POLITICS

The outgoing governor wants
to leave the slate in the black
by Charles N. Wheeler III

When Gov. Richard B. Ogilvie left office in 1973, he left a significant bequest for Dan Walker, the Democrat who defeated him: a state budget that was in the black.

Now, retiring Gov. Jim Edgar hopes to become the first chief executive since then to do the same favor for whoever wins the November election.

To achieve that goal, however, Edgar will have to convince election-minded lawmakers to forego tax cuts they have proposed in light of what appears to be an extraordinary surfeit of tax dollars. Thanks to the robust economy, Illinois ended last fiscal year on June 30 with $806 million in the bank, the highest balance ever. General funds revenues are expected to increase by almost $1 billion this fiscal year and slightly more in fiscal year 1999, which begins on July 1.

With the state apparently rolling in dough, it's no surprise various tax relief proposals have surfaced. House Republicans and two GOP senators seeking higher office — U.S. Senate candidate Peter Fitzgerald and state comptroller hopeful Chris Lauzen — want to double the income tax credit for residential property taxes. Senate Democrats and lieutenant governor candidate Pat Quinn want to increase the personal exemption from the income tax.

To achieve his goal, Jim Edgar will have to convince election-minded lawmakers to forego the tax cuts they have proposed.

But the $37.4 billion budget Edgar is proposing for next fiscal year has no room for any of the tax relief plans now floating about the legislature. Instead, Edgar earmarked the $1 billion in expected new money for program spending. Most — $614 million — would go to education, from kindergarten through college. Cost-of- living increases for medical and community service providers would cost $189 million, while $129 million is targeted to add more than 3,000 prison beds and hire 132 new state troopers. Edgar also proposed a $94 million boost for health insurance coverage for children of the working poor.

Lawmakers are likely to deem all these causes worthy and be reluctant to trim the proposed funding levels. So the most tempting target for would-be tax-cutters may well be the $750 million that Edgar wants to have in the bank at year's end, six months into his successor's term.

Keenly aware of the legislative mood, Edgar acknowledged in his budget address to lawmakers that the amount "seems like a lot of money."

"And tapping into that balance could be tempting for some who want to curry favor with voters in this election year." But $750 million is only about 3.6 percent of general funds revenues, the governor noted, enough to cover just nine days of bills. Moreover, $750 million in state coffers is equivalent to a cushion of less than $2,000 for the average working family in Illinois, he said.

In fact, the $750 million is exactly what the budget projects will be needed to pay outstanding fiscal year '99 bills through the lapse period, which ends on August 31. "In other words," Edgar said, "we will be able to pay all the bills that normally arrive over the following two months. We will not be dipping into next year's revenues to pay this year's bills."

Should that happen, the books will come out even — the first time since 1975 that the state has avoided red ink three years in a row. The current fiscal year is expected to show a $75 million budgetary balance, following a modest $45 million surplus in fiscal year '97, after lapse period spending of $761 million out of the $806 million in the bank on June 30.

The state's current fiscal well-being is a far cry from the "real mess" he inherited after state government in the 1980s "spent down its so-called surplus and then some," including "money it didn't have," Edgar said. The fiscal crisis that bedeviled his first term had its roots in the 1989 spring session when the legislature and Gov. James R. Thompson enacted $1.2 billion in new taxes, but approved $2.6 billion in additional expenditures, for fiscal 1990. To cover spending more from general funds than the new taxes produced, the lawmakers and the governor tapped a modest budget surplus from the previous year, drew down the state's available balance and relied on natural revenue growth.

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Still, the budgetary balance dipped to a $191 million deficit in fiscal year 1990 from a $148 million surplus in fiscal year 1989.

When Edgar took office in 1991, his financial advisers warned spending needed to be cut hundreds of millions of dollars to keep the ship of state afloat as the national recession stunted revenue growth. In his first full day in office, the new governor sliced his office budget by almost $1 million and ordered his department heads to make similar cuts. Ultimately, tax receipts in fiscal year '91 came in more than $500 million below the estimates used in putting the budget together, a major factor in the $666 million budget deficit posted for fiscal year '91.

When Edgar took office in 1991, his advisers warned spending needed to be cut hundreds of millions of dollars to keep the ship of state afloat.

To cope with a looming $1 billion shortfall for fiscal year '92, Edgar's first budget called for deep cuts in welfare and other programs and some 1,400 layoffs; after 19 days of legislative overtime, he settled for about $400 million in program cuts and $600 million in cash-management devices, most of them one-time revenue boosts. But revenue projections once again proved too optimistic, so the governor and the legislature were forced to cut another $350 million in midyear. Despite the herculean effort, the state racked up its largest budget deficit ever in fiscal 1992, an $887 million ocean of red ink that took five years to overcome.

Edgar has not forgotten the mountains of unpaid bills, the credit rating downgrades, the short-term borrowing, the embarrassing image of Illinois, the deadbeat state. "I don't want that happening again to the next governor," he said. "There will be no spending binge. We will not sacrifice fiscal integrity on the altar of election- year expediency."

While Edgar's caution is clearly correct, legislators seeking new terms may not be willing to be as prudent and principled as a lame duck governor.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.

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