In the heat of the spring tax hike fracas Comptroller Roland W. Burris accused the Thompson administration of spending money like a drunken sailor. This summer the state of Illinois went on the wagon, taking the cure administered by lawmakers unwilling to hike taxes. Illinois started down the road to fiscal sobriety with the July 1 beginning of the 1988 fiscal year. It was a shaky and tentative start. Revenues in July, August and September increased over 1986 levels, but there was no miraculous recovery. First quarter spending was the highest ever. Also at a record level was the pile of unpaid bills on Burris' desk, a stack that stood at $300 million on November 6. Richard Kolhauser, deputy director of the Bureau of the Budget, cautioned against talk of cash balances: "With $250 million to $300 million in bills backed up, the balance is essentially zero and will remain zero for the rest of the year."

Revenue growth was steady in the first quarter. Receipts in the general funds (the funds from which ordinary operating and school aid payments are made) totaled $2,747 billion, an increase of $231 million or 9.2 percent from the $2,516 billion figure for the first quarter of fiscal 1987. The increase dropped to 4.5 percent when the one-time August infusion of $118 million in telephone call taxes from a protest fund was subtracted. Neither administrative nor legislative fiscal experts saw a trend that would justify an increase in revenue estimates.

One quarter does not a year make, but three months is the interval at which state revenues are analyzed. The Illinois Economic and Fiscal Commission, the legislative revenue forecasters, found some increases and some decreases in the first three months. For the full year they trimmed their estimate of revenues $34 million to $11.469 billion and left the big taxes unchanged. The commission decided it was too soon to forecast an increase in the sales tax and expressed concern that individual income tax receipts must be strong to offset $160 million in one-time increases last spring attributable to federal tax reform. The commission found for the first quarter:

Sales tax: up $61 million or 7.6 percent, but left its annual growth projection at 5 percent.

Individual income taxes: up $31 million or 4.3 percent, but left its earlier 2.6 percent annual growth estimate unchanged.

Corporate income taxes: up $43 million or 41.7 percent, but let stand its projection of 2.3 percent annual growth while cautiously optimistic for a future upward revision.

Public utility taxes: down $4 million or 3.4 percent from last year. The commission stood by its estimate of a 2.6 percent annual increase anticipating a harsher winter and higher gas and electric usage.

Lottery transfers: $112 million, a decrease of $15 million or 11.8 percent from last year. Estimates for the year were reduced $20 million, to $550 million.

In early November the commission's reluctance to further hike revenue estimates appeared advisable. General funds revenues for October, the fourth month in the fiscal year and the first month in the second quarter, were $80 million (8.66 percent) lower than in October of 1986. The latest figures put four-month general funds receipts at $3,590.9 million, an increase of $150.8 million or 4.4 percent. Without the $118 million in message taxes transferred from the protest fund, the four-month increase was less than 1 percent.

Sluggish revenue growth has become the rule in Illinois. According to an analysis done by the Illinois Economic and Fiscal Commission staff, general funds receipts rose from $6.3 billion in 1978 to $10.9 billion in 1987. That is a 72.1 percent increase, but inflation has taken a toll. In constant dollars computed using the Deflator for State and Local Government Purchases of Goods and Services, the commission says, revenues are down 4 percent. Without high growth lottery revenues, inflation adjusted revenues would have declined 9 percent.

And then there's the question of where the national and Illinois economies are headed in view of the October 19 "black Monday" stock market drop. Anthony Liberatore, an economics professor and coauthor of the Quarterly Economic Forecast done by Millikin University's Tabor School, says that impact cannot be good. "There's no way that you can take a trillion dollars out of the stock market without having a negative effect on consumption and investment." For the state that will mean depressed income and sales tax revenues, Liberatore suggests. How much will be lost depends on how governments in Japan and West Germany, as well as the United States, react to maintain economic growth. "We simply don't know at this point how bad the slowdown will be, because that depends on government policies [here and abroad]," Liberatore says.

Slow growth has dogged state revenues, but it has not limited spending since at least 1985. "One way to look at it," says Budget Director Robert L. Mandeville, "is that in '86 and '87 we raised a number of programs, namely education, to a plateau that was not affordable." Thompson's $363 million in budget cuts and the financial plan now in place for the year ending June 30 call for revenues to exceed spending. An economic downturn or new spending could change that. That financial plan also says that the June 30, 1988, cash balance will be higher than that of June 30, 1987. That has happened only three times in the last 10 years.

Douglas L. Whitley, president of the Taxpayers' Federation of Illinois, said this year's restrained spending is the first since 1983: "The state spent pretty heavily in 1984, 1985 and 1986." Whitley says the revenue picture reminds him of the early Thompson years. "His revenue picture is back where it was 10 years ago, tight," Whitley says.

For the first quarter of this year, however, the state continued its practice of spending more than it takes in. Spending in July, August and September totaled $2,793 million, an increase of $183 million or 7 percent over the same period in 1986. The state general funds were hit with a double whammy of unusually high tax refunds and Medicaid spending. Budget Director Mandeville contends that Burris could have paid $116 million in tax refunds in June but held them to inflate the June 30 balance. Burris counters that they arrived too late for processing. Had he paid them in June, first quarter spending would have been within revenues. Cash flow problems, though, would have been unchanged.

Major spending increases for July, August and September included:

Refunds: up $104 million or 96.3 percent.

School aid: down $20 million because of budget cuts.

Higher education: up $22 million in part because public universities were asked last year to ease cash flow by using their tuition money before drawing on state general funds.

Agencies: up $20 million, a phenonemon that some observers believe may reflect charging of bills to the previous year's budget knowing this year's would be tight.

Public Aid: down $5 million despite high Medicaid spending. But both revenue and spending figures have been overwhelmed by attention given to the state's general funds balance. Measured by the height of the stack of unpaid bills on the comptroller's desk, the state's fiscal health is not good. How then does Illinois make it through the fiscal year?

The Bureau of the Budget has maintained since July that the crunch will come in February. A cash flow analysis prepared by the Bureau of the Budget in September for a bond sale shows the state with $60 million in general funds available on January 1, 1988, the first day of the state's third fiscal quarter. On January 1, 1987, the state had $99 million available, then borrowed $100 million a month later to meet cash flow demands. This year the state will begin the third quarter with $39 million less and must repay the $100 million borrowed last February. But zero balances pay no bills, and a way must be found through the hard times. To make it until income tax payments replenish state coffers in March, the comptroller must delay payment of income tax refunds and extend the delays in paying medical bills for the poor, Mandeville says. Doctors, hospitals and nursing homes have been waiting 40 days for payment of bills. They will have to wait longer. Mandeville says lawmakers appropriated (gave authority to spend) $150 million too little for Medicaid this year. At the current rate of spending the state would be out of spending authority by the middle of May.

Illinois spends $5 million a day on Medicaid, so extending the payment cycle (delaying payment) another 30 days to 70 days will free up $150 million. That could help ease the February cash flow problems, Mandeville says. "At some point during the year he [Burris] has to stop paying as quickly as he is now," Mandeville says.

But managing cash flow has been left to the comptroller. Deputy Comptroller Thomas Dodegge says in normal times that the Bureau of the Budget takes a more active role in having vouchers held in agencies when money is tight. They are not doing so this year, as evidenced by the unpaid bills in the office. Nor did they in 1983. Dodegge says. This year's cash flow crunch which began in August and will extend until April began earlier and will run longer than that in 1983, Dodegge says. "What we're seeing right now is not really an FY 1988 cash flow problem as much as cash flow problems that were developed in 1986 and 1987 that are coming to fruition now." Dodegge offers two examples. He says that, although he has no analysis of the age of corporate tax refunds sent to the comptroller, many extend back to 1985 and 1986. And this year's first quarter Medicaid spending was high because the fiscal year 1987 appropriation was too low, forcing his office to hold bills in June until the new appropriation was signed in July. Dodegge believes that, barring a downturn in revenues or new appropriations by the General Assembly, the current cash flow problem will not be repeated next year. The first three months of fiscal 1989 will see high Medicaid spending, he says, but other spending should be down. "We could see balances above $200 million — $200 to $300 million in July and August —that would not in my view be extraordinary," Dodegge says.

Mandeville, too, sees fewer cash flow problems in the year that will begin July 1, 1988, but cautions they could reappear. "I believe that if you enter [fiscal year] 1989 with a beginning balance of $200 million, you could still have cash flow problems." That is in part because Illinois will enter the year with unpaid bills. The state will still owe $100 million or more in income tax refunds. And the state will have $100 to $200 million in bills owed Medicaid providers that must still be paid. If lawmakers agree to address the situation, Mandeville says, the solution will consume a hunk of the revenues available in the year that begins July 1, 1988, and prompt a "constrained budget." He sees no spending for new programs and tight budgets all around. "If you meet your payable situations, there's no room. There could be minimal increases, not even inflation level increases."

That means that the cure is not a one-year fix. The delirium tremens that this year's dollar withdrawal provoked in Illinois schools and human service agencies may shake the General Assembly next spring. But then, nobody promised that fiscal sobriety would come easy.