Executive Report

By DIANE ROSS

Revenue down; Thompson gets spending-cut authority

THE GOVERNOR hinted at it in November, but he asked for it outright in December: the power to control spending in the State's so-called entitlement programs, the ones for which the state must fork over the cash according to the formulas, benefits, and reimbursements set by law.

The governor got the unprecedented power last summer to transfer money to avoid anticipated cash flow problems. On November 18 he said that it had only then become apparent that the budget for state fiscal year 1983 was out of balance by $200 to $300 million. On November 18, he described the fiscal situation as: a "cash flow problem" for November and December 1982; a "spending problem" for January through June 1983; and a budget problem for the next fiscal year.

On December 1, Gov. James R. Thompson officially asked the Illinois General Assembly, then sitting in its veto session, to:

1. raise the state liquor tax to the average national rate;
2. speed up the rate at which the state receives the revenue from state and municipal taxes on public utilities, from monthly to weekly;
3. give him the "broadest, possible" power to cut executive agency appropriations for state fiscal 1983. Together, the three proposals would raise $46 million in revenue and cut $164 million in spending for state fiscal 1983 in order to offset what Thompson said is at least a $200 million "shortfall" in revenue in the state's crucial general revenue funds.

"We have no way of knowing now whether the shortfall will stop there or whether it will slide to $225 million or $250 million," Thompson said in his December 1 news conference. The legislature's Economic and Fiscal Commission and Democratic Comptroller Roland Burris contend the shortfall could prove to be far worse.

Thompson plans, nevertheless, to end the fiscal year on June 30 with a $187 million balance in the general funds; he projected back in March 1982 that the ending balance would be $190 million.

Thompson called the spending cut powers he sought "wide ranging" and "open-ended," and he admitted that gubernatorial power to control entitlement spending would be a "radical departure" from current state policy. "I believe the governor of Illinois should possess that power," Thompson told reporters, adding that governors in 19 other states have it. Technically, the spending cut power would allow Thompson to order all executive branch agencies to avoid spending all of the funds already appropriated by the General Assembly. If granted the power, Thompson said, he plans to cut 2 percent of each agency's appropriation, which means cutting spending by 4 percent for the last half of the fiscal year. That would mean elementary and secondary education would lose $42 million, higher education $20 million, and public aid $54 million. Also cut would be $43.2 million from other agencies under his jurisdiction, and $4.8 million from agencies under other constitutional officers.

Raising the liquor tax and speeding up the rate the state receives public utility taxes would provide "not only cash flow improvement, but permanent revenue improvement," he said. Unlike his liquor tax proposal last year, which would have switched from volume to alcoholic content, Thompson now wants to raise the rate of the current taxes. If approved by the legislature, the earliest effective date would be February 1. The hike would yield $12 million in fiscal year 1983; it would yield $50 million the following fiscal year.

Currently the state requires public utilities to turn over their collections of state and municipal taxes once a month; Thompson now wants them to do so weekly. If approved, the speedup would take effect immediately, yielding $34 million in fiscal 1983. Of course, the speedup would not increase revenue the following year.

For the record, on November 18 Thompson promised to solve the short-term cash flow problem via management; delay state income tax refunds, delay reimbursement to those who provide medical services for welfare clients, and maximize receipt of federal aid. He also asked the legislature not to override any of his vetoes of appropriations.

On December 1 he said he was pleased the legislature had not overridden any vetoes. Thompson said, however, if the General Assembly did not act on its own on his newest proposals, he would convene a special session before January 1.

The legislature did act before it wound up its veto session and left town December 3. That is, the leadership acted. The rank and file, as usual in these "crises," merely rubber-stamped the deal.

House Speaker George Ryan, House Minority Leader Mike Madigan, Senate President Phil Rock and Senate Minority Leader Pate Philip refused to put any spending-cut proposal before the House and Senate until Thompson agreed to attach a number of strong strings, chiefly a provision that allows him to use the unprecedented powers only in state fiscal 1983.

The leadership said flat out that the rank and file would never consider raising the liquor tax. But they did guarantee the passage of the speed-up in the collection and receipt of public utility taxes. Thompson became the first governor to get the power to cut 4 percent from: grants spending by public aid — that's benefits to clients and reimbursement to providers; grants spending by elementary education — that's state aid and categorical aid to local districts; and operations and grants spending by higher education. Thompson also got the power to cut 4 percent from the total operations spending by all the agencies under his jurisdiction. But he can't cut spending in any one agency by more than 5 percent, and he can't cut salaries in any one agency by more than 2 percent. In addition, the same power to cut operations spending by 4 percent goes to the other constitutional officers, the chief justice of the Illinois Supreme Court and to the House speaker and Senate president.

This crisis was resolved in only three days in one vehicle bill. □

State sells $150 million in general obligation bonds

Preserving its triple-A bond rating, Illinois sold $150 million in 25-year general obligation bonds on November 16 to a syndicate headed by the First National Bank of Chicago. The bonds will have equal maturities of $6 million due on November 1 of each of the years from 1983 to 2007. The average bond maturity is 13 years. The interest rate is 9.29 percent, payable semi-annually. This is a considerable improvement over the 11.33 percent rate charged on the state's July 8 sale of 25-year general obligation bonds and will cost the state about $40 million less in interest charges. With the new bond sale, Illinois had approximately $3.1 billion in outstanding general obligation bonds as of December 1.

January 1983 | Illinois Issues | 35