CHICAGO - Ending a six-year drought in new capital spending, Illinois Gov. Pat Quinn yesterday signed a $31 billion, partially bond-financed construction program into law as lawmakers prepare to return to work today to resolve an impasse over a new fiscal 2010 operating budget.

"This is a crucial economic recovery initiative that will generate what's needed most in Illinois - jobs, jobs, jobs," Quinn said at a bill-signing ceremony. "Illinois Jobs Now provides many long-awaited improvements to our bridges and roads, transportation networks, schools and communities."

The ceremony provided the governor with what's become a rare opportunity to show unity with lawmakers - even ones of his own Democratic Party that control the General Assembly's chambers. Many lawmakers have resisted Quinn's pressure to raise the state's income tax to help wipe out a $12 billion deficit and preserve spending on social services and health care. Republican and Democratic leaders spoke at the ceremony along with Chicago Mayor Richard Daley and labor leaders.

"A comprehensive infrastructure program is a significant accomplishment. It is critical that we address our crumbling infrastructure in communities across Illinois. At the same time, the economy of Illinois will get a boost and our citizens will have more job opportunities," said Senate Minority Leader Christine Radogno.

Quinn had refused to sign the capital plan that lawmakers approved in late May, using it as leverage to pressure legislators to sign off on his proposed $52.9 billion fiscal 2010 operating budget with the tax increase. Quinn decided late last week to reverse course and sign the capital budget Monday in hopes of furthering efforts to win some accord on an operating plan.

In signing the capital budget, the state ends a long drought in new bonding authorization for construction. The last major capital plan was former Gov. George Ryan's $12 billion Illinois FIRST program, approved in 1999. Annual increases in new capital authorizations dried up about six years ago.

This year's bill provides funding for roads, bridges, transit, state facilities, school buildings, airports, "green" projects, fresh water and sewer projects, and a high-speed rail line from Chicago to St. Louis. About $14 billion would go to transportation projects, $7 billion for transit and $1.5 billion for higher education. Quinn has touted the program as supporting more than 439,000 jobs.

The state will pay for the program through a combination of federal matching grants, including $3.7 billion from the stimulus package, local matching funds, and about $12 billion in state funding that would come primarily from borrowing.

The bills signed yesterday authorize $3.6 billion in new general obligation and sales-tax backed bonding. That authority is intended to fund the first two years, with additional bonding authorization needed in future years.

Illinois will dip into its transportation road fund for $150 million annually to repay the bonds. Another $322 million annually would come from various increases in vehicle-related fees, while $39 million more would come from extending the sales tax to include candy and $14 million by increasing taxes on tea, coffee, and personal hygiene products. Another $109 million would come from increased liquor taxes and $300 million from expanded gaming.

On the operating front, Quinn is expected this week to propose a bare-bones budget without an income tax increase. He would attempt to resurrect the tax hike during the General Assembly's annual fall veto session.

The Senate late this spring approved its own version of an income tax increase and the House rejected it, sending the governor a budget plan with funding for only six months of operations. Quinn has repeatedly warned that without an income tax increase the state's social service network would be devastated because of dwindling revenue.

The new budget is expected to raise to $3.5 billion his proposal that previously sought to borrow $2.2 billion to cover a portion of the state's $4 billion payment owed to the pension systems. He also will propose additional budget reforms and spending cuts.

In the June revenue update, the Illinois Commission on Government Forecasting and Accountability reported that revenues were down $515 million at the close of fiscal 2009 even with an infusion of $1.6 billion in federal stimulus aid. "Clearly, were it not for the gains made possible by the stimulus package, Illinois would have suffered the largest one-year revenue drop in its history," the report read.

The state must have a budget in place this week - even if it is a temporary one - in order to make its next payroll and resume paying vendors. Rating analysts are watching the outcome of the budget mess closely. Moody's Investors Service in April lowered the state's long-term GO rating on $19 billion of debt one notch to A1. Fitch Ratings rates the state AA-minus but has it on negative watch. Standard & Poor's downgraded the credit in March to AA-minus.

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