Businesses large and small struggle as state's debts pile up

TIM LANDIS

The state of Illinois owes more than $9.6 million to Springfield-area businesses for services ranging from cremating public-aid recipients to motor repairs, according to information obtained by The State Journal-Register.

The disclosure shows the local impact the state’s budget woes are having on businesses large and small as state payments for goods and services lag by six months or more.

The snapshot from the week of May 2 showed the state owes amounts ranging from $265.60 due to Green Automotive Group to more than $2 million owed Sparc, a Springfield program for people with disabilities. The state later caught up with $450,000 for Sparc, but the group still had to borrow money from a bank and its endowment fund to pay for operations.

Sparc executive director Clarissa Puckett said the backlog has become the talk even of her human-service colleagues in other states.

“They all know how bad it is in Illinois,” Puckett said.

Wide-ranging debt

The list contains a wide range of businesses that are owed money for everything from office supplies to locksmith services.

But one of the more eye-catching items is the amount owed to local funeral homes for cremating the indigent.

As of mid-May, the state still had not paid more than $2 million of $5 million owed funeral homes statewide for 7,368 burials and cremations. The numbers from the Illinois Department of Human Services are for the fiscal year begun July 1, 2010.

Actual amounts could be higher, said Bradley Hahn, a spokesman for Illinois Comptroller Judy Baar-Topinka. The overdue bills represented only those that have been presented for payment.

Outstanding invoices are not included.

Hahn said payments are running four to six months late in most cases. One Springfield funeral home has bills dating back a year.

Interest building

The delayed payments come at additional cost for the state. Illinois must pay interest on the overdue amounts. For the fiscal year ended July 1, 2010, that amount was $62.3 million. Year-to-date for the current fiscal year is $16.3 million, according to the comptroller’s office.

Ironically, interest payments are relatively low this fiscal year because interest is paid only when the whole bill is paid. The interest figure will increase as state payments catch up, the comptroller’s office said. The rate is 1 percent per month for bills qualified as deserving “prompt payment.”

Otherwise, the rate is 1 percent per month after 60 days and 2 percent per month for most Medicaid reimbursements after 60 days.

The delays discourage would-be entrepreneurs seeking to do business with the state, said Kevin Lust, director of the Illinois Small Business Development Center at Lincoln Land Community College.

“Businesses that would ordinarily do business with the state don’t even put it in their projections anymore,” Lust said. “The ones who do business with the state now look at it and say, ‘We have to keep doing business.’ But they can’t count on it for any sort of cash flow.”

Bills for local businesses piled up to the point that the Greater Springfield Chamber of Commerce has called for a four-year, $6.1 billion state borrowing plan to pay down a backlog estimated at $8 billion statewide.

Craig Mannschreck, co-owner of Resource One, an office furniture and design firm based in Springfield, helped introduce the plan. If the situation continues to worsen, some small businesses will not survive, he said.

“It hurts employment,” Mannschreck said. “It hurts the city and the state.”

Tim Landis can be reached at 788-1536.

Backlog builds up

Here are examples of bills, large and small, owed Springfield businesses and not-for-profits by the state of Illinois.

Largest

* $2.095 million; Springfield ARC Inc. (Sparc)

* $1.603 million; Mental Health Centers of Central Illinois

* $664,640; Illinois Principals Association

* $399,995; St. John’s Hospital

* $322.977; Complete Care Systems Inc.

* $285,606; Levi, Ray & Shoup

* $274,428; Sojourn Women’s Center

* $245,362; Anderson Electric Co.

* $164,485; CTG Inc. (computer systems)

* $130,797; Xerox Corp.

Smallest

* $265.60; Green Automotive Group

* $271.68; First Electric Motor Shop Inc.

* $307.51; Hillier Storage & Moving Inc.

* $352.22; Watts Copy System

* $381.30; Central Illinois Staffing Service

* $441.26; Springfield Vision Care Associates

* $472.70; The Hope School

* $520; Illinois Association of Minorities in Government

* $533.52; Bishop Hardware & Supply Inc.

* $602.26; Looking for Lincoln Heritage Coalition

Others

* A-1 Lock Inc.: $52,691

* George Alarm Co.: $4,391

* Springfield Urban League: $7,600

* Don Smith Paint Co.: $3,198

* Carpet Weavers Inc.: $3,640

* Illinois Association of Minorities in Government: $520

* SIU Physicians & Surgeons Inc.: $5,254

* Aramark Uniform Services Inc.: $305.42

* Irwin & Dunbar Transmission: $4,390

* President Lincoln Hotel Venture: $1,097

* Isaacs Refrigeration Co.: $2,299

* Londrigan, Potter & Randal (law office): $2,524.

Source: Illinois comptroller’s office (bills were from a single week in early May; some may since have been paid)

“The worst ever”

The Illinois Department of Human Services has approved $5.1 million to pay for for cremation and burial of indigent clients since the current state fiscal year began July 1, 2010. As of May 11, a little more than $2 million had been reimbursed to funeral homes that provided more than 5,300 burials and 2,300 cremations.

About $2,600 of that is owned to Kirlin-Egan & Butler in Springfield.

“If you were to look at accounts receivable, the state is a big portion of that,” said Chris Butler, president of Butler Funeral Home. “They are probably half of that.”

“What we’re owed is generally when we provide a funeral or cremation, and the client was a public-aid recipient,” Butler said.

Staab and Vancil-Murphy funeral homes in Springfield, and Wilson Park Funeral Home in Rochester also were listed in comptroller’s records as being owed $3,309, $1,553 and $4,075, respectively, by the state.

Butler said state reimbursement is not a significant portion of the funeral-home business, but it is a big piece of overdue bills.

“Now, sometimes it’s well over a year,” said Butler “It’s the worst ever.”

Borrowing to make ends meet

The 60-year-old Sparc program for people with disabilities was owed a little more than $2 million in before the state recently came through with a $450,000 payment, said executive director Carlissa Puckett.

“That was from last November. They are just starting to pay those bills,” said Puckett. The state accounts for about 90 percent of the agency’s estimated $9.4 million annual budget.

Puckett said a state income tax increase earlier this year appears to have helped speed payments. But she said the recent $450,000 will go out quickly to repay loans taken out from a bank and an endowment fund to pay operations costs.

Puckett said Sparc avoided layoffs in a work force of 270 and cuts in basic training programs only by holding down expenses and borrowing.

The agency has cut back on outings for clients, dropped out of the Special Olympics and is not replacing vehicles. Sparc also could be forced to increase the number of clients per group home from five to seven now to eight, the maximum allowed by law.

Sparc is on step two of a “seven-step” response plan to the late state payments, Puckett said. Borrowing was part of step two. The most drastic step would involve putting up endowment property as loan collateral.

She said she hopes step two will be the last.

“We’ll see how much reimbursement they give us,” Puckett said. “We don’t expect it’s going to be much better in the near future. We’re just very conservative about our spending and watching our cash flow.”

Business shifted

strategy to cope

State contracts that once accounted for up to 60 percent of business at Resource One, an office furniture and design outlet in Springfield, is down to 5 percent to 10 percent as a result of the state’s chronic inability to pay its bills on time.

“It was causing us cash-flow problems,” said co-owner Cindy Davis.

The state did recently catch up with a backlog of $300,000 to $400,000 owed the company, which is nearing its 25th year in business. Still, Davis said Resource One stopped taking state contracts paid for out of general revenue funds about 1½ years ago. The general-revenue fund is the state’s main checkbook for paying bills.

Resource One still has some state contracts for projects not paid for from general revenue, but Davis said the firm has shifted its focus to health care and other industries.

“A long time ago we decided we were not going to put all our eggs in that state basket,”

Davis said. “We started diversifying. We had to do that because, if we had to rely on the state, we’d have our doors closed.”

A combination of the economy and slow state payments also contributed to cuts in the number of employees, Davis said. Resource One now has a work force of 20, down from about 30 three years ago.

Davis said the company would welcome the return of general-revenue contracts, but she said she must see evidence the state can pay on time.

Mover wary

of state work

The state office relocation business has been good the last few years in Springfield.

Getting paid is the challenge, said Tom Swift, co-owner of Hillier Storage & Moving Co., a family-owned firm founded in 1906.

“We still do business with the state, but it’s not as regular as it was a year ago,” Swift said. “It’s not a big part of our business, but it does impact us like it does all companies.”

He said it is common for the state to be six to eight months late paying for jobs. He, too, said the company is wary of state general-fund projects.

“There are times the moves that we’re doing are coming out of an account that has money,” Swift said. “It’s the general fund that’s the problem.”

State business?

Cash only, please

The Trout Lily Cafe in downtown Springfield is not owed money by the state, and owner Kate Hawke intends to keep it that way.

“A small business can’t afford to wait to get paid. I’m really a micro-business,” Hawke said.

She said the cafe, which is nearing its 12th year in operation, still provides takeout orders and deliveries to the General Assembly. But payment must be by cash, debit card or credit card only. The cafe stopped accepting state charge accounts several years ago.

“The last time I did it, I made a phone call every week for weeks until I got a check,” said Hawke. “Then I said, ‘You have to pay upfront just like everyone else.’”