, right.

They make all of us look bad.

And so they go ahead and use it as a re-election tool how honorable they were in self-sacrificing.

And then once they were no longer in office turned around and sued me as a comptroller to pay them back.

Those very raises that they rejected when they were in the legislature.

And so look, I'm going to continue to appeal this and fight this on behalf of taxpayers.

I just, it makes me sick to my stomach.

And I feel that even though, the judge did rule thankfully that if I do have to pay them it's only those two and not everybody who voted down their pay raise, but you know, it's about $167,000.

We are in the middle of a global pandemic.

I could think of many other more deserving entities for $167,000 of taxpayer funds than those two guys, but at the end of the day, you know, $167,000 that's not going to solve our budget deficit but it definitely increases exponentially.

The deficit of trust that exists already from the public towards elected officials.

And yes, I'm going to keep fighting it.

It is going to be under appeal.

And we just hope that another judge does the right thing here and says you guys knew what you were doing.

They were not just senators but they were lawyers.

They understand constitutional law.

And this was the constitutional law of this had been debated in the wages.

And it seemed like it was fine to do so.

I don't think I should (converses quietly) them.

- And with that a half hour is never enough time when we want to talk about state finances.

So we'll have you back on again to talk about other things but we do say thank you to the Illinois state comptroller Susana Mendoza for joining us on At Issue.

Thank you.

- Thank you so much H. Have a wonderful day.

- All right.

And that is another edition of At Issue.

We'll be back next week when we'll be talking about the teacher shortage in the state of Illinois, join us then for the next At Issue.

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