State’s FY2013 Budget Still Missing Significant Components
August 16, 2012 - 1:50pm
The State of Illinois’ enacted budget for FY2013 is missing key components needed to carry out the General Assembly’s spending plan, according to a recent filing in connection with State bond offerings.
The bond disclosure documents, which were filed by Governor Pat Quinn’s Office on August 6, 2012, indicate that the enacted general operating funds budget totals $33.041 billion. In contrast, a press release issued after Governor Quinn signed the budget on June 30 stated that the budget totaled $33.7 billion. Similarly, a report at the beginning of August by the General Assembly’s Commission on Government Forecasting and Accountability cited a budget total of $33.659 billion.
The difference is explained by the fact that the enacted budget does not include at least $779 million in planned expenditures. Those expenditures relate to roughly $550 million in group insurance for State employees and $229 million in transfers out of General Funds, mainly to pay for Medicaid. (The $33.7 billion in the Governor’s press release also does not include $132 million to repay money borrowed from other state funds.)
If these items were included, planned spending for FY2013 would total $33.820 billion. The following table compares the various budget numbers discussed above.
The confusion over planned spending in the fiscal year that began on July 1 shows that the budget process is still ongoing. It also reflects a lack of information on the enacted budget.
The Governor’s budget recommendation, presented this year on February 22, is available on the website of the Governor’s Office of Management and Budget (GOMB). After the budget is signed, the State does not publish an enacted budget document. Currently, the best source of data on the enacted budget is bond documents submitted by the State to the Municipal Securities Rulemaking Board.
The bond documents indicate that GOMB has raised its projection of General Funds revenue for FY2013 to $34.398 million. When the Governor presented his FY2013 budget recommendation in February, GOMB expected revenue of $33.940.
The General Assembly began its budget-making process by agreeing on its own projection for FY2013 General Funds revenue, which was intended to cap spending. That projection, adopted in a joint resolution on March 7, was $33.719 billion, or $221 million below the Governor’s estimate. Actual projected spending of $33.820 billion—including the components that have not been approved—exceeds this cap by at least $101 million, according to the information contained in the new bond documents.
As previously discussed on this blog, the enacted FY2013 budget includes only $550 million in General Funds appropriations for group insurance, down from $1.436 billion in FY2012 and $1.171 billion recommended by Governor Quinn for FY2013. The Governor reduced his proposed appropriation from FY2012 to reflect expected cost savings on health insurance to be achieved during labor negotiations, which are ongoing. The General Assembly appropriated approximately half of the Governor’s recommendation, with the apparent intention of passing a supplemental appropriation later in the year. (Half of the Governor’s proposed appropriation is actually $585.5 million.)
In addition, the enacted FY2013 budget does not include $229 million in planned transfers. As discussed here, these transfers involve a portion of the State’s plan to fill a $2.7 billion gap in the Medicaid budget. The General Assembly addressed $2.4 billion of the $2.7 billion funding gap in FY2013 through a package of program changes, rate reductions and revenue increases described here. The remaining $300 million was addressed in Senate Bill 2971, as amended by the House, which passed the House on May 30, 2012 but did not pass the Senate. Senate Bill 2971 authorizes the transfer of $151 million from General Funds to the Healthcare Provider Relief Fund, generating roughly $300 million to pay Medicaid expenses in FY2013 through a cycle of Medicaid spending and federal reimbursement known as churning. The Senate reportedly did not pass SB2971 due to a dispute about the level of education funding in the FY2013 budget.
If these measures are enacted later in FY2013, the General Funds operating surplus will be lower, meaning that available funds to pay off accumulated unpaid bills will be reduced. The operating surplus is currently estimated at $1.356 billion, according to the updated revenue and expenditure numbers in the bond filing.
On the other hand, not enacting the measures would result in growth in the backlog of unpaid Medicaid and group insurance bills. Public Act 97-0691, part of the Medicaid legislation passed by both the House and the Senate, virtually eliminates the State’s ability to defer Medicaid bills under the Section 25 exception to the State Finance Act. The new law limits Section 25 Medicaid liabilities to $700 million in FY2013 and $100 million thereafter. The limit could create significant difficulties if bills pile up in FY2013.
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