CHICAGO -- Facing opposition to a $1.5 billion bond restructuring and Medicaid reform plan, Gov. Jim Edgar of Illinois this week revamped his proposed state budget for fiscal 1995.
Edgar's new plan replaces the controversial debt restructuring plan with a smaller debt refinancing and taps about $248 million of unanticipated revenue increases in fiscal 1994 and 1995 to help pay off a backlog of Medicaid bills.
Mike Colsch, division chief of economic analysis and debt management for the Illinois Bureau of the Budget, said the new plan would raise about $388 million for the fiscal year that begins today. Of that amount, $328 million would be available for Medicaid bills, while the rest of the money would be spent on social services for families and the elderly.
A key element of the $32 billion all-funds fiscal 1995 budget Edgar proposed in March was the restructuring and refinancing of $1.5 billion of state general obligation bonds and possibly some Build Illinois sales tax revenue bonds to raise about $700 million over two years, mostly by deferring debt service payments for two years.
The $700 million would have been matched with federal Medicaid funds to give the state $1.4 billion toward its Medicaid budget. In conjunction with the debt plan, the Republican governor also proposed Medicaid reforms that included expanding the state's managed care program.
However, Democratic leaders in the Illinois General Assembly last week announced their opposition to the plan, calling it a "debt payment holiday."
The lawmakers specifically objected to the fact that the debt restructuring would defer debt service for two years, costing taxpayers at least $200 million in additional interest. They also questioned whether Edgar's Medicaid reforms would produce the kind of savings that would avert future Medicaid bill backlogs.
Colsch said the Democrats' opposition has taken the debt plan "off the table" for the fiscal 1995 budget deliberations. However, he said debt restructuring could be revisited in the future as a way to raise money for Medicaid bills.
The $388 million would come from a variety of sources.
Edgar's revised plan would need legislative approval to refinance up to $750 million of GO debt, according to Colsch. He said the state expects to save $25 million from the refinancing of outstanding debt issued from the late 1970s to the early 1990s.
Another $50 million would come from tapping excess revenues in the Build Illinois bond reserve fund, Colsch said.
That combined $75 million, along with $65 million of budget cuts plus $100 million of higher-than-anticipated revenues in the current fiscal year and $148 million more of revenues in fiscal 1995, would raise $388 million.
Colsch said $328 million of the amount would be matched with federal Medicaid dollars to raise about $640 million to pay Medicaid bills.
"It will allow us to pay off about half of the backlog," he said, noting that the other half would have to be addressed sometime during the fiscal year.
While the new plan has the support of the Republican-controlled Senate, it is uncertain if the Democrat-controlled House will go along with the revision.
Mark Gordon, a spokesman for Senate President James Philip, R-Wood Dale, said the revised budget is similar to the one passed earlier this year by the Senate. He said the Senate is expected to pass the budget bills again with "slight modifications" to encompass the governor's revisions.
But House Speaker Michael Madigan, D-Chicago, yesterday called for hearings today on where the $388 million of "magic money" is coming from, said Steve Brown, Madigan's spokesman.
The lack of agreement on the budget pushes the state into overtime deliberations as fiscal 1995 began today without an approved spending plan. Brown said that House members would go home for the holiday weekend and return next Thursday to consider the budget.
