By NORA NEWMAN JURGENS

Where is Build Illinois its first year?

AS THE Thompson administration was issuing its flurry of press releases announcing various projects being funded around the state under Build Illinois, the state's fiscal situation was tightening, leading to a concern — mainly from Democrats — that the commitment for Build Illinois construction may be coming at the expense of other state programs.

The $2.3 billion five-year Build Illinois program approved last July by the General Assembly had problems getting off the ground. When lawmakers voted to fund the first year at $380 million, they included their "wish list" of some 100 projects totaling $135 million, administration refers to as "add-ons." Excluding the $100 million housing portion of Build Illinois' first year, there was $280 million available to commit the first year: $211 million for the governor's part of the program and $69 million to apportion among projects on the legislature's wish list. The $280 million first-year funding is based on revenue available from a combination of bond issues and a new tax on the private sale of used cars; it was the bottom-line funding level not to be violated.

Democrat legislators never agreed with the term "add-on" applied to the list of legislative projects. They claim they agreed to Gov. James R. Thompson's original proposal with the understanding that they would be able to include projects for their own districts. Members of the administration insist that lawmakers knew there would only be a certain amount of money available the first year and had agreed to let the governor decide which projects to fund.

Gov. Thompson promptly passed the job paring $135 million in legislative projects down to $69 million to his second-in-command, Lt. Gov. George H. Ryan. (See "Build Illinois: the plan and the master plan," January 1986, p. 15.)

In order to fund as many of the projects as possible, the Ryan team did some creative financing to recommend $113 million worth of projects. Of the original 108 legislative projects, 10 worth $15.45 million were deemed worthy by Thompson, leaving $53.55 million in "uncommitted" first-year funds for the rest. Ryan's team chose 44 other legislative projects worth $53.53 million, and another 24 totaling $15.35 million were squeezed in by funding them from the governor's $211 million, which was still uncommitted. Ryan also approved but deferred until next fiscal year eight projects totaling $28.7 million. That left 22 legislative projects worth $21.9 million returned to the General Assembly for "reconsideration" as Build Illinois projects.

The main criterion used by the Ryan review team was economic development, especially as it applied to job creation. The report went on to recommend funding all of the legislative projects. This could be accomplished by increasing Build Illinois revenues by $6 million or $7 million each year.

Reaction to Ryan's recommendations varied, depending on whose projects were funded, and whose weren't. While nearly all legislative projects located in DuPage County were recommended for first-year funding, projects totaling $25.5 million proposed for Chicago were either deferred or eliminated. House Speaker Michael J. Madigan (D-30, Chicago) had warned last fall that if Build Illinois was not administered "fairly," there would be a "reckoning" in the General Assembly.

An analysis of the legislative list by Ryan's office shows that Chicago is getting a good piece of the $113 million that he recommended. Chicago received $48 million, or 43 percent of that total; DuPage County received $8.5 million, 7.5 percent of the total.

The majority of the governor's $211 million has been earmarked for programs, not specific projects. Until all specific projects under the governor's broad programs are announced, no geographical or political analysis is possible.

Ryan did point out that legislative projects sponsored by Democrats totaled $70.4 million, or 63 percent of the $113 million he recommended. Of the 108 legislative projects, including the 10 specifically approved by Thompson, 64 were Republican-sponsored and 29 of those were all or partly deferred to next fiscal year. Nine of the 32 Democratic-sponsored projects will have to wait. Twelve projects, many in the Chicago area, had no sponsor listed; five of those were deferred.

Shortly after Thompson announced his acceptance of the Ryan report, complaints started coming in that no one, particularly the city of Chicago, had seen any money. A "Study Group" formed by Senate Democrats last year when Build Illinois was first proposed decided it was time for a reckoning. Chaired by Sen. Howard W. Carroll (D-l, Chicago), the 14-member group sent letters to administration representatives requesting information and an appearance at a public hearing in Chicago February 27.

The only beneficiaries who showed up were officials from the city of Chicago, including budget director Sharon Gilliam. She told the senators that the city was "dependent on Build Illinois for economic development, infrastructure, housing and public works projects. . . . on real money, not press releases." Faced with the loss of almost $200 million in federal revenue sharing dollars in the next fiscal year, the city was relying on Build Illinois to "minimize the damage," according to Deputy Comissioner of Economic Development Rosalind Paaswell. As of the hearing date, February 27, the city had not received "one thin dime" for the city's approved Build Illinois projects, Gilliam said.

When it came time for the administration to respond, the city officials had all left, prompting Sen. Carroll to quip, "There's no one here to answer to." The hearing turned into an inquisition, with Sen. Carroll and his colleagues grilling the administration about the poor performance of Build Illinois' revenue base. In his opening remarks, Carroll expressed concern over the shortfall in the revenues being generated by the new tax on the private sale of used cars, a major Build Illinois funding source. The shortfall, he said, would result in the program becoming "merely a public works project" paid for out of general revenue funds. While the main focus of the hearing was to be on the status of the Build Illinois program, the questioning continually shifted to the state's overall fiscal condition. Faced with the prospect of a tight fiscal 1987 budget, the senators wanted to know if other state services would have to be cut to pay for Build Illinois.

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First to appear was James Reilly, Thompson's chief of staff. He explained that Chicago had not received any funding because the city council had yet to approve the projects. "Why should we give the city of Chicago $5 million to just sit in the bank and collect interest?"

Responding to questions about the sluggishness of the used car sales tax, Reilly stressed that it is too soon to determine how much the new sales tax will generate. If the difference has to be made up out of general revenue funds, he said, that would represent only one-quarter of 1 percent. "It's not going to have a big impact," he said. Robert L. Mandeville, director of the Bureau of the Budget, supported Reilly, saying "the financial plan will work" for the $1.3 billion being funded by the sales tax and the sale of bonds.

The other part of Build Illinois, $1 billion in housing bonds, has been allocated to the Illinois Housing Development Authority (IHDA). Director James Kiley told the senators that anticipated changes in federal tax laws have already affected the sale of housing bonds. The U.S. House of Representatives last year approved a tax reform resolution, sponsored by Rep. Dan Rostenkowski (D-8, Chicago), which would place severe limits on the ability of the states to sell tax-exempt bonds. Because the bond market is treating the resolution as if it were a law already enacted, "H.R. 3838 has stopped us in our tracks," Kiley told the senators. IHDA has not been able to sell any bonds since January 1. When the housing program was announced last December, IHDA had sold some $275 million in tax-exempt bonds to finance homes under Build Illinois. He hopes the tax reform issue will be resolved this year, and expects IHDA to have another bond sale in June or July. But Kiley said the state may have to seek other ways to finance its home building programs. "Tax-exempt bonds have seen their heyday," he said.

As the second year of Build Illinois approaches, Gov. Thompson was optimistic in spite of concerns about its revenue base. "The people of Illinois will not have to choose between Build Illinois and education," Thompson told the General Assembly during his March 5 budget message.

The fiscal 1987 budget calls for a total of $295 million in new apropriations for Build Illinois. These include $68.8 million for business development programs, $62.5 million for education improvements, $140.3 million for infrastructure and transportation and $23.4 million for environmental protection programs.

Since the program is funded by 2.2 percent of the state's sales tax as well as the proceeds from bond sales, the administration feels the funding is solid. But if the used car sales tax, which is supposed to act as a replacement for the 2.2 percent in general sales taxes, fails to live up to expectations, Thompson may be forced to make some hard decisions about the future of Build Illinois.

14/April 1986/Illinois Issues