With the state still short on cash, Comptroller Dan Hynes withdrew his opposition to borrowing money and recommended Thursday that the state borrow a record $1 billion.
The comptroller’s decision to drop his resistance to short-term borrowing sets the stage for a program to begin as early as July and represented a significant breakthrough in the battle over how to deal with the state’s mounting backlog of overdue bills.
Gov. George Ryan has supported borrowing for months, emphasizing it again in his special Memorial Day budget address to lawmakers, but the Republican governor needed the approval of the Democratic comptroller and Republican Treasurer Judy Baar Topinka.
The three agreed Thursday in concept on borrowing, but they stopped short of a deal because they must work out the details, Topinka said. Ryan spokesman Dennis Culloton said those details don’t seem like impediments.
In May, Topinka laid out a series of conditions, such as borrowing only to ease cash flow and setting up a fund to repay the money, before she would agree to short-term borrowing.
Hynes on Thursday also called on Ryan to ask lawmakers in the fall veto session to consider better controls on spending, a fully funded rainy day fund and more emphasis on paying down state debt.
Without borrowing, Hynes said bills could back up five months and the state would be forced to pay interest penalties for late payments. Although Illinois would pay up to $15 million in interest on borrowing, penalties for late payments would cost up to $90 million, he said.
Unless the state borrows, all but one month in the next fiscal year would have a billion-dollar backlog in bills, possibly $1.7 billion in April, Hynes said.
Hynes and Topinka had been reluctant to borrow before the new budget was balanced. Ryan used his veto authority this month to slash $500 million from a $54 billion budget that lawmakers approved. They upheld most of his cuts in a special session.
The state borrowed five out of eight years under Gov. Jim Edgar, Ryan’s predecessor. The highest amount was $900 million, although the Edgar budgets were smaller.
Hynes and Topinka have urged the governor to veto a proposal to let the state borrow $750 million through general obligation bonds that could be used to pay for operating expenses. The borrowing would be repaid over time by using a portion of the state’s share of a nationwide tobacco settlement.
Culloton said Ryan wants to keep that option available.
