CHICAGO - Illinois Treasurer Patrick Quinn is questioning Gov. Jim Edgar's plans for a $300 million general fund cash-flow borrowing next month.

Mr. Quinn is concerned that the money will be used to cover up an unconstitutional deficit in the state's fiscal 1992 budget.

Marj. Halperin, Mr. Quinn's spokeswoman, said Friday that Mr. Quinn wants to be sure the money is needed to pay fiscal 1992 bills that have been rolled over into fiscal 1993 and will not be used to cover a deficit from last fiscal year or be used to pad the current budget against an anticipated deficit during the current fiscal year.

Under the state's Casual Deficits Act, any short-term borrowing must be approved by the governor, treasurer, and comptroller. So far both the governor and Comptroller Dawn Clark Netsch have agreed to the borrowing, according to spokesmen for the officials.

The Edgar administration had raised the possibility of cash-flow borrowing shortly after the governor finished signing the state's fiscal 1993 budget into law on July 9. Fiscal 1993 began July 1. State officials have said the money is needed to pay off a record rollover of bills from fiscal 1992.

The comptroller's office has estimated that the rollover, which is called lapse-period spending, could reach $1 billion.

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

The treasurer "doesn't want lapse-period spending to be a euphemism for a deficit," Ms Halperin said. "And the only way to prevent this is to clarify where the money is going."

She added the treasurer could support the cash-flow borrowing if the Edgar administration agreed to use $176 million of the proceeds to push up the state's September aid payment to schools to August, the last month of fiscal 1992 for school districts in the state.

But Dan Egler, a spokesman for Gov. Edgar, said the governor is not prepared to commit to an accelerated school payment, mainly because of dissatisfaction with progress by the money's largest recipient, the Chicago school system, in dealing with a $155.9 million deficit in its fiscal 1993 budget.

Mr. Egler contended all $300 million of the money from the short-term borrowing is needed to pay overdue bills. He added that the administration was not trying to conceal any deficit by issuing the debt, pointing out that the state did a similar cash-flow borrowing of $185 million in August 1991 that Mr. Quinn had approved.

Ms. Halperin said the treasurer was concerned this time around that the state would continue to borrow "year after year" with the hope that the economy would turn around and revenues would be available later on.

Mr. Egler explained that the state collects more than half of its annual revenues in the second half of the fiscal year, while some of its largest expenditures occur at the beginning of the year due in part to lapse-period spending.

Mr Quinn, however, has agreed to the governor's plan to issue $600 million of general obligation certificates, backed by assessment taxes and fees levied on hospitals and nursing homes that provide Medicaid services, and federal matching Medicaid funds, according to Ms. Halperin. The proceeds from that issue, which the comptroller has also agreed to, will be used to speed up the payment cycle of bills owed to Medicaid providers.

The state had planned to competitively sell both GO certificate issues early next month. Mr. Egler said that plan is on hold, while the administration continues to work out the details for the borrowing with the treasurer's office.

State budget officials met with the rating agencies last week to discuss the borrowing plans and the fiscal 1993 budget. Todd Whitestone, a managing director at Standard & Poor's Corp., said that while the budget appeared to be based on a reasonable amount of spending cuts and revenue estimates, the agency continued to be concerned about increases in lapse-period spending and short-term borrowing.

Mr. Whitestone also said he did not think the state had solved its financial imbalance problem with the fiscal 1993 budget.

In February, Standard & Poor's assigned a negative outlook to Illinois's AA Go rating, citing the lack of a long-term plan for dealing with the state's ongoing financial imbalance.

Steve Hochman, a vice president and assistant director of state ratings at Moody's Investors Service, said the agency is reviewing the budget. The state's GO debt is rated Aa 1 by Moody's.

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