When new governors took office earlier this year in Illinois, Michigan, Minnesota, and Ohio, they inherited fiscal problems that in some cases resulted in fiscal 1991 budget deficits in the hundreds of millions of dollars. They also faced the task of putting together balanced budgets for fiscal 1992, and getting those budgets through the legislative process.

On the front lines of these budget-balancing battles were four new budget directors appointed by their respective governors.

ILLINOIS

Less than a month after Gov. Jim Edgar, a Republican, took office on Jan. 14, Standard & Poor's Corp. placed about $7 billion of Illinois debt on Credit Watch with negative implications.

The rating agency's action was not taken because the $13.7 billion general fund state budget was facing a deficit, but because overspending cut the projected yearend general fund cash balance for fiscal 1991 to $100 million, from $395 million for fiscal 1990.

The budget for fiscal 1992, which began July 1, became the focal point for the rating agencies to gauge how Illinois wound solve its financial problems.

As budget director, Joan Walters was a key person in the development of the $27.5 billion all-funds budget that is projected to raise the cash balance to $200 million by the end of the fiscal year. The final budget included about $800 million of budget cuts and $515 million of onetime revenue measures.

The Road to the State's Budget

"My whole goal was to create a budget that was credible," she explained. "We were able to prevail in beginning to fix the imbalances we inherited, and we did that during a difficult budget year."

During budget negotiations with the Democrat-controlled legislature. Ms. Walters took a behind-the-scenes role, which led some observers to question whether her experiences as a senior budget analyst for the city of Seattle and an assistant to the superintendent of Seattle City Light were sufficient background for her new job. Ms. Walters also had worked as an assistant secretary of state when Gov. Edgar was secretary of state.

"I think [Ms. Walters's] low visibility may be more of a conscious style than a measure of whether she was involved or not," said James D. Knowlan, president of the Taxpayers Federation of Illinois, a fiscal watchdog group.

One budget negotiator pointed out that the budget staff made "too many stupid errors" -- for example, cutting programs that were federally mandated. Ms. Walters said the errors constituted a small percentage of the total state budget and were corrected as soon as they were discovered.

Still, the budget -- passed 19 days into the fiscal year by the General Assembly -- has failed to maintain the state's GO ratings. Its AA-plus rating with Standard & Poor's has been downgraded to AA, and its Aaa rating with Moody's Investors Service has dropped to Aa1.

Ms. Walters's supporters gave her credit for making the best of the state's bad financial situation. Mark Gordon, a spokesman for Senate Minority Leader Pate Philip, R-Elmhurst, said, "The big picture is we came through largely with the budget submitted by the governor intact, and a certain amount of credit for that would have to go to the budget director."

MICHIGAN

Patti Woodworth, who was appointed budget director by Republican Gov. John Engler, faced a major challenge when the administration took office on Jan. 1: The $7.6 billion general fund budget for fiscal 1991, which began Oct. 1, was already in deficit by nearly $1 billion, and that deficit would grow by another $400 million as an adverse court decision and a slowdown in revenues dug into the state's coffers.

Ms. Woodworth's orders were to downsize state government while not harming education funding.

"We probably couldn't have a better budget director, particularly at this time in Michigan, when we're trying to reestablish our priorities," said Senate Majority Leader Richard Posthumus, R-Alto. "She has got to be one of the top budget directors in the country." Ms. Woodworth calls herself a "tough negotiator" in her role as the governor's point person in budget dealings with the Republican Senate and the Democratic House.

Others thought she was too tough. Steve Serkaian, a spokesman for House Speaker Lewis Dodak, D-Birch Run, said, "She redefined the definition of bad cop."

One political observer traced Ms. Woodworth's knowledge of state budgets to her background as the former director of Florida's Office of Planning and Budgeting and her earlier position as director of Michigan's Senate Fiscal Agency. But House Democrats claim she imported her sometimes controversial style to Michigan from Florida, where she also wielded the ax over spending for former Gov. Bob Martinez.

"She brough the same pattern of confrontation with the Legislature to Michigan," Mr. Serkaian contended. "Her approach is to try to usurp the Legislature's appropriation authority."

Ms. Woodworth said criticism of her methods was no surprise, given the fact that her commitment to a balanced budget was not "entirely consistent" with the wishes of "some state legislators."

In June, the state balanced its budget through spending cuts and about $775 million of one-time revenue measures. The agreement gave Michigan some breathing room with Standard & Poor's Corp., which affirmed the state's AA GO rating in July, albeit with a negative long-term outlook, and removed $3.14 billion of state debt from CreditWatch.

With fiscal 1992 just around the corner, Ms. Woodworth is expecting another tough budget battle. But she is convinced the administration will "prevail in getting a budget that won't put us into a deficit in [fiscal] 1992."

MINNESOTA

John Gunyou made the move to Minnesota finance commissioner from Minneapolis finance commissioner in January, just when the state was facing its biggest shortfall in history.

Mr. Gunyou, appointed by freshman Independent-Republican Gov. Arne Carlson, was the administration's lead negotiator with the Legislature in hammering out a budget package that eliminated an approximately $1.7 billion shortfall for the biennium that began July 1.

The negotiations between the administration and the Democratic-Farmer-Labor Party majority were fairly heated, recalled Rep. Paul Ogren, DFL-Aitkin, but he added that Mr. Gunyou handled his first state budget process well.

"He came in at a pretty fractious time between a new governor and the Legislature, and there were some rocky roads," Rep. Ogren said. "But he came off as a straight player who you could believe when he told you something."

Professional Balance Needed

Mr. Gunyou said he believes an important part of his job during budget negotiations is ensuring that both sides are well informed on the choices that confront them.

"Obviously, the office has an allegiance to the governor, but we should maintain professional standards and be nonpartisan about our revenue and spending forecasts," he said. "The battles should be over policy issues and not what the numbers are."

The $15.5 billion biennial budget, passed by the Legislature in May, was balanced by drawing down the state's rainy-day fund to $400 million from $550 million, increasing taxes by $270 million, and cutting spending by $1.2 billion.

The first year of Gov. Carlson's term has been somewhat rocky, with several top aides resigning. The resignations came after legislation the governor opposed became law when he did not correctly follow state veto procedures. But Mr. Gunyou should not be effected by any political bloodbaths.

"He really doesn't have a political agenda, and I think he's highly valued," said one political observer.

OHIO

When Greg Browning was appointed director of the Ohio Office of Budget and Management by Republican Gov. George Voinovich last December, the state was facing a projected $271 million deficit in its $12.2 billion fiscal 1991 general revenue fund budget.

A round of executive order cuts agreed to by the legislature and departing Gov. Richard Celeste brought the budget in balance until February, when revenue shortfalls caused the budget to spring another leak of $127 million.

A subsequent round of executive order cuts and transfers were made by the Republican administration, which took office on Jan. 14. For those cuts, the budget office used "a scalpel and not an ax," Mr. Browning said.

Meanwhile, shrinking revenues led the administration to project a $1 billion to $1.5 billion deficit for fiscal years 1992-93, which began July 1.

Mr. Browning described his role in the budget process as one of "defining the problem," developing fiscal policies, and dealing with the legislature. With the latter, in particular, Mr. Browning scored high points.

Donald Berno, president of the Ohio Public Expenditure Council, a fiscal watchdog group, called Mr. Browning "an insider," due to his extensive experience as a Republican staff member in the state House during the 1980s.

Patrick Sweeney, D-Cleveland, chairman of the House Finance and Appropriations Committee, said Mr. Browning worked "brilliantly well with us" during the budget negotiations earlier this year.

"He softened the rough edges of the governor's position," Mr. Sweeney said.

The result was a $27.3 billion general fund budget that incorporated more than $760 million of revenue enhancements, including the use of $200 million of the state's $300 million budget stabilization fund.

"I think we have a responsible budget in place, but the budget is also very fragile," Mr. Browning said. "It's not a budget that has a lot of money laying around inside of it."

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