CHICAGO – – The Illinois transportation secretary joined Gov. Bruce Rauner and other state officials to warn that capital spending is on the "verge of crisis" because of the state's long-running budget stalemate.
"We are on the brink of what was once unthinkable….the suspension of the IDOT construction program," Randy Blankenhorn, secretary of the Illinois Department of Transportation, said at Wednesday's news conference.
Capital projects now underway face a work stoppage next month that threatens conditions at some state facilities and the state won't be able to fully put proceeds of its $550 million sale Thursday to work unless a stopgap budget plan is adopted.
The Illinois Capital Development Board had to suspend 200 projects due to a lack of appropriation in the current fiscal year amid a prolonged state budget impasse and that threatens conditions at state prisons, mental health facilities, and veteran's homes, said Executive Director Jodi Golden.
"Without stopgap funding we won't be able to do needed work" that has become more urgent, Golden said.
IDOT has fared better this year because funds were appropriated, but the start of a new fiscal year July 1 without an appropriation in place will stall ongoing projects.
The transportation department could be forced to shut down 800 active projects worth $2 billion, jeopardizing federal funding, Blankenhorn said.
The state can tap proceeds of Thursday's $550 million general obligation sale for road projects with approved fiscal 2016 appropriations, but the funds earmarked for other projects can't be spent without a new appropriation.
Rauner pressed Democrats to pass two bills submitted by Republican leaders that would fund public school education and provide funding for capital projects, human services, and universities. Without legislation in place, the Rauner administration has warned that some critical services could be halted as agencies will be unable to cover some costs.
"It is critically important…government must continue to function," said the Republican governor, who on Wednesday softened the tone he's taken in recent news conferences that included sharper attacks on Democratic leaders. The administration is pushing Democrats to pass the bills in their current form without attaching additional spending. "It's a responsible bill….it is affordable."
The two bills would get the state through the November elections and into January providing some breathing room to reach a more sweeping budget plan for fiscal 2016 and 2017.
Rauner has been at odds with the Democratic leadership in the General Assembly since taking office in 2015. About 90% of government continues to operate in the absence of a budget through continuing appropriations, court orders, consent agreements, and some legislative agreements.
The interim budget would appropriate the remaining non-general revenue fund line items for the current fiscal year and use the state's rainy day fund to pay outstanding bills at various state agencies. It would fund utilities, food and medical services at state prisons and other facilities, dipping into a human services fund for $458 million.
For fiscal 2017, it would fund early childhood and K-12 education, appropriate the fiscal 2017 road construction program paid for with motor fuel tax and vehicle registration fees and appropriate all federal funds. It would appropriate non-general revenue funds for capital projects that were halted in mid-construction and cover emergency repairs at state facilities.
The interim package would provide $600 million from the Education Assistance Fund for Higher Education and appropriate $180 million from a human services fund to cover payments to human services providers.
Warnings over the status of the state's capital budget come as repayment of debt continues to weigh on the state's general fund due to the poor performance of taxes and fees approved in 2010 to fund the $31 billion Illinois Jobs Now capital program.
The state has borrowed about $12 billion of mostly general obligation bonds to help fund infrastructure projects but the capital projects fund has an accumulated deficit of $800 million because of a shortfall in tax and fee revenues earmarked for the capital projects fund, according to a recent report from the Civic Federation of Chicago.
The revenues come from dedicated sources including fees from video poker; an expanded sales tax on candy, sweetened beverages and some hygiene products; the lease of a portion of state lottery operations; an increased per-gallon tax on beer, wine and liquor; and increased license and vehicle fees.
In fiscal 2017, capital projects fund revenues are projected at $754 million compared to $731 million in fiscal 2016 and $687 million in fiscal 2015. The state owed debt service of $791 million in fiscal 2016 and $787 million in fiscal 2015. The accumulated deficit figure of $800 million includes $245 million that is supposed to be transferred annually from the capital fund into the general fund.
The legislative projections in 2010 anticipated the taxes and fees would generate $943 million to $1.2 billion annually to cover debt service and the $245 million general fund deposit.
The largest shortfalls are due to delays in legalizing poker machines and the decision of some local governments to opt out of allowing poker machines in establishments. The state lottery lease is no longer expected to bring in any funding for the capital budget this year and next. It was assumed that the contract would earn $150 million annually. The state has terminated its current vendor agreement and it's unclear when a new one will be established.