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Providers Going Broke Waiting for State Money

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Providers Going Broke Waiting for State Money

Illinois State Comptroller Dan Hynes hasn’t been able to pay social service providers on time. (AP/Seth Perlman)

Illinois’s elected officials have been busy. The governor is sorting out his legal defense and legislators are preparing to try him. What they are not doing is dealing with the state’s looming economic fiasco. Besides an old-fashioned deficit, Illinois is also months behind on its bills and people who supply critical services say they’re going broke while they wait.

When government provides a service, it’s often little private agencies that do the work. They pay for staff and supplies, and the state pays them back. That was the arrangement at Bethel New Life – a fixture on Chicago’s West Side and a haven for many low-income seniors.

MCCOLOUGH: A lot of the elders have some dementia, things like that … (Ding dong!) Sorry, that’s the bell so people don’t wander. Good morning! Good afternoon, I should say!

CEO Steven McCullough says Bethel’s adult daycare service helps elderly people hang on their last bit of independence.

NURSE: We’re gonna layer up, we’re gonna use our hats,. Our scarves and our gloves.
MCCOLLOUGH: We have a nurse talking about hypothermia. And, it’s important because we don’t know what’s happening in the home.
ANTHONY: I put the hat on, and then I got my hood.
NURSE: That’s good, you’re doin’ the correct thing, Anthony!

Besides paying nurses, Bethel also buys formula for babies, meals for needy families and books for teens. Right now, the state is almost 3 months behind in paying Bethel back- last fall, the lag stretched to 5 or 6 months. That means Bethel doesn’t have cash to pay the light bill or make payroll. The agency has cut almost a fifth of its staff and lately, they’ve even been running out of the basics. Margaret Daniels works with new mothers.

DANIELS: It’s really disheartening when a parent comes to you and say, I need Pampers for my baby. Then you gotta go home thinking I’m not able to provide this service we’re supposed to provide because of the state funding.
Now take that dilemma, and multiply it by about 50-thousand. That’s how many invoices the state is sitting on from childcare providers, nursing homes, hospitals and others all over Illinois. In the past, those places could just go to their banks and borrow money to get by. But now, for many agencies, that safety net has been yanked away. Steven McCullough says Bethel can no longer borrow against what it’s owed.

MCCOLLOUGH: They’re not confident about our receivables. Bethel’s not the only agency that’s facing this. There’s agencies across the state that are going to banks, and banks are saying, I have no confidence that the state is going to pay its bills. Therefore I will not extend your credit. Or here’s the extra hoops you have to jump.

GAMBS: Where it used to be hey, you got state government, you know, you look at that almost like a guaranteed payment. Almost like a cashier’s check. And now it’s what if they don’t pay you for six months?

Matt Gambs is CEO of Diamond Bank in Chicago. He says as the state fell further and further behind, he finally had enough. A few years ago, he just quit lending money to most state contractors.

GAMBS: If you are any person who does business with the state government, being paid within a reasonable amount of time is not a guarantee, and it has a crippling affect on the ongoing credit-worthiness of the company that does it.

That wariness, combined with the credit crunch, has made it extremely tough on agencies waiting for their money. Comptroller Dan Hynes says the state has a backlog of about $3.5 billion.

HYNES: The state is really making a great deal of difficulty for a lot of people.

Hynes pushed through a big bond sale last month, which let the state pay down $1.4 billion. But that was a one-time thing and the state has to pay it back by summer. Meanwhile, Hynes expects the delays to get worse.

HYNES: The providers, they’re getting squeezed from both ends. They’re having the state hold off on paying, and then if they can’t get credit elsewhere, they have very few options left.

Illinois has typically had some of the worst delays in the country – and by most accounts, it got a lot worse last year. Hynes blames his political nemesis, Governor Rod Blagojevich. Bethel New Life’s Steven McCullough says no one in Springfield is showing leadership right now.

MCCOLLOUGH: With the impeachment process, that pushes the conversation on financial issues that much further back. So I don’t know when we’re gonna get paid next.

He says Bethel has managed so far to avoid slashing services but it’s not far from the brink. And many other agencies are much smaller, or poorer, or have stricter bankers. For those providers, payday might not come in time.

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