CHICAGO -- Gov. Jim Edgar of Illinois may resurrect a plan to restructure outstanding state debt as a remedy for paying off a large backlog of Medicaid bills.
The plan resurfaced during a continuing review of Illinois' proposed managed-care program by the federal Health Care Financing Administration. As part of the review, the state faces a Tuesday deadline for telling the federal agency how it intends to deal with the backlog, which currently stands at about $900 million.
Eric Robinson, a spokesman for Edgar, said the bond restructuring "is an option like anything else is an option."
"We're still developing our plan for paying off the Medicaid backlog," Robinson said, adding that the final plan would be made public "at a later date."
State budget officials have been keeping the bond restructuring plan on the back burner since Democrats in the General Assembly succeeded last June in excising it from the Republican governor's proposed fiscal 1995 budget.
In the meantime, a change in the political landscape could pave the way for approval of the plan. The Nov. 8 election put Republicans in control of the House, giving the GOP a majority in both legislative chambers.
Mike Colsch, the state's deputy budget director, said the restructuring has always been left open as an option and that the budget office "periodically stays on top" of potential savings from the restructuring.
A debt restructuring at the present time would involve about $800 million of outstanding general obligation and Build Illinois sales tax revenue debt, according to Colsch. He pegged the possible savings at about $550 million.
Last spring, Edgar proposed a $1.5 billion debt plan that included both refinancing and restructuring that would have freed up $700 million of state funds. The $700 million would have been matched with federal Medicaid funds to raise $1.4 billion for bill payments. However, Colsch said that an economic refinancing is less attractive now given the rise in interest rates.
In fact, the state has been unable to tap refunding authorization for up to $750 million of outstanding GO bonds. The budget passed by lawmakers last July allowed for the refinancing in order to realize an approximately $25 million savings that could be used to help pay off the state's backlog of Medicaid bills.
Colsch said the amount of possible savings from a refunding has shrunk since then.
Mark Gordon, a spokesman for Senate president James Philip, R-Wood Dale, said Philip is keeping an open mind about the return of the debt restructuring plan.
"We supported it last time and we would want to take a look at it this time to see if it's changed," Gordon said.
Mike Cys, a spokesman for Lee Daniels, R-Elmhurst, who will become House speaker on Jan. 11, said debt restructuring "is not something we're terribly fond of."
"But considering the situation with the Medicaid budget and other financial problems the state faces, it's not something that may be avoidable," he said.
Democrats, meanwhile, remain skeptical of the plan. Steve Brown, a spokesman for outgoing House speaker and new House minority leader Mike Madigan, D-Chicago, called the debt plan "a very, very risky idea," given higher interest rates and recent unrest in the municipal market caused by the Orange County, Calif., bankruptcy.
Even though Republicans will be in the majority during the next legislative session, Brown said he is not sure they will be "comfortable with the scheme."
Earlier this year, Democrats objected to the fact the debt restructuring would defer debt service for two years, at a cost of at least $200 million in additional interest. They also raised concerns that the plan, which Edgar linked to his proposal to move 1.1 million Medicaid recipients into a less costly managed-care program called MediPlan Plus, would result in enough savings that would avert future Medicaid bill backlogs.
Illinois is seeking approval of the MediPlan Plus program from the Health Care Financing Administration, which also has posed about 150 other questions regarding the program's implementation. Dean Schott, a spokesman for the Illinois Department of Public Aid, said the state plans to answer all the questions by the Tuesday deadline.
The program's implementation date of April 1 next year has already been postponed because of the lack of final approval by the agency. Schott said that despite the delay, the state still hopes to save $2 billion over five years by implementing the program.
