Ring it up: Price spikes seen in budget impasse
SPRINGFIELD — When Bruce Rauner said he would be a pro-business governor, this probably wasn't what he had in mind: Companies are jacking up prices and will be earning extra interest payments from the state because of the ongoing budget impasse.
According to a sampling of vendors, some companies that supply state government are increasing their prices to account for the lengthy delays they face in getting paid. One company that has sold shoes to the Illinois Department of Corrections since 2009 says it boosts its prices by about one percent when it deals with Illinois.
"We just put that in our budget when we bid. We're a business. We're here to make a profit," said James Little, administrator of state and federal contracts for the Alabama-based Shoe Corporation of Birmingham.
In addition to paying higher prices, the state also is paying interest to companies when they are not paid on time. In the fiscal year ending June 30, taxpayers shelled out $49.5 million in interest payments.
In 2013, the state paid out more than $239 million in interest because of late payments, which is money that could have been spent on other programs.
In all, over the past five years, taxpayers have financed $484.3 million in interest to companies because the state can't pay its bills on time.
"It's stupid," said Steven Stratton, owner of Stratton Hats in Bellwood, which sells hats to the Illinois State Police. "It's just costing the state more money in the end."
"To me, you're going the expensive route," Little said.
That interest money, however, is keeping some companies from bolting.
Jim Smith, chief operating officer of Knighthawk Coal in Percy, said the lack of a budget isn't a major concern for him because state payments have typically been late.
"This isn't anything new. We like working with the state. They've never not come through and not paid," said Smith, whose company supplies coal to the Choate Mental Health and Developmental Center in Anna and the Murray Developmental Center in Centralia.
That wasn't the case for a company that leased semitrailers to the Illinois Department of Corrections.
The Chicago Tribune reported last week the Larson Group walked away from its contract early because it was owed more than $17,000.
The Secretary of State's office also has lost a contract with a security company over the late payments.
And, cities and utility companies that supply water and electricity to state facilities also have expressed concern about the state's inability to pay its bills without a spending plan in place.
On Friday, there were no signs the impasse between Rauner and Democrats who control the General Assembly was close to ending. The state has been operating without a budget since the beginning of the fiscal year on July 1.
Rauner and the four legislative leaders are scheduled to meet for the first time in months during a Nov. 18 public meeting in Chicago. The House and Senate are scheduled to be in session Nov. 10.
Without a resolution, Little said if more companies stop bidding to supply products to the state, it will drive up costs even more because there will be fewer companies competing for contracts.
"It's all hurting the state's economy," Little said.
At Tri Industries in Chicago, which supplies the state with printer cartridges, George Indelli agreed that fewer bidders will mean higher prices for taxpayers.
"It's hard to quantify, but it is still a shame," Indelli said.