CHICAGO -- The ink was barely dry on Illinois's fiscal 1993 budget signed by Gov. Jim Edgar Thursday, when the governor said the state may have to resort to cash- flow borrowing to pay off an avalanche of overdue expenses.
Mike Lawrence, the governor's spokesman, said Friday that the governor is "inclined" to turn to short-term borrowing now that the budget is completed, and that he "is serious enough about it that we have contacted the comptroller and treasurer."
Under the state's Casual Deficits Act, any short-term borrowing must be approved by the governor, treasurer, and comptroller.
The cash-flow borrowing would be in addition to a short-term borrowing for Medicaid bills that the state plans for later this year. The Medicaid borrowing would be backed by hospital assessment taxes, nursing home fees, and federal Medicaid matching money.
One state source said the Edgar administration may issue $300 million of short-term general obligation certificates to cover the cash shortage and $600 million of the certificates to pay Medicaid bills.
But Ellen Feldhausen, a spokeswoman for the state Bureau of the Budget, said the bureau has not yet decided how much the cash-flow issue will be or when it will happen.
A state budget official has said the Medicaid borrowing would be similar to the $500 million of GO certificates the state issued in February to pay off overdue expenses owed to Medicaid providers.
Ms. Feldhausen said the state needs the cash-flow money because of the record rollover of fiscal 1992 expenses into fiscal 1993 expected for the first three months of the new fiscal year.
The comptroller's office has estimated that the rollover, called lapse period spending, could reach $1 billion.
Jim Ofcarcik, special assistant to state Comptroller Dawn Clark Netsch, said if the governor is willing to propose a cash-flow borrowing, "we're not going to turn it down."
Marj Halperin, a spokeswoman for state Treasurer Patrick Quinn, said the treasurer is waiting for more details on the borrowing before he makes a decision.
Ms. Feldhausen said state officials would be discussing the state's borrowing plans with the rating agencies later this month. The state also plans a competitive sale of up to $250 million of GO bonds next month.
Steve Hochman, a vice president and assistant director of state ratings at Moody's Investors Service, said further short-term borrowing by the state would be "a continued indication of the tight cash position by the state."
Illinois's GO debt is rated Aa1 by Moody's.
Jon Reichert, a vice president at Standard & Poor's Corp., which rates the state's GO debt AA with a negative outlook, declined to comment on the state's possible cash-flow borrowing.
Both agencies are in the process of reviewing the $28.4 billion all funds budget for the fiscal year that began July 1. In signing the budget last week, Gov. Edgar vetoed a $12 million state sales-tax appropriation that local governments were using to help pay debt service on tax increment financing bonds.
Don Eslick, executive director of the Illinois Tax Increment Association, said Friday that his group will try to convince lawmakers to override the veto in the fall. He said the lack of state money will create problems for issuers of tax increment bonds, who must now find other sources of revenue to help pay debt service on the bonds.
Under a 1986 state law, local governments that use incremental increases in their sales and property taxes to support tax increment bonds would also be eligible for incremental state sales-tax revenues from the tax increment financing districts.
