State FY2012 Budget Update: Capital Bill Reauthorization and More Medicaid Interfund Borrowing

June 23, 2011 - 4:12pm

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The Illinois General Assembly reconvened on June 22, 2011 for an extra day of the spring session to sort out several issues that were not addressed three weeks ago when the legislature adjourned after approving a $33.2 billion budget.

Both the House and the Senate took action to reauthorize the State’s ongoing $31-billion capital program, which was first enacted in FY2010. As previously discussed here, the original capital reauthorization bill did not pass the House after the Senate added an amendment containing $430 million in additional General Funds spending for FY2012. The estimated $23.1 billion in unspent capital appropriations were introduced during the extended session in a new bill, SB2414. Free of the additional spending, the legislation passed unanimously in both chambers. The action was seen as urgent after Governor Pat Quinn threatened to shut down all road construction projects statewide if the reauthorization was not passed immediately. Although the Governor’s proposed capital budget called for increasing capital appropriations in FY2012 by $4.0 billion, the more than 1,600-page bill purportedly only contains reauthorization of previously approved projects.

The General Assembly also used the extra day to pass an additional interfund borrowing authorization to pay down Medicaid bills. The budget bills passed on May 31, 2011 included authorization to borrow $900 million from the Road Fund and State Construction Fund to pay down a portion of the backlog of Medicaid bills. The measure was intended to maximize federal reimbursements to the State before June 30, 2011 when the reimbursement rate drops from 57% to 50%. The additional authorization passed in the extra day of the session, SB1633, allows the State to delay repaying cash it is required to transfer to the Budget Stabilization Fund and instead transfer $365 million from the General Funds to the Hospital Provider Fund to pay for Medicaid bills. The total interfund borrowing will increase the federal reimbursements received by the State from the federal government by $90 million in FY2011, according to comments made by Rep. Barbara Flynn Currie during discussion of the measure on the House floor. However, both loans must be paid back by the end of July. The amount the State owes to the Budget Stabilization Fund, which totals $276 million according to the Governor’s budget documents, must be repaid by July 15, 2011. The $900 million from the Road and State Construction Funds must be paid back by July 30, 2011. Transferring these funds is likely to cause enormous cash flow issues for the State in the first month of its new fiscal year.

No action was taken on a proposal to swap funding from other programs to fund community mental health programs that had been cut by $30 million in the original human services appropriation bill. Rep. Sara Feigenholtz, who serves as the Chair of the House Human Services Committee, introduced the measure that passed the House before it adjourned in May. However, despite statements from Feigenholtz that the change was needed to clean up a mistake made in committee, the bill was not taken up by the Senate.

The General Assembly is now scheduled to stand adjourned until October 25, 2011, when it will reconvene for the fall veto session, unless a special session is called in the meantime.

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