CHICAGO -- Gov. Jim Edgar of Illinois yesterday signed into law a $29.9 billion all funds budget for fiscal 1994, less than one day after the General Assembly passed the spending plan in an overtime session.
Lawmakers approved the budget Tuesday night after the governor and legislative leaders reached an accord on Monday for the fiscal year that began July 1.
The budget increases state general obligation bonding authority by more than $500 million, makes permanent a temporary income tax surcharge, increases education spending by nearly $200 million, and boosts the cigarette tax by 14 cents to raise $105 million to help pay for the state's Medicaid program.
"The budget for the coming year is balanced, maintains education as a top priority, and continues our efforts to better manage limited state resources," Edgar said in a press release. "Once again, we have held the line on general state taxes while addressing the priorities that will keep Illinois a premier state in the 1990s and well into the 21st century."
The budget calls for a year-end cash balance of $200 million, which would be slightly higher than the $172 million balance at the end of fiscal 1993. However, lapse period spending is expected to improve more than Edgar had projected in his proposed budget in March. Under lapse period spending, the state may use revenues from the first three months of a coming fiscal year to pay expenses incurred in a current fiscal year.
Edgar said that $838 million of fiscal 1993 bills will be pushed into the current fiscal year, compared to the $919 million projected in March and the $1 billion actual amount in fiscal 1993. He added that lapse period spending will drop another $73 million next year.
"We are definitely headed in the right direction." Edgar said.
In 1991 and 1992, overspending and lean fund balances led to downgrades of the state's GO rating, which now stands at AA-minus with Standard & Poor's Corp. and Aa with Moody's Investors Service.
Todd Whitestone, a managing director at Standard & Poor's, said the budget is a "modest improvement" for the state.
"It's not getting any worse, but they haven't improved their financial picture," Whitestone said, adding that he does not believe the budget will spur any rating action by the agency.
Steve Hochman, a vice president and assistant manager of state ratings at Moody's, said the final budget "looks as though it continues the state's incremental approach to achieving structural balance." He said the state is taking "small steps to reduce its lapse period spending problem."
"Because those steps are small it leaves the state financially vulnerable for an extended period," Hochman said.
Illinois' budget includes about $400 million of new state general obligation bonding authority for schools, corrections, conservation, mental health, state agencies, and water resources, according to Mike Colsch, division chief of economic analysis and debt management in the Bureau of the Budget.
Lawmakers also approved a 20-year extension of a 0.3 cent per gallon motor fuel tax for the state's underground petroleum storage tank program and $110 million of GO bonding authority to fund a backlog of claims related to the program.
Colsch said the bureau's debt-issuing plans for fiscal 1994 include the sale of $450 million of GO bonds, $200 million of Build Illinois sales tax revenue bonds, and a possible $200 million Build Illinois bond refunding this fall.
The bureau, which sent out requests for proposals to underwriters and bond counsel firms in May, has not yet chosen firms to handle the state's negotiated bond business for fiscal 1994 and 1995, according to Ellen Feldhausen, a spokeswoman for the bureau. The state received responses from 52 underwriters and 19 bond counsel firms.
Under state law, only GO college saver, Build Illinois, civic center, and refunding bonds can be sold on a negotiated basis.
Edgar has proposed borrowing $900 million for cash-flow purposes this fiscal year, saying the state spends more than it receives in revenues in the first six months of a fiscal year. The plan calls for issuing $600 million of certificates payable from the state's general fund and $300 million payable from Medicaid assessment fees and federal matching Medicaid funds.
Under Illinois' Casual Deficits Act, any short-term borrowing must be approved by the governor, the comptroller, and the treasurer. if approved by all three officers, the cash-flow borrowing would mark the third straight one for Illinois. In fiscal 1993 the state borrowed $900 million, and in fiscal 1992 it borrowed $185 million.
While state Comptroller Dawn Clark Netsch is supporting the borrowing, state Treasurer Patrick Quinn will not make a decision until he reviews Edgar's plan, according to Marj Halperin, spokeswoman for Quinn.
Hochman said the state continues to turn to cash-flow borrowing because of its "narrow" balances.
A major sticking point in budget negotiations was a temporary income tax surcharge that expired on June 30. Edgar had originally proposed that most of the revenues from the surcharge be directed to the state instead of local governments, where the money went the past few years. Under the compromise plan, the legislature made the surcharge permanent, giving the state $258 million and local governments $86 million.
Chicago, which loses $28.2 million this fiscal year in surcharge revenues, did convince the legislature to make permanent four city taxes worth $40 million annually.
Lawmakers declined to consider Mayor Richard Daley's riverboat gambling project, which calls for up to $350 million of bonding to help acquire land for the project. Chicago has estimated the project would generate nearly $500 million a year for the state, the city, and Chicago public schools.
As part of the budget agreement, lawmakers also approved placing an advisory referendum on the November 1994 ballot for capping property taxes in Cook County.