CHICAGO (Reuters) - Illinois began tackling its $16.7 billion backlog of unpaid bills on Wednesday as it received recent bond sale proceeds and enacted a law requiring more frequent spending reports by state agencies.
In October, Illinois sold $6 billion of general obligation bonds to help pay off the backlog.
State Comptroller Susana Mendoza said her office would prioritize the payment of bills eligible for federal matching funds in order to maximize revenue.
"These payments will effectively stop the bleeding of late payment interest penalties on this portion of the backlog," Mendoza, a Democrat, said in a statement. "There is still a long, hard road ahead of us, but this is a vital first step toward smart planning for FY 2019 and beyond."
The comptroller's office has estimated that the state owes an additional $900 million to vendors and service providers for late payment penalties of as high as 12 percent annually.
An impasse between the Republican governor and Democrats who control the legislature left Illinois without complete budgets for an unprecedented two fiscal years and caused the bill backlog to balloon to record levels.
In July, the legislature enacted a fiscal 2018 budget that included the bond authorization, as well as an income tax hike, over Governor Bruce Rauner's vetoes.
The Senate on Wednesday joined the House in overriding Rauner's August veto of legislation requiring monthly instead of annual reports from state agencies on bills they are holding.
Mendoza championed the transparency measure, which takes effect Jan. 1, as a way to give her office, which is charged with paying Illinois' bills, a more complete picture of what is owed.
In his veto message, Rauner said the legislation looked more like an attempt by the comptroller to "micromanage" executive agencies than to get the most helpful information on monitoring the state government.
The House unanimously overrode the veto on Oct. 25.
(Reporting by Karen Pierog; Editing by Richard Chang)