Illinois stiffs vendors, health-care providers going under

The state of Illinois can’t pay its bills, according to the local CBS affiliate in Chicago.  Illinois has a $3 billion cash gap in its budget, and is now pushing vendor payments out to three months on average.  One health-care provider that supports at-home care may have to shut its doors and lay off its employees while it waits for almost a million dollars owed by the state:

The State of Illinois’ pile of unpaid bills has grown to a record-breaking $3 billion. Comptroller Dan Hynes said Tuesday it’s never before been this bad at this point in any previous fiscal year. CBS 2 Political Editor Mike Flannery reports that some social service agencies that rely heavily on state reimbursement warn they will soon be forced out of business.

Hynes said that things are likely to get worse before the state’s bleak revenue picture begins to improve. …

It’s all very discouraging to the physician who runs Family Home Service.

Dr. Norman James said he does not have enough cash to pay his 250 employees this Friday. He said he may have to close the doors, leaving more than 450 clients without the support they need to stay in their own homes and out of expensive nursing homes.

Dr. James said his bank had tripled the size of his line of credit, but that money is now all gone. Dr. James said Illinois owes his agency $900,000, about $700,000 of it past due by up to five months.

But the state legislature and governor are responding to this budget emergency, right?  After all, tax revenues are falling, creditors are calling at a rate of 2600 calls per week, and vital services will cease operations unless something gets done quickly to free up cash.   Cities and counties, which get a share of state funds, are also getting put off.  Unfortunately, the governing class in Illinois, including Governor Pat Quinn, have decided to put off a solution until next year.

There are two lessons from this.  The least important one is the folly of attempting to get the Olympics, an event which requires massive capital for years before one dime of revenue is seen.  Illinois and Chicago simply didn’t have the resources to stage the event.  Had they actually won the bid, no one can doubt that federal tax dollars would have had to be used to bail out Chicago’s Olympic indulgence.

More importantly, it highlights a big problem in ObamaCare, which relies on a large expansion of Medicaid to provide health insurance coverage to currently-uninsured low-income earners.  That acts as a huge cost transfer from Washington to the states for ObamaCare, as the states have to pony up most of the Medicaid reimbursements to providers.  Instead of having these safety-net providers go under, Illinois residents would be seeing a massive decline in provider availability under these circumstances, which would (a) drive costs up as demand gets funneled to a reduced supply, and (b) increase wait times for treatment.