We Mean Business. Illinois Business.
 
 

Republicans continue to fight governor's debt plan
By KERRY L. SMITH

   SPRINGFIELD - Although state lawmakers concluded their 51-day overtime session July 24 and Gov. Rod Blagojevich signed the state's $43 billion operational budget seven days later, legislators did not reach agreement on a capital budget - a plan to finance long-term outlays for fixed assets.

   Typically legislators vote on the capital budget and the operations budget at the same time, but not this year. Lawmakers are planning to pass a capital outlay strategy during the November veto session. But business leaders and the Illinois Treasurer's Office are worried that if the governor insists on a plan to backload the debt - extending the payback period from 25 years to 30 years - it will tie the hands of future decision makers.

   "It will be a contentious issue," said John Webb, director of legislative affairs for operations and budget in State Treasurer Judy Baar Topinka's office, adding that a three-fifths vote is necessary.

   Republicans are at odds with Blagojevich on his proposal to restructure the state's long-term debt comprised of general obligation bonds so the largest payments come due at the end.

   "We agree with Senate Republicans that the obligations should come in the form of level principal payments," said Webb. "What the governor has been touting since he came into office is similar to balloon payments."

   Of the three fiscal responsibility package proposals Topinka's office presented in Springfield a few months ago, only one got a nod from legislators: the one mandating a restriction on long-term borrowing, capping state-issued debt at 7 percent of general fund revenues from the previous year. The treasurer's proposal further stipulated that the only way the state could exceed the 7 percent cap would be by approval from the treasurer and comptroller.

   Webb said the legislators agreed to a more narrow interpretation.

   "Our initial proposal included any debt service related to general obligation bonds - including pension obligation bonds and state-issued revenue bonds," he said. "But they agreed to the 7 percent cap for general fund and road fund appropriations."

   Debt service payments have not been that high in the state's history, but are now approaching that threshold.

   Illinois Chamber of Commerce President Douglas Whitley said the capital budget issue ranks No. 1 among the chamber's priorities.

   "It's the No. 1 carryover issue from the 93rd General Assembly," he said.

   Whether the governor's Opportunity Returns initiatives will be approved, and even more importantly, how they will be funded, is a question that is being asked by an increasing number of business advocates.

   "As of today, the governor has announced only six out of the 10 Opportunity Returns regions' plans," said Whitley. "Legislators are cautious about the plans that still haven't been introduced. And there has been no funding introduced. Our assumption, as it stands right now, is that the state will be claiming existing road fund money to pay for additional bonds."

   Governor's spokesman Andrew Ross said Opportunity Returns is still alive and well. He was not able to identify a time period for when the final four regional initiatives would be announced. Southwestern Illinois' OR program was revealed during Blagojevich's stop in Godfrey in December 2003.

   "The Opportunity Returns road projects are being kept separate from the Illinois Dept. of Transportation's standard program," Ross said. "Business development and jobs training programs we've announced so far are being funded with monies from the state's fiscal 2004 budget (ending June 30)."

   Whitley charges that Blagojevich's strategy to extend the period of debt service is questionable public policy.

   "There has never been a road construction program in Illinois, tied to bonds, that has not had a revenue stream tied to it. The governor is suggesting that we ought to sell the bonds now and worry about paying for them later," he said. "The depleted Illinois road construction fund would have even more of a draw on it to pay for OR initiatives, so almost all the dollars in our state road program would be tied to paying off bonds, with limited funds for repair, safety and maintenance."

   The analogy, said Whitley, is akin to credit card debt. "If you follow it to its logical conclusion, you're setting up a situation. Spend today and worry about paying for it tomorrow. It's almost a self-fulfilling prophecy."

   Road projects introduced as OR initiatives, Whitley said, are being financed by turning IDOT's five-year plan into a seven-year plan.

   Topinka said the governor is touting the extended borrowing strategy to avoid making critical spending choices - and that he is structuring the debt so that most of the repayment costs will not hit taxpayers until well past his time in office.