By MARGARET A. PENDER
A healthy growth in general funds,
Comptroller sums up fiscal year 78 THE STATE'S fiscal condition was much better the end of fiscal 1978 than it has been in a long time. On this both Gov. James Thompson and his gubernatorial opponent Comptroller Michael J. Bakalis agree. However, in his fiscal year sum-up, Comptroller Bakalis pointed out the general funds balance would look even better if the governor would transfer available money from other funds. He also warned in his July report of the need to control the general obligation bond debt. Both the governor's and the comptroller's reports mention inflation, but according to Bakalis, the state's annual revenues have increased an average of 10 per cent each year since the start of the state income tax about 3 per cent ahead of the cost-of-living factor. The available balance in the state's general funds on June 30, 1978, was $85.7 million, only slightly higher than the $85 million projected by Gov. Thompson in his fiscal 1978 and fiscal 1979 budget documents. However Comptroller Bakalis stated in his fiscal 1978 report that the state began fiscal 1979 with a true balance of $140 million, $54 million better off than the balance in the general funds would indicate. This is a result of three specific factors: 1. Federal receipts of $25 million in Health, Education and Welfare grants were temporarily delayed and not received by the until the beginning of the new fiscal year; 2. About $17 million in surplus money available from special state funds (the agricultural Premium Fund, Fair and Exposition Fund, Metropolitan Exposition Auditorium and Office Building Fund, and the Fire Prevention Fund) was not transferred into general funds in June, as called for by the governor's budget, and is thus available to the general funds during fiscal 1979; 3. An additional $12 million which was available from cash deposits into the three debt service funds (to suspend transfers out of the general funds to pay for debt service) was not used in fiscal 1978 and is now available for fiscal 1979. According to Comptroller Bakalis, Gov. Thomson made good on his prediction of $85 million in general funds at the end of fiscal 1978 by not transferring as much surplus money as he could have into general funds and by not using his authority to suspend transfers from general funds. Bakalis also stated that another reason for the governor's accurate forecast of the available balance in general funds was due to an overestimate of federal funds and transfers being offset by an underestimate of revenues from state sources.
"Combined funds" are general funds plus the unobligated money available to "special state funds" which can by statute or administrative action either be transferred to the general funds or used to support spending that otherwise would be made from general funds. Thus in theory, combined funds indicate the full potential for the general funds' available balance. However, a portion of the combined funds does go to meet obligations in the special state funds from which they come. In general, combined funds are an indication of the state's bill paying ability. On June 30, 1978, the available balance of combined funds was $146 million $40 million or 38 per cent higher than at the end of fiscal 1977. The available balance in the road fund at the end of June 1978 was $115 million $22 million or 24 per cent higher than at the end of June 1977. Total road fund receipts in fiscal 1978 were $108 million or 13 per cent less than comparable receipts in fiscal 1977. Total expenditures were $111 million or 14 per cent less than comparable spending in fiscal 1977. The available balance in all funds at the end of June 1978 was $1.285 billion $262 million or 26 per cent higher than the balance of fiscal 1977. "All funds" include the total funds available to the state. Total spending from all funds increased by $60 million only 0.5 per cent over spending in fiscal 1977. The increased spending from these funds for awards and grants was offset by decreased spending in transportation. State revenues go up Comparing general funds transactions in fiscal 1978 to those in fiscal 1977, statistics indicate that the available balance of $86 million at the end of fiscal 1978 was $34 million 65 per cent higher than in 1977; total general funds receipts were $413 million 7 per cent higher than in fiscal 1977. Since the inflation rate for fiscal 1978 was about 7 per cent, it would appear that the 7 per cent increase in state revenues was completely offset by inflation. However, a spokesman from the comptroller's office pointed out that this is not quite the case. Other factors intervene, such as the state's cash flow and a one-time boost in revenue in 1977 when accelerated tax collections went into effect. Taking these factors into account, state revenues may have increased more than 7 per cent in fiscal 1978. Sales taxes were up $190 million or 11 per cent the largest increase in the history of the Illinois sales tax; income taxes were up $152 million, 8 per cent; public utility taxes up $43 million, 13 per cent; inheritance taxes up $29 million, 34 per cent, and cigarette taxes were up $17 million, 10 per cent. Federal revenue sources were up only $6 million or 6 per cent. This was because of a decline in Aid to Families with Dependent Children (AFDC) and a reduction in social service reimbursements. Transfers into general funds were down $42 million or 26 per cent. According to Bakalis, this was due mainly to the governor's failure to transfer surplus money from special state funds. Total expenditures from general funds in fiscal 1978 were $305 million, 5 per cent higher than in fiscal 1977. This was the smallest increase in annual spending since the state began collecting its income tax at November 1978 / Illinois Issues/23
the beginning of fiscal year 1970, and it marked the second successive year of smaller increases in general funds spending. Gov. Thompson pointed out that general funds spending increased 5 per cent in fiscal 1978 and 6 per cent in fiscal 1977, compared to 12 per cent in fiscal 1976 and 14 per cent in fiscal 1975. Public aid grants accounted for $45 million of the 1978 increase. A high increase in medical assistance grants counteracted decreased spending for AFDC grants. Spending for government operations was up $68 million or 5 per cent because of increased spending for higher education. For all other grants, spending was up $62 million or 9 per cent, due to increases in grants for local schools, mental health and property tax relief for senior citizens. Common school fund spending was up $61 million or 4 per cent. Transfers out were up $52 million or 14 per cent. According to Bakalis, $17 million of this increase was not necessary because Gov. Thompson should have used his statutory authority to suspend transfers to three debt service funds. Refunds spending was up $17 million as a result of more efficient processing of income tax refunds. Lapse spending deficit is down At the end of fiscal 1978, Gov. Thompson said that his administration had balanced the general funds budget with no new taxes, by holding the state's spending within its income. Comptroller Bakalis agreed that this is true if you go by the "available balance" concept which views whether the state spent less or more than its income during the fiscal year. According to this concept, fiscal 1978 ended with a surplus of $34 million. However, Comp. Bakalis points out that according to the "budgetary balance" concept, results are different. Used by governors prior to fiscal 1978, this concept asks whether the available balance at the end of any fiscal year (June 30) will be sufficient to pay the bills outstanding on that date (lapse period spending). This concept indicates that although the end-of-year available balance was $86 million, lapse period spending (July through September) for the fiscal 1978 appropriations could reach $207 million, resulting in a negative budgetary balance of $121 million. Bakalis points out that for the third consecutive year, the state must borrow from next year's revenue to pay outstanding bills from the year before and that this situation had never occurred prior to fiscal 1976. However, statistics show that the Thompson administration has lowered the deficit by $42 million, from a budgetary balance of $-163 million in fiscal 1977 to about $-121 million in fiscal 1978. The comptroller's fiscal report for July 1978, after one month of the new fiscal year had passed, revealed that the available balance in the general fund had increased from $86 million on June 30, 1978, to $256 million on July 31,1978 an increase of 198 per cent. The increase was due to federal reimbursements which normally would have been received in fiscal 1978, a 14 per cent increase in tax revenues over the July 1977 level and a $15 million reduction in general funds expenditures below July 1977 spending. The reduction in expenditures was largely a continuation of the 28-month decline in AFDC cases. Bond sales remain high In his July report, the comptroller made a special analysis of the state's use of general obligation bonds. In order to be repaid, these bonds draw upon general revenue funds. At the end of fiscal 1978 the outstanding general obligation debt in Illinois reached $3.364 billion. This is the amount the state owes lenders for their help in financing roads, buildings and other capital needs (for further details see "General obligation bonds," July 1976 Illinois Issues, pp. 18-23). For the third consecutive year a high level of general obligation bonds were sold. Illinois sold $405 million in general obligation bonds in fiscal 1978. About $400 million in general obligation bond sales is projected in the governor's fiscal 1979 budget. The comptroller pointed out that there is a direct tie between bond-financed spending and current tax revenues. As additional bond sales occur, spending for debt service from the state's general funds and road fund (which rely on tax revenues) will also increase. A sudden large increase in debt service, such as occurred this year, also limits the allowable spending increases for other state programs. The comptroller predicted that in the next several years approximately $150 million in general funds revenue and about $60 million in road funds must be used in each of the next several years to repay the principal and interest due on outstanding general obligation bonds. He stated that in order to control state spending, the level of bond sales and the resulting debt service costs must be controlled. 24/ November 1978/ Illinois Issues
|
|||||||||||||||||
