August 5, 2011
The State of Illinois’ plan to relieve some cash flow pressures in FY2011 by borrowing nearly $1 billion from its Special Funds to pay for operations netted less than half of that amount at the close of FY2011.
The interfund borrowing program, previously discussed here, was approved by the General Assembly as part of the FY2011 Emergency Budget Act. It allowed the State to transfer cash balances from funds outside the General Funds to pay for operations and required repayment within 18 months of the initial loan. Last year the Commission on Government Forecasting and Accountability (COGFA), the legislature’s budget research agency, estimated that the State would gain $964 million for FY2011 operations from the interfund borrowing plan. However, in its recently published FY2012 budget summary, COGFA reports that the State only borrowed a total of $496 million from the State’s Special Funds in FY2011. According to the report, the last of the borrowing from the special funds was completed in March 2011 and the largest amount taken from any fund was $100 million from the Local Government Tax Fund, the fund where sales tax revenues passed through from the State to local governments are held.
COGFA estimates the State will need to return $487 million to more than 170 Special Funds in FY2012. Twelve funds were repaid in full before the end of FY2011. The State has in excess of 600 of these funds that are intended for designated purposes outside of its General Funds. In the Governor’s recommended budget that was released in February 2011, an updated budget summary showed the State repaying the interfund loans in FY2011 despite the additional six months provided in the legislation. However, it appears the special funds will not be repaid until later in FY2012. The State may wait until after January 1, 2012 to begin repaying these loans. Under the authorization to borrow from special funds, the State is also required to repay any interest lost by the funds or penalties paid if balances are not available to make payments required of the funds.
The General Assembly did not include additional interfund borrowing in the FY2012 budget but provided for some year-end transfers in FY2011 to pay down Medicaid bills. However, the Governor never signed the authorization to borrow an additional $900 million from the Road Fund and State Construction Fund. Instead the General Assembly passed a separate authorization to transfer $365 million to the Health Care Provider Relief Fund from the General Funds, which the Governor approved. Unlike the other borrowing, the funds from that transfer will not have to be repaid.