CHICAGO -- Gov. Jim Edgar of Illinois has scrapped plans for a $300 million general fund cash-flow borrowing, but will move forward with a $600 million short-term borrowing backed by Medicaid funds, a spokesman for the governor said yesterday.

Dan Egler, the governor's spokesman, said Gov. Edgar decided to proceed with only the Medicaid borrowing because of the state treasurer's "adamant opposition" to the general fund borrowing. The Edgar administration had planned to sell both issues competitively early next month.

Under the state's Casual Deficits Act, any short-term borrowing must be approved by the governor, the treasurer, and the comptroller. In a statement released yesterday, state Treasurer Patrick Quinn reiterated the opposition he expressed last week to the $300 million borrowing, but said he will support the $600 million borrowing. The governor and state Comptroller Dawn Clark Netsch have agreed to both borrowings.

The $600 million of general obligation certificates, backed by assessments and fees levied by the state on hospitals and nursing homes, and federal Medicaid matching funds, are tentatively scheduled to be competitively priced Aug. 13, according to Mike Colsch, division chief of economic analysis and debt management for the state Bureau of the Budget.

The certificates will mature by June 30, the end of the current fiscal year, he added.

Mr. Quinn had voiced concerns last week that the money from the cash-flow borrowing would be used to cover up an unconstitutional deficit in the state's budget for fiscal 1992, which ended June 30. While the state ended the year with a $131 million general funds cash balance, an estimated $1 billion in fiscal 1992 bills were rolled over to the current fiscal year due to the lack of available funds.

Under a practice called lapse-period spending, the state may use revenues from the first three months of a new fiscal year to pay expenses incurred in the previous fiscal year.

Proceeds from the $600 million of certificates will be used to pay bills owed to hospitals and nursing homes that have provided Medicaid services. Proceeds from the $300 million of certificates would have been used to reduce the backlog of other state bills.

Mr. Egler said that without the cash-flow borrowing, "a number of vendors that have waited months to be reimbursed for their services will not have to wait longer."

The treasurer has said he could support the borrowing if $176 million of the proceeds are used to accelerate the state's September school aid payment to August, the end of fiscal 1992 for school districts in Illinois.

Gov. Edgar rejected that plan.

"The governor believes it would be a mistake to borrow money to advance money to some people while it owes money to other people," Mr. Egler explained.

In his statement, Mr. Quinn contended that his plan would have accommodated both the vendors and the schools by providing vendors with $124 million of the debt proceeds.

While Mr. Egler said the door was still open to the cash-flow borrowing if Mr. Quinn changes his mind, Tom Colgan, Mr. Quinn's spokesman, said yesterday the treasurer was not budging from his position.

The Edgar administration had proposed the cash-flow borrowing shortly after the state's $28.4 billion fiscal 1993 budget went into effect earlier this month.

The state's GO debt is rated AA with a negative outlook by Standard & Poor's Corp. and Aa1 by Moody's Investors Service.

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