CHICAGO -- Illinois will need to do about $300 million in short-term borrowing this fiscal year to ensure the cash-strapped state can pay its bills, state Comptroller Dawn Clark Netsch said yesterday.
"We simply do not have enough money in the bank to pay our bills in a timely fashion," Ms. Netsch said at a seminar in Chicago sponsored by the Tax Foundation.
The state ended fiscal 1991 on June 30 with a $100 million balance in its general funds account. Ms. Netsch said her office is holding about $100 million in unpaid bills and estimated the Department of Public Aid has an additional backlog of about $620 million in unpaid bills.
Under the state's Casual Deficits Act, the state can do short-term borrowing if it is repaid within one year and approved by the governor, treasurer, and comptroller.
Ms. Netsch said she hoped to reach agreement with the governor and treasurer on short-term borrowing sometime in August.
Republican Gov. Jim Edgar and state Treasurer Pat Quinn did not immediately embrace the idea of short-term borrowing, but neither ruled it out.
"Right now, I'm against that, but I would keep an open mind on the proposal if tax collections decline," Mr. Quinn said.
George Hovanec, deputy budget director, said the administration would not comment on the need for cash-flow borrowing until it has completed the budget review process and the budget is signed into law by the governor. However, he added that Gov. Edgar has not closed the door on short-term borrowing.
Illinois lawmakers last week passed an approximately $26 billion fiscal 1992 budget that relied on a number of one-time revenue measures to bring spending in line with revenues.
Twice in the past, the state has done $100 million in short-term borrowing: once by issuing general obligation-backed certificates and once by drawing down a bank line of credit.
Senate Democrats earlier this year had proposed borrowing $600 million to ease the pain of budget cuts in drafting the fiscal 1992 budget, but Gov. Edgar was cool to the idea because it appeared it was being offered to avoid tough budget choices.
Both Standard & Poor's Corp. and Moody's Investors Service previously have said that short-term borrowing was not a solution to the state's fiscal problems.
Standard & Poor's, which has about $7 billion of state-related debt on Creditwatch with negative implications, warned in a May 15 report that "attempts to postpone the necessary corrective actions, such as short-term borrowing, will result in a rating downgrade, possibly to the lower end of the AA category."
The state's general obligation debt is rated AA-plus by Standard & Poor's and Aaa by Moody's.