CHICAGO — The $1.3 billion sweep of non general fund accounts to help close a shortfall in Illinois' current budget drew $300 from key transportation funds used to pay for capital projects and cover debt service, according to a report from a local government watchdog organization.
The funds sweep approved by lawmakers and signed by Gov. Bruce Rauner late last month relied on $250 million from the road construction fund and $50 million from the motor fuel tax fund. Both "are not usually considered targets for budgetary relief," the Civic Federation of Chicago wrote in a report posted on its website April 10. In addition to the state's regular use of those funds for debt service and to finance projects, the highway fund helps the state leverage matching federal dollars.
The state previously expected to close out fiscal 2015 on June 30 with $968 million in the road fund and $115 million in the motor fuel fund, totals now reduced by $300 million following the withdrawals.
The Illinois Department of Transportation said the sweep would not affect the current year's $1.85 billion road construction program. The department recently told local governments the sweep from the motor fuel account would force the state to delay the distribution of about $27 million expected from the fund this month. IDOT said payments would return to the normal rate in May.
The legislation closing a $1.6 billion gap in the current budget also relied on spending cuts. In addition to the highway accounts, the sweep dipped into surpluses in another 100 funds, including $200 million from sales tax revenues collected by the state for distribution to local governments.
The state's various funds were expected to close out the current fiscal year with a total balance of $2.7 billion before the sweep.
Some of the accounts appear to currently lack the funds needed to cover the anticipated draws, the federation found in its review. "Since the fiscal year 2015 budget depends on the full sweeps amount of $1.3 billion any balances not available to be swept before the end of the fiscal year would create a deficit and need to be filled with other resources, cut from other spending or would increase the backlog of unpaid bills that is already expected to total more than $6 billion," the report read.
The state has relied on either fund sweeps or interfund transfers in the past. Transfers must be repaid, while the sweep does not.
The state is facing what Rauner's administration has said is a $6.6 billion gap in the next budget, which begins July 1. He has proposed plugging that gap through deep spending cuts and savings from pension and healthcare reforms which, if approved, would be subject to a union legal battle.
Rating agencies and investors are watching closely to see how Illinois solves its budget deficit. It's one of the three big black marks on the state's weak, low single A general obligation credit, along with pension obligations and a massive backlog of unpaid bills.
