The state of the State                                                   

Edgar lays claim to revenue from surcharge By CAROLINE A. GHERARDINI

Gov. Jim Edgar proposed a 29.173 billion budget for the fiscal year beginning July 1, and with its details on spending and premises for revenue, he immediately set the framework for negotiations in the legislative session and for the 1994 fight for the gubernatorial election.

Jobs. Mandates. Education. Health services and welfare programs. And prisons. These are the stuff of mighty passions in the debate over final spending decisions for Illinois government. The governor said during his budget message that the "state is escaping the icy grip of recession." He claimed his policies for state government were helping Illinois' economy: "We cut. We downsized. And we resisted the temptation to raise taxes. And because we slashed spending instead of taking more money for government from consumers and businesses, we aided, instead of stifled, economic recovery in Illinois."

But the colossal battle this spring will be focused on the revenue side of the budget: on exactly who gets the $450 million in revenue from renewing the personal income tax rate of .25 percent and the corporate income tax rate of .4 percent. These percentage increments are the temporary surcharge with half the revenue, $211 million, going to local governments. Gov. Edgar based his fiscal 1994 budget on extension of the surcharge, which expires June 30, but he plans for all revenues to go to the state, not local governments.

These are high stakes for Edgar, who has been consistent in pushing for no higher taxes but campaigned matter of factly on making permanent the temporary income tax surcharge in effect in 1990. During the spring 1989 session when James R. Thompson was governor, almost everyone in Springfield was caught off guard when Speaker Michael J. Madigan presented the two-year surcharge plan. Two years later with Edgar as governor, a revised plan ultimately accepted made permanent a portion of that temporary income tax, with revenues devoted solely for education spending by the state. The other half of that temporary tax was extended for two years with half of those surcharge revenues dedicated for local governments. That surcharge is now set to expire, and Chicago Mayor Richard M. Daley and at least 92 other municipal governments are hotly disagreeing with the governor's decision to take that revenue from their local budgets.

Edgar says the question now is between kids and concrete, contending that the state can use the money better for spending on the services across the state, especially those that benefit children — education in particular. Almost immediately the Illinois Municipal League cried "foul," resurrecting a speech made by then gubernatorial candidate Edgar in September 1989 at its annual conference. The league claims the governor is not living up to his promise of a state and local partnership. The bottom line in this rift is whether Edgar is perceived to have broken any promises.

Both the governor and local governments complain of mandates that leave them no discretion for some spending. Edgar complains of the federal government and its mandates to the state, especially for welfare and health programs. Illinois mayors, counties, school officials and others in local governments gripe about state laws that force them to spend their time, money and frustration.

Also forcing some of Edgar's budgeting decisions are court decisions, which are tantamount to telling state government to deliver on its promised services. Most outstanding is the $ 118 million the governor has added to the budget for the Department of Children and Family Services in order to conform to the reforms required by one of the court-ordered decrees. In fact, he has requested for the current fiscal year $72 million in a supplemental appropriation for the department to add caseworkers before a July 1 deadline in the consent order. More case-

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workers will be hired under the fiscal 1994 budget. The total new caseworkers planned for the agency is 470. The load on caseworkers is supposed to drop from its more than 50 to a maximum of 30 children (or 25 multichildren families) per caseworker.

To finish the current 1993 budget year, the governor is requesting supplemental appropriations totaling just over $1 billion for all funds. In the key general funds part of the budget, the supplemental request totals $269.01 million. While part of that amount represents bookkeeping maneuvers, more than half is spending in various agencies that is assumed to be part of their new budgets in fiscal 1994.

Education gets a boost from Edgar in his 1994 budget, but he presented those increases and other "compelling" demands on the state as bargaining chips in gaining for the state the revenues from the extension of the income tax surcharge. While his proposed increases in education budgets were nowhere near the requests from the State Board of Education and the Illinois Board of Higher Education, Gov. Edgar emphasized "education must be the number one priority."

Elementary and secondary education gain $110 million and higher education $37 million in the governor's budget. While these increases may not satisfy all the interests pushing for greater state financing of education, last year elementary and secondary education barely received any increase and higher education got none.

Higher education gets another indirect boost for fiscal 1994 with the governor's $123 million proposed increase in state funding for state employee health insurance to allow more timely payments. Higher education is also budgeted for a $26 million increase in bond-funded construction projects.

Other increases for agency programs in Edgar's budget include:

• $79 million for the Healthy Moms-Healthy Kids program, which was pushed by Edgar last session and was being implemented in the last months of the current fiscal year. Administered by the Department of Public Aid, the program is designed to provide preventative medical treatment to poor children and pregnant women. The increase covers a full year of funding and provides higher rates to physicians than the state pays through its other medical service programs.

• $65 million for the Department of Corrections to open and staff new prison beds. With the funds, 1,900 new beds will be available in the state's overcrowded prison system, which will still be overcrowded.

• $62 million for the Department of Mental Health and Developmental Disabilities. The department is moving towards funding services through community-based agencies, and its budget includes slight increases in rates for payment of these services.

A big question mark in the 1994 fiscal budget is Medicaid. Federal payments to the state are leveraged via the very unpopular assessment on hospitals, nursing homes and other health care providers. Though the federal government is not exactly happy with Illinois and other states' methods of gaining more federal funds via Medicaid reimbursements, the rules were changed for states to continue receiving that large increase in federal funds. With the new Clinton administration in place, Edgar is hopeful that the former governor will not push costs back onto the states. Ultimately the entire system of Medicaid and Medicare plus all health services are expected to be addressed by Clinton and Congress. Meanwhile, with Illinois' method of assessing its providers of Medicaid services set to expire, Edgar bases his fiscal 1994 budget on continuing the same assessment system and the $750 million in federal funds it garners.

The main fights on Edgar's budget will focus on the state's basic operating budget of $14.145 billion. The operating budget includes all appropriations to pay for basic day-to-day services of state government and is dependent on revenues from state general taxes and some federal funds.

With the economy finally showing some positive performance, the governor also projects natural revenue growth of $414 million for fiscal 1994. That growth comes from $234 million in sales taxes, $194 million in personal income tax and $36 million in corporate incomes taxes; a downward adjustment of $50 million from other sources puts the total at $414 million. If the economic forecasters are correct for the nation and Illinois' normal but later participation in the upturn holds, that growth in revenue is expected again for fiscal 1995, according to Joan Walters, director of the governor's Bureau of the Budget.

If Edgar wins the battle to put revenues from the extension of income tax surcharge into the state's general funds, he will have built that amount into the state operating budget, plus for fiscal 1994 he can expect another $414 million in natural revenue growth to fund the operating budget.

A lot of Democrats immediately criticized Edgar for his budget plan.

From Speaker Madigan: "Mr. Edgar has been the governor of Illinois for three years. For the third year in a row he has proposed an increase in taxes to provide for an increase in the state's bureaucracy. I would be prepared to vote for a tax increase if it was to help local governments pay for police and fire salaries. However, if the only proposal on the table is to raise taxes to provide for an increase in the state bureaucracy, then I'm not convinced that we need to do that.

"Just last year, we did significant reductions in state spending. That happened as the budget was adopted by House Democrats, and if we did it last year, we can do it again, providing for areas such as the departments of Children and Family Services and Mental Health that do require increased appropriations."

Missing this year was the harsh criticism of Edgar for proposing cuts in welfare. Instead, the Public Welfare Coalition, while critical of omissions in the budget, said "the governor seems to be trying to better meet some pressing needs."

As negotiations proceed over the Illinois budget and the fate of the income tax surcharge, everyone — Republicans and Democrats — will be closely following the plans and packages of the Clinton administration. The avowed goal of the Democratic president is a sound economy with plenty of jobs, a goal that is little different from Republican Gov. Edgar. *

April 1993 /Illinois Issues/11