Investing to Eliminate Illinois' Backlog
Cutting the backlog, earning enhanced investment returns, and savings taxpayers money
Overview
Under Public Act 100-1107, legislation championed by Illinois Treasurer Michael W. Frerichs and signed into law in August 2018, the Illinois State Treasurer can invest up to $2 billion in the State of Illinois’ account payables (e.g. the bill backlog) at a reduced, market-based rate as opposed to the 9% or 12% late payment interest rate penalty. This enables the Illinois Treasurer to:
- Generate Cost Savings: Help the State of Illinois offset significant late payment penalties;
- Increase Investment Returns: Generate incremental investment earnings for the State of Illinois;
- Produce Liquidity: Assist the Illinois Comptroller in paying vendors on a timely basis; and
- Boost Confidence: Help eliminate the bill backlog and increase the public market’s confidence in the state’s fiscal stewardship.
Although the Illinois Treasurer does not have a formal role in preparing and implementing the annual state budget, we understand the critical, negative impact the state’s burgeoning bill backlog has on the state’s ongoing cash flow needs and fiscal stewardship. As a result, Treasurer Frerichs introduced and advocated for a pioneering investment program to save and earn Illinois taxpayers hundreds of millions of dollars while producing liquidity and boosting market confidence.
By offsetting payment penalties required under the State Prompt Payment Act, the Illinois Treasurer's new investment program is expected to save Illinois residents up to $200 million each year when fully invested.
Currently, late-interest penalties on the bill backlog are as high as 12%. Under the new program, the Illinois Treasurer can invest in the State’s account payables at a lower, market-based rate, thereby helping eliminate the bill backlog and saving hundreds of millions for Illinois taxpayers over a five-year period.
Rep. David Harris, a Republican from Arlington Heights, called this “one of the most creative and innovative programs to save money that has ever come before the House.”
How the Process Works
Key Data Points
• Investment Authority: Up to $2 billion (at any point in time)
• Current Investments: $0 million
• Realized Investments: $1.9 billion
• Aggregate Investments To Date: $2.1 billion
• Realized Interest Cost Savings to State Taxpayers To Date: $82.5 million
• Realized Total Earnings to Investing Funds To Date: $24.0 million
• Realized Incremental Earnings on Investments To Date: $9.7 million
• Realized Total Benefit to State Taxpayers To Date: $92.2 million ($82.5M + $9.7M)
• Number of Occurrences Repayment of the Realized Investments Were Late: 0
• Number of Occurrences the Realized Investments Were in Default: 0
As of May 31, 2021
There are no current investments as of May 31, 2021.
Interested in learning more?
Click below for intergovernmental agreements between the Illinois Treasurer and Illinois Comptroller: