The state of the State

All eyes focus on state's available balance

"AVAILABLE BALANCE" in the state's general fund — what does the figure mean to you? If you do business with the state, are the recipient of a state grant (such as public aid), or are a state employee, it is an important figure. This is especially the case when, as now, the state is spending more than it is taking in and the available balance in the general fund has to be watched carefully to safeguard against drawing it down to zero.

(The "general fund" in this discussion is a composite of three funds— general revenue, common school, and federal revenue sharing — which account for two-thirds of state spending.)

"The available . - . balance in the General Fund is the amount of money left after expenditures and revenues have been tallied, like an individual's checkbook balance," says State Comptroller George W. Lindberg in The Dynamics of Illinois State Finance: A Fiscal Barometer, a 10-page booklet prepared for a legislative seminar last fall. "It is the single most important indicator of the fiscal health of the state."

Spending exceeds income
For example, the state began October 1975 with a balance of $39 million. Cash receipts, primarily from taxes, came to $315 million. Transfers from other funds added up to $28 million. Federal aid totaled $95 million. Total receipts: $438 million. General fund spending totaled $404 million (including public aid, $158 million; school aid, $112 million; and state operations, $98 million). Transfers out to other funds added up to $24 million. Total spending: $428 million - $10 million less than income. The closing balance for October was $49 million (source: "Comptroller's Monthly Fiscal Report" for October 1975 released November 18).

Looking into the future is a chancy business, but the comptroller is able to project trends which take into account official forecasts of revenues and what is likely in the way of spending (based on appropriations). Projections which he presented at the seminar for legislators last fall undoubtedly influenced several to vote against overrides of the education appropriation vetoes. These projections took into consideration $100 million additional which it is now agreed will be needed to meet public aid costs during fiscal 1976 if present economic trends (and joblessness) continue. The projections indicated that the general fund balance would stay around $40 million until March and then rise to $100 million in June (because of seasonal increases in tax revenues).

Zero balance possible
But if the legislature had increased appropriations last fall by another $ 100 million — by overriding vetoes on education appropriations — the projections showed the balance would drop to zero in March. If this were to happen, there would be delays in meeting state payrolls, in paying the state's bills, and perhaps in paying public aid grants. As a matter of fact, the comptroller's November 18 release asserted that "the Governor's agencies have begun a slowdown in paying those who do business with the state. Those affected are doctors, hospitals . . . and other commercial enterprises." (A spokesman for the Bureau of the Budget under the governor denied a "slowdown" was occurring at the operating agency level. Centrally, however, the payment of bills was being managed to avoid a cash shortage, he said.)

General fund surpluses and deficits, 1965-1976

"Such a slowdown, if it continues, will have the effect of shifting the cash flow problems of the state to the private sector, thereby allowing the state to partially abandon its fiscal responsibility, " Lindberg said. "That's bad news for businessmen." "To keep the state from becoming a 'dead beat' on paying its bills, we have to face reality. Very soon we must either cut spending or find new income." Penalty for unpaid bills If payment of bills is put off too long, it could also cost the state money. House Bill 221 (Londrigan, D., Springfield) requires the state to pay a penalty of 1 per cent per month on bills unpaid after 90 days. The bill was vetoed by Gov. Dan Walker, but passed both houses over his veto. The state could borrow. The Constitution permits borrowing up to 5 per cent of appropriations in anticipation of revenues and up to 15 per cent of appropriations to meet deficits "caused by emergencies or failure of revenue" (Art. IX, sec. 9). But no enabling legislation for such borrowing is on the books. Internal borrowing—switching from an earmarked fund to a general fund — was tried during the Kerner administration, but this procedure seems of limited usefulness; amounts in earmarked funds have already been committed or appropriated.

Tax increase in wind?
The chart shows the history of surpluses and deficits in the general funds since 1965. The large deficit shown for 1968 occurred prior to the adoption of the state income tax which brought in a big surplus in 1970. Do the large deficits for 1975 and those projected for 1976 presage a tax increase?/ W.L.D.

February 1976/Illinois Issues/23