SPRINGFIELD - Like disaster clean up crews, there's always businesses that find a way to make money off other's misfortunes. With Illinois' financial disaster of paying its bill to service providers up to a year late - now owing $9 billion in unpaid bills despite 2011's 67 percent state income tax hike - few vendor solutions are available.
Refinancing the debt, issuing bonds again, rather than cutting spending or delaying expensive projects, seems to be the path Illinois' political class is choosing. Taxpayers will be left with the bill sooner or later, and every day the legislature refuses to deal substantially with the pension crisis, Illinois taxpayers pay more, due to lower credit rating and skyrocketing interest rates.
But there's one industry springing up in the midst of Illinois' money crunch. Political insiders are hunting near-death small businesses that can't get reimbursements from the state in a timely manner. These insiders are swimming in to rescue those businesses with outstanding receivables and making a nice buck doing it. One of these new businesses was written up in the Wall Street Journal last week.
Two Democrat insiders, Brian Hynes and Patti Solis Doyle, have set up Vendor Assistance to keep state-owed businesses functioning. Hynes, a lawyer and lobbyist, and Doyle, a former top aide to Hillary Clinton and Vice President Joe Biden, have set up the first such business in Illinois, but are looking to expand to other financially struggling states as well.
Vendor Assistance is funded by a small investor group and has secured a revolving credit facility totaling $320 million, with Citigroup Inc. as the lead lender, WSJ reports. The company currently has 12 employees.
Hynes' past business partner raises eyebrows: a prominent member of former Governor Rod Blagojevich's inside circle of wheeler/dealers - Tony Rezko. Hynes and Rezko's real estate partnership was mentioned in the Blagojevich trial as a way to get money to Blagojevich's wife Patti.
Now Hynes is back assisting state-owed vendors. Vendor Assistance pays vendors 100% of what the state owes them—90% initially, and then the vendor is paid the remainder in two installments. Vendor Assistance makes its money from the late fees, which in Illinois are 1% a month on the balance owed after a 90-day grace period. Last year, Illinois paid a total of more than $85 million in late fees.
The more behind Illinois gets, the more money Hynes and Doyle will make. And the more hard-working taxpayers will have to pay - if they choose to stay in Illinois at all.