Federal debt limit debate could hurt Illinois

Less money for state means more trouble

July 27, 2011

Kristen McQueary

(AP/file)

Republicans and Democrats in Washington continue to disagree over how to handle the nation’s debt limit. Talks continued this week between both sides.

But what if they don't reach an agreement? Illinois coffers are likely to suffer, according to former Illinois budget director John Filan, now vice president of DSI Civic, a financial consulting firm.

The state of Illinois relies heavily on money from the federal government to run basic operations. At least twice a week, money from Washington gets wired directly into the state’s bank accounts. If the federal government can’t borrow more to pay its bills, Illinois projects and grant programs, from transportation to agriculture, could be in trouble.

Money for road construction, new schools and bridges would be shoved to the end of the line, along with something else lots of taxpayers are waiting for:

"Things like tax refunds could be slowed down as a result of not having the authority to do the kind of borrowing they do to make those payments," Filan said.

He said Medicaid payments, upon which the state relies weekly, would start to diminish. Doctors who count on federal money to pay for low-income patient care would have to wait even longer to get paid.

The state of Illinois could find itself applying for short term loans to get by, which taxpayers end up paying off with interest.

 

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