August 25, 2011
As the State of Illinois enters the third year of its Illinois Jobs Now! capital program, the Governor and General Assembly enacted a capital budget for FY2012 with a considerable increase in spending on new projects.
The State’s annual capital budget, which is proposed and approved separately from the operating budget, increased by $2.2 billion for FY2012. This marks the first expansion of the current ongoing capital spending program since its inception in FY2010. The capital budget also included reauthorization of $22.8 billion in previously approved projects, bringing the total to $25.1 billion. Unlike the State’s operating budget, which requires that all appropriated funds be spent in the same year they are approved, capital appropriations must be reauthorized over multiple years as planning, engineering and construction of capital investments commence.
Although the FY2012 capital budget includes a significant increase in capital spending, the enacted total is significantly less than the increase included in the Governor’s recommended FY2012 capital budget. The total capital spending approved for FY2012 was $2.1 billion less than the total $27.1 billion in the Governor’s FY2012 capital budget.
The following chart compares the capital budget proposed by the Governor for FY2012 to the budget passed by the General Assembly and signed into law by the Governor on June 30, 2011(P.A. 97-0076).
The amount of capital spending reauthorized from previous years fell slightly due to some projects spending more of their existing appropriations before the end of FY2011 than was estimated in the Governor’s capital budget. The more significant reduction in the FY2012 capital authorization was the $1.8 billion in new projects proposed by the Governor but omitted from the capital bill approved by the General Assembly.
The new spending in the enacted budget is almost entirely dedicated to additional transportation spending on roads, bridges, airports, rail and mass transit, totaling $2.15 billion of the approved spending. As previously discussed here, transportation spending makes up more than half of the total spending in the capital budget and consists almost entirely of broad grants given to the Illinois Department of Transportation rather than assigned to specific projects.
The remaining $57.4 million of the newly approved capital spending for FY2012 is spread out among 22 other line items in the budget, ranging from $80,000 for new state-wide snowmobile trails to $17.0 million for coal demonstration program grants.
No new revenue sources were passed to support the additional spending. The State relies heavily on the sale of bonds to fund the capital budget and also receives federal funding and some pay-as-you go funding from user fees, taxes and local government funds. Updated estimates of the funding for the enacted FY2012 budget are not yet available, but the Governor’s FY2012 proposed budget estimated that the State would need to sell $16.0 billion in total capital bonds to support the program, or approximately 60% of the total funding. So far, the State has only issued $2.7 billion in General Obligation (GO) Bonds to pay for capital projects since the capital program began in FY2010.
In 2009, the State approved a package of revenue measures including: increasing taxes on alcoholic beverages; additional vehicle and license fees; legalizing and taxing video poker; leasing out the management of the state lottery; and extending the sales tax to candy, sweetened beverages and some hygiene products. These new revenues were expected to total $943 million to $1.2 billion annually to support the new capital borrowing associated with the Illinois Jobs Now! capital program. However, the State has not reported on the revenues earned from these sources. Until recently the capital bills were the subject of a lawsuit. The complaint claimed that the disparate revenues sources used to fund the program violated the State’s single subject rule, which requires all legislation to be regarding the same topic. The Illinois Supreme Court ruled in favor of the State and upheld the law in July 2011. Also due to administrative delays the State Gaming Board has yet to begin licensing video poker. More than 60 county and local governments passed measures to prohibit the expansion of video gaming in their jurisdictions, which also threatens the potential revenues from the capital program’s largest source.