CHICAGO -- Illinois Treasurer Patrick Quinn agreed yesterday to let the state issue $300 million of short-term general obligation certificates to pay overdue bills.
The debt will probably be sold competitively late this month or early next month, said Ellen Feldhausen, a spokeswoman for the state Bureau of the Budget. The issue is set to mature by the end of the fiscal year on June 30.
Marj Halperin, a spokeswoman for the treasurer, said mr. Quinn approved the borrowing because the governor last week sped up a $176 million state aid payment to schools. She also said the treasurer decided on the borrowing because the budget bureau agreed to make more detailed public reporting of Illinois' financial condition so the need for future borrowings will not come as a surprise.
The state's Casual Deficits Act says any short-term borrowing must be approved by the comptroller, the treasurer, and the governor.
In July the treasurer had rejected the borrowing plan, which was backed by Gov. Jim Edgar and state Comptroller Dawn Clark Netsch. At that time, the governor refused to accelerate the school payment until the Chicago Board of Education, which needed its $43.2 million share of the payment to balance its budget, cut spending.
But late last month, Gov. Edgar advanced the school aid payment after the board of education made progress on its fiscal 1993 budget. On Sept. 2, the governor sent a letter to Ms. Netsch and Mr. Quinn reiterating his support for the $300 million borrowing.
Mr. Quinn said in a press release yesterday that he preferred borrowing in the debt market to "what has been, in effect, an unofficial loan from the state's own vendors."
Under a practice called lapse-period spending, Illinois rolled over an estimated $1 billion of unpaid fiscal 1992 bills into the first three months of fiscal 1993 because of a lack of available cash. As of Friday, the backlog of bills at the comptroller's office totaled $447 million, while available general revenue funds totaled $11.8 million, according to Rick Davis, a spokesman for Comptroller Netsch.
The treasurer pointed out that "it is unfortunate that the illinois state government is in the position of seeking general funds borrowing for an unprecedented second year in a row," referring to the state's $185 million cash-flow borrowing in August 1991.
"I encourage the governor to find a permanent method of paying bills in the future so that vendors and the taxpayers can rely on a more stable cash flow from the state," Mr. Quinn said.
Gov. Edgar had proposed the $300 million general fund borrowing along with a $600 million borrowing to pay Medicaid providers in July, shortly after signing the state's $14.5 billion general funds budget for fiscal 1993.
The $600 million borrowing, backed by Medicaid fees and taxes assessed on hospitals and nursing homes and matching federal Medicaid funds, was competitively bid on Aug. 13 after the governor, the comptroller, and the treasurer agreed to issue the debt.
The certificates sale triggered rating agency reviews that led to the downgrade of the state's GO debt to AA-minus from AA by Standard & Poor's Corp. and to Aa from Aa1 by Moody's Investors Service.
Standard & Poor's cited Illinois' continued weak financial operations and liquidity position, while Moody's Investors Service pointed to "a substantial deficit" accumulated by the state.
The certificates were rated SP-1-plus by Standard & Poor's and MIG 1 by Moody's.