CHICAGO -- Gov. Jim Edgar of Illinois signed into law a $33 billion all-funds budget for fiscal 1995 yesterday after state lawmakers approved a compromise spending plan 12 days after the fiscal year began.

Signing the budget from a hospital room where he is recovering from heart surgery, Edgar said the budget increases funding for education and reforms the state's Medicaid system -- two things he pushed for in his original proposed version of the budget. The state's fiscal year began. July 1.

The House and Senate approved the budget on Tuesday after days of negotiations between legislative leaders and administration officials that culminated in a tentative agreement last Friday in Edgar's absence.

Edgar underwent emergency quadruple bypass surgery last Thursday after experiencing discomfort in his chest for a few weeks. He is recovering in a suburban Chicago hospital and could be released as soon as this weekend.

Major points of contention over the budget were spending on Medicaid and education. The compromise plan boosts education funding by $277 million, incorporating the $247 million increase Edgar called for in the budget he proposed last March and adding an additional $30 million.

The budget also allocates $353 million to pay off a backlog of Medicaid bills. That money will be matched with federal Medicaid funds to raise a total of $687 million for bill payments, according to Mike Colsch, division chief of economic analysis and debt management for the state bureau of the budget.

The extra money will come from refinancing up to $750 million of general obligation debt to produce a savings of $25 million, tapping $50 million in excess revenues in the Build Illinois sales tax revenue bond reserve fund, making $160 million of budget cuts, and using about $223 million in higher than anticipated state revenues. Revenue assumptions in the budget call for an increase of 6.6%, Colsch said.

Democrats in the General Assembly rejected Edgar's original plan to refinance and restructure $1.5 billion of the state's outstanding debt to raise $1.4 billion once matched with federal funds to pay off Medicaid bills over two years. House Speaker Michael Madigan, D-Chicago, had called the plan a "debt holiday" because two years of debt service would be deferred on the bonds.

The budget contains extensive reforms to the Medicaid system that call for placing 1.1 million Medicaid recipients in a managed care program as of April 1.

George Hovanec, administrator of Medicaid programs for the Illinois department of public aid, said the $687 million addition to the $4.9 billion Medicaid budget will eliminate about half the backlog of bills at the department. He said the extra money should slightly improve the state's payment cycle, which is up to about 120 days for nursing homes and 150 days for hospitals.

Illinois will continue its practice of using current year revenues to pay the previous fiscal year's bills. The practice, called lapse period spending will increase to $750 million next year from $700 million this year, according to Colsch. He said the lower number for the current fiscal year was due to the state's collection of higher' than expected revenues.

Growing lapse period spending has been cited by rating agencies as a symptom of a chronic imbalance between Illinois' revenues and expenditures.

In a comment released yesterday, Moody's Investors Service said it will be reviewing the new budget "to evaluate the extent to which it makes progress in addressing serious fiscal issues facing the state."

Todd Whitestone, a managing director at Standard & Poor's Corp., said the hope is that the state will modestly improve its financial position with the fiscal 1995 budget.

Illinois is rated AA-minus by Standard & Poor's and Aa by Moody's.

Both agencies expect to meet with state officials next week in conjunction with a $250 million general obligation issue the state plans to competitively sell in early August.

The new budget allows the governor to issue $600 million to $900 million of short-term GO certificates to expedite the payment of Medicaid bills, Colsch said. The debt may be sold competitively next month, he said.

The budget also authorizes the issuance of $550 million of GO bonds and $135 million of Build Illinois bonds, Colsch said.

The General Assembly failed to ap prove Chicago Mayor Richard Daley's proposed riverboat casinos project, which would be financed with up to $800 million of revenue bonds, even after Daley tried to enhance the proposal by adding $1 billion of bonds for school projects. A spokeswoman for the mayor said yesterday that Daley will push the plan again in the fall when the-legislature reconvenes.

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