01/30/2012 02:11 pm ET Updated Jan 30, 2012

Illinois Unpaid Bills: Report Warns Governor, State Legislature 'Must Act Now' To Avoid Financial Mayhem

A budget watchdog group that has repeatedly criticized the state's handling of its finances once again called on lawmakers to do something about Illinois's massive backlog of unpaid bills -- which they fear will quadruple over the next five years if action is not taken.

A new report [PDF] was unveiled by the Civic Federation just days before Gov. Quinn is to deliver his annual State of the State address Wednesday. The speech, Quinn staff told the Rockford Register Star, will focus on "jobs, jobs, jobs," though many residents and lawmakers are anxiously awaiting the governor's budget speech, slated for later in February, where Quinn is expected to address the state's budget deficit and growing backlog of unpaid bills.

Those concerns are front and center in the Civic Federation's report, which has projected that the state's unpaid bill backlog will balloon to $34.8 billion from its current $9.2 billion -- slightly more than the amount State Comptroller Judy Baar Topinka recently estimated -- within the next five years. The state's operating deficit is expected to swell to $3.2 billion from $508 million.

Even if the state's "temporary" income tax hike, approved just over a year ago, becomes permanent, as many state GOP leaders fear it will, the report projects that the state's unpaid bills will still amount to some $28 billion.

"The Governor and General Assembly must act now," Laurence Msall, president of the Civic Federation said in a statement. "Failure to address unsustainable trends in the State's pension and Medicaid systems will only result in financial disaster for the State of Illinois."

The group outlined a number of recommendations to improve the state's financial status, including that all current state retirees and employees hired before January 1, 2011, be subject to the same pension benefit increases as new employees.

The federation also suggested that state retirees should share the cost of their health insurance premiums and that Medicaid reform legislation passed in January 2011 should be implemented. The group also disagreed with the governor's call for the state to borrow additional money to pay down its mounting backlog of bills and suggested that the state should increase its cigarette tax from 98 cents per pack to $1.98 per pack, resulting in an increase of state revenue they estimate at $307 million annually.

"It's one that calls for, not half measures, not politically massaged answers. It calls for significant, drastic action by the state of Illinois," Msall continued.

The report further calls for the state to create "a comprehensive economic development incentive policy to curb economic brinksmanship by Illinois businesses and allow the state to monitor the relative effectiveness of various incentive programs."

In an appearance last week on MSNBC'S "Morning Joe," Gov. Quinn said the description of those tax breaks as "sweetheart deals" was unfair because the incentives are intended "to keep jobs and grow jobs both for large businesses and for small businesses." The governor also said he would not be giving in to state Republicans calling for the income take hike to be revoked anytime soon.

Earlier this month, due to similar concerns for the state's ongoing financial problems, Illinois's credit rating was reduced to the lowest of any state in the country by Moody's Investor Services, a move Gov. Quinn's office called an "outlier decision" but state Republicans said was "very bad news."

AFSCME on Monday responded to the report claiming that the group "attacked public-employee pensions, wages and health care, pushed for facility closures, and urged higher taxes and no prescription drug help for seniors, yet said nothing about the state's broken tax system" -- an oversight they say "calls [the federation's] credibility into question."

WATCH Illinois House Speaker Mike Madigan speak last week on the state's financial struggles and overspending: