Thompson's budget

RESTORING the fiscal health of Illinois is Gov. James R. Thompson's aim. In his proposed $10.0 billion budget, a cash balance of $85 million dollars is projected for the end of fiscal year 1978; $37 million is expected from revenue growth and $48 million from the fiscal 1977 year-end balance. In presenting this austere budget to the General Assembly on March 2, Thompson stressed his intention to halt the trend towards deficit spending and to avoid a major tax increase in fiscal 1978. But maintaining a balanced budget without a tax increase means sacrifice, and although the overall budget reflects restraint, Thompson proposed bigger budgets than in fiscal year 1977 for some areas but at the expense of others; this obviously shows his priorities. Thompson hopes to restore balance to the state's revenues gradually and detailed his plan for the next two years. He recommended that the increase in spending from the general funds over what was spent in fiscal 1977 be kept to $311 million in fiscal 1978 and announced that his recommendation for fiscal 1979 would be an increase of only $300 million over the funding level of fiscal 1978. Expenditures for the different state programs are recorded against various funds, so the state budget appropriations are also divided by fund. Collectively, the General Revenue Fund, the Common School Fund, the Federal Fiscal Assistance Trust Fund and the Federal Public Works Assistance Fund comprise the budget appropriation fund known as the general funds. The general funds, in turn make up only a portion of the total funds available for state budgeting. Chart 1 shows all sources of revenue for the state and indicates that money from the general funds accounts for support for 59 per cent of the budget appropriations. Chart 2 shows where money that goes into the general funds is obtained, and that the total revenues expected in the general funds for fiscal 1978 is $6,347 million. That figure reflects an increase of $426 million in the revenues of the general funds over fiscal 1977 (See chart 3). Of that increase in revenues, Thompson has recommended that $311 million be spent for budget appropriations. Thompson said he'll need $78 million of the additional revenue to correct the fiscal 1977 deficit and lambasted former Gov. Daniel Walker for three years of overspending which caused the first negative budget balance for the general funds in 25 years. That still leaves $37 million in new revenues which Thompson wants retained in the general funds and added to the $48 million year-end balance expected for fiscal 1977. The total year- end balance for fiscal 1978 should be $85 million, according to the governor's proposal. Thompson plans to continue this trend, gradually adding to the revenue balance by limiting spending; his general funds spending limit for fiscal 1979 will be $300 million. All of this will happen, however, only if the General Assembly passes appropriation bills at the limits proposed by Gov. Thompson's budget.

Of the total anticipated $6,347 million in the general funds, Thompson has recommended total appropriations of $5,992 million: 43 per cent for education, 25 per cent for health (including medicaid), 17 per cent for public aid (excluding medicaid), 5 per cent for other human services, and 10 per cent for all" other appropriations from the general funds.

Nearly all departments of government will be asked to keep a tight rein on spending if the budget is approved by the legislature. Funding for most departments is proposed at levels close to

24 / May 1977 / Illinois Issues

or, in some cases, below the current funding for fiscal 1977. The departments recommended for major appropriation increases are: Public Aid (up $106 million), Corrections (up $48.5 million) and Mental Health (up $13 million). In addition, Thompson proposed an increase in state aid to education (up $125 million).

The Department of Public Aid would realize the greatest increase with a recommended appropriation of $2.1 billion. Anticipated growths in the cost of providing medical treatment for public aid recipients and the expansion of welfare fraud investigations will account for the largest part of the appropriation. Within the Department of Public Aid budget, programs are divided into three areas of activities for budget purposes. Income assistance would receive an appropriation of $879 million; medical assistance, $1.1 billion; and social services, $27.5 million. Public aid administration is budgeted for $155.4 million. No increase in benefits for individual recipients has been made in the past two years, and no increase is suggested in this budget.

The largest percentage increase for any state agency is recommended for the Department of Corrections; its total budget of $132.6 million is needed to cope with the increase in admissions and the decline in the parole rate. The adult inmate population at state penal institutions is expected to rise to at least 13,000 and may go even higher since the number of criminal division judges in Cook County will be doubled by the end of fiscal year 1978; clearing up the backlog of cases may result in an additional influx of inmates above the number already expected. The major portion of the budget is earmarked for improving the deteriorating and overcrowded conditions in adult facilities. This would be accomplished by hiring additional security and program personnel, opening a new unit at the Menard Correctional Center, renovating the Joliet Correctional Center, converting former youth centers to minimum security adult institutions, spending $2 million for clothing, bedding, food service equipment, upgrading plumbing systems and adding 650 beds at the institutions. An additional $25 million in capital funds is being requested for renovating existing facilities.

Finally, the Department of Mental Health has a proposed $13 million increase in a budget totaling $405 million to be used in expanding community based programs.

Most other departments would operate at budget levels close to the fiscal 1977 appropriations. Significant exceptions are the Environmental Protection Agency and the Department of Transportation.

For the Environmental Protection Agency, the appropriation would be $296 million. This is a cut of $66 million from fiscal 1977. The decrease is due primarily to one-time federal funds which were available in fiscal 1977. But also, federal funds which are available to local communities for the construction of waste water treatment facilities will be relied on more heavily than other years for EPA's appropriation. The Department of Transportation would receive an appropriation of $1.7 billion, which is a decrease of $245 million from fiscal 1977. The decrease is primarily the result of a lower reappropriation for funding highway improvements currently underway from previous years' programs. Of the $1.7 billion recommendation, $1.1 billion would be in the form of state funds — $6 million of that coming from the general funds; $505 million would be federal funds and $85 million would be local contributions. In the road program, $505 million would be used for highway improvement, the emphasis being on rehabilitation of existing road systems rather than construction of new ones. An additional $117.9 million would be designated for road maintenance efforts such as snow removal, pothole patching, signs, and stripes. The cost to local governments for maintenance services would be increased to 35 per cent of the total cost.

Realizing the state could not afford to meet the cost of full funding for schools, Thompson had earlier announced his intended appropriations for education below levels sought by the Board of Education and the Board of Higher Education. Thompson told the legislators, "Education is my first priority," and he allocated the largest dollar amount of any budget item, $3 billion, to this area. In fact, the appropriation is the most provided for education in the history of Illinois. Of the $125 million increase over fiscal 1977, $75 million goes towards elementary and secondary education and $50 million for higher education. This means that elementary education would have almost $2.2 billion for operations and grants, and higher education would receive more than $864 million. In addition to these amounts, $327 million would be used for capital improvements at various schools and campuses. The budget includes increases over fiscal 1977 for the areas of special education, vocational and regular pupil transportation, and $2 million for desegregation assistance to metropolitan area school districts. The State Board of Education, when it made its recommendations for funding levels for fiscal 1977 (as is mandated by the 1970 State Constitution), had already advised the governor that "if approved by the legislature, it would fully fund all mandated state formula programs."

Thompson's first proposed budget is slightly smaller than former Gov. Walker's final one. Thompson's is $70 million less than the total appropriated for the current fiscal year. Of the $10 billion requested, Thompson said only $8.971 billion will actually be spent in fiscal 1978, a 4.6 per cent increase over fiscal 1977. This would be the smallest spending increase since 1969, when the state income tax was adopted.

Trying to reenforce his tough fiscal policy, Thompson told the legislators, "This budget contains recommended levels of appropriations. It does not mean that all of this money should be spent. It is our obligation, and I mean to

May 1977 / Illinois Issues / 25

In reorganization Thompson emphasizes mission reform and interagency cooperation with an eye to capturing federal dollars

enforce it, to continue to examine this budget through the rest of fiscal 1977 and into fiscal 1978, to make sure the money is wisely spent. If it is not, it won't be spent."

Thompson proposed reorganization in his budget in the areas of law enforcement and general services while reserving judgment on the social services agencies.

In the social services area, he said "mission reform" or getting services to people who need them is more important than structural change. "It will do us little good — in fact it will do us harm — to wrap inefficiency, waste and failure in a shiny new package." Thompson said he is not ready to accept the concept of an umbrella social service agency which would put all existing departments and agencies under one director. "Mission reform and interagency cooperation — especially that designed to capture available, but untapped, federal reimbursement dollars — is the place to begin." Thompson said he is creating an intracabinet group, the Governor's Council on Social Services, which will involve the Departments of Public Aid, Mental Health, Public Health and Children and Family Services. Taking a dig at Walker, Thompson said, "We will not repeat the examples of the last administration where the directors not only failed to cooperate for the benefit of the people, but oftentimes wouldn't even talk to each other."

In a first step toward reorganization, Thompson issued two executive orders March 31, becoming the first governor to exercise this constitutional power. Executive Order No. 2 proposes to merge the Illinois Bureau of Investigation into the Department of Law Enforcement, which would consist of five divisions: administration, state police, investigation, support services and internal investigations (which would replace the Office of Special Investigations created by former Gov. Walker).

In Executive Order No. 1, two departments, Finance and General Services, would be merged into a new department of Administrative Services. Thompson said, "The goal of this merger is aimed substantially at gaining better financial management information under one roof for the state's public service agencies, so that the public service agencies may, in turn, provide their services more economically for the taxpayer."

The governor's action had been expected. In his budget message he had earlier revealed the plans although he had expressed doubts as to his ability to meet the April 1 deadline. The proposals fall far short of the program presented to Thompson last fall by a Task Force on Governmental Reorganization (see this magazine, April 1977, page 25). If wholesale reorganization is to come by this constitutional route, it must come next year.

April 1 was the deadline for the governor to exercise a constitutional power which allows him to reassign functions among, or reorganize, agencies directly responsible to him. When such reorganization would contravene a statute, he must submit executive orders to the General Assembly. The orders become effective in 60 days unless either house acts to veto them by a vote of a majority of the members elected. The power is spelled out in Article V, Sec. 11 of the Constitution.

Thompson said his budget will also reduce bond sales. This reduction plus stopping deficit spending are both necessary to maintain investor confidence in Illinois bonds, he said. Although the state currently maintains a triple-A bond rating, "when it comes to the actual sale of those bonds, the interest we have been paying during the past year has been higher than the normal triple-A interest rates. In fact, it has been close to the normal double-A rates," he said.

A general obligation bond is one that carries the "full faith and credit" of the state. It is issued for a 25-year period, during which time any unpaid balance represents future liability which the state must pay. Thompson said he expects bond sales of about $405 million in fiscal 1978, compared with $535 million in fiscal 1977. The bonds will be used to finance a road program that includes $505 million in new projects, down from $548 million a year earlier.

The governor also proposed reducing the state's bond-financed capital construction appropriations from $1.5 billion to $1.1 billion. The proposed $1.1 billion is about $400 million under the current year's authorization level and $800 million under the 1975-76 level. Debt service — payment of principal and interest on outstanding bonds — will total almost $200 million in fiscal 1978. "The growth in bond-funded capital appropriations must cease," Thompson said. "Bonding is not free. The state goes into debt every time bonds are issued, with outstanding debt increasing from $339 million in fiscal year 1971 to $1.8 billion this year."

Thompson said the only other option to a tax increase is to hold spending within revenues and to raise fees for license plates and recreational activities and to increase the gasoline sales tax.

"If you don't like bankruptcy as an option," Thompson said, "then you could choose to raise general taxes. But there's a problem with that option, too. Namely, I campaigned for Governor against it. As I stand here today, I have been Governor for almost two months and I still can't guarantee any citizen of Illinois that the taxes he or she is now paying are spent wisely. How then, can I, in good conscience, ask for more taxes?

"If we want more new roads, if we want to repair and modernize existing roads, if we want to repair and replace bridges — throughout Illinois — then we will have to tax ourselves more to do it. Nobody builds roads for free."

The budget document consists of two books, the Illinois State Budget (311 pp.) and the Illinois Budget Appendix (279 pp.). The first book summarizes the recommended budget appropriations by category and purpose. An overview of the various state programs follows the general summary and a selection of tables and charts support the explanations. The accompanying appendix book provides detailed appropriation figures. The proposed budget covers the 1978 fiscal year beginning July 1, 1977, and ending June 30, 1978.*/ Mary C. Galligan and Therese Sheehy 

*The two books can be obtained by the public from the Bureau of the Budget, Room 100 State House, Springfield, Ill. 62706.

26 / May 1977 / Illinois Issues