SPECIAL STAFF REPORT Fiscal 1976
Gov. Walker told the legislature in June to cut general fund appropriations by 6%. They gave him an impoundment bill—which he vetoed. Then he began making his cuts, over half a billion dollars. These reduced the budget total to $9.8 billion. That is a tenth above 1975 budget
Table 1.
Action on fiscal 1976 appropriations (all funds) in millions of dollars
Function |
Budget |
Passed by |
Approved by |
Elementary and |
$ 1,907.4 |
$ 1,957.7 |
$1,787.1 |
Higher education |
828.4 |
835.4 |
774.9 |
Public-aid |
1,821.7 |
1,815.2 |
1,764.7 |
Mental health |
399.1 |
391.5 |
376.5 |
Children & |
114.6 |
120.8 |
109.9 |
Corrections |
96.6 |
94.7 |
94.7 |
All other |
5,582.8 |
5,206.2 |
4,944.6 |
$10,750.6 |
$10,421.5* |
$9,852.4 |
Source: Bureau of the Budget as on July 31, 1975 Veto actions However, it was the general fund that
particularly concerned the governor in
early June when he called on the
legislature to cut spending levels in that
fund to 6 per cent below the amounts he
had recommended in March. Walker's
June recommendation was made in the
face of predicted declines in general
revenue for the state. When the
legislature failed to follow his
recommendation, the governor began
using his veto power to reduce or strike
appropriation items. The legislature
had, however, authorized the governor
to impound up to 8 per cent of general
fund spending, but the governor vetoed
this impoundment bill, saying it was unconstitutional. "We have had enough of
impoundment in this country," he said.
"1 want no part of it." Figures prepared by the Bureau of
the Budget showed that the governor
cut more than $300 million—approximately 6 per cent—from appropriations financed by the general
revenue fund and the common school
fund. (In early August, appropriations from these funds involving $35 million
were yet to be acted on.) The vetoes that
attracted the most attention—and are
most likely to result in legislative
attempts to override them—concern
Public aid and elementary and secondary education. Table 2 shows action on
general fund appropriations. Public aid cuts Cuts in education funds October 1975 / Illinois Issues / 291
* Includes $72 million not then acted on by the governor.
WHEN THE legislature returns to
Springfield on October 22, it will have
nearly $550 million in vetoes by Gov.
Dan Walker to consider. Even if the
legislature allows all the vetoes to stand,
Illinois for its 1976 fiscal year will still
have the largest budget total in its
history, $9.8 billion. The budget will be
about one-tenth higher than the total
$8.7 billion appropriated for fiscal
1975, which included supplemental
amounts passed in the spring session to
finish out the last fiscal year.
Table 1 summarizes action on the
budget to the early part of August when
the governor still had to act on bills
totaling $72 million. Thus far, vetoes
amount to about 5 per cent of sums appropriated. Table 1 pertains to all
funds, including bond funds.
By reducing public aid's $1.8 billion
appropriation by $50.5 million, the
governor made a reduction of about 3
per cent. Most of this cut was made in
the medicaid category, including
medical assistance grants reduced from
$827.7 million to $778.0 million. The
governor emphasized that he had made
no reductions in the money designated
for public aid grants: "In view of
current economic conditions, it would
be inappropriate to reduce amounts appropriated for grants to recipients."
The governor's cuts in funds for
elementary and secondary education
amounted to 6 per cent from his
original recommendations. Amounts
vetoed were $49.5 million in Office of
Education operations and grants, $81
million in distributive (state aid) funds,
and $20.9 million in teacher retirement
funds. However, $9.7 million of the
retirement fund was a duplicate of a
sum already approved in a different bill.
The governor also vetoed three bills
that contained revisions of the state
school aid formula and authorizations
for increased local property taxes (H.B.
534, S.B. 209, and S.B. 1493). He said
the revised formulas do not solve inequities that hurt downstate urban areas
and would lead to future increased
property taxes without referenda. He
said the bills would also have cost the
state more than it could afford in fiscal
1976 Walker said he would call a
special session of the legislature in the
Both state comptroller and business group say cutting money bills isn't enough. It's also necessary to hold
down pace of spending
fall, coinciding with the regular session,
to consider an administration bill which
would protect downstate urban school
districts from losing state aid in the
coming year. "Under the present formula—even
with full funding-—a large number of
districts, including Rock ford,
Bloomington, Peoria, Springfield,
Champaign and Urbana all would
receive less money than in the school
year Just completed, even without any
reduction," he said. "Decatur, Moline
and Rock Island would be right on the
line of losing money.'" The Office of Education's distributive fund, after reduction, is $1.173
billion, which is a level that will place
Illinois ahead of California, Michigan,
New York, and Ohio in state share of
education support, according to the
governor. And among the five largest
cities, Chicago will be second among
Philadelphia, Detroit, Los Angeles, and
New York in state aid per pupil, he
said. The extent of state aid for local
schools has an important relationship to
property taxes since state aid is the only
significant alternative revenue source
for local school districts. Higher education The governor said he worked closely
with the Board of Higher Education in
selecting areas for cuts, and the board in
turn worked with university officials.
The governor said that 7 per cent pay
raises could still be granted higher
education employees. He said an additional $4.1 million (an increase of 5.4
per cent over 1975) will be available for
scholarships. Although the governor's
announcement said that no tuition increase would be necessary to fund
higher education programs for the 1976
fiscal year. University of Illinois officials and a Board of Higher Education
advisory committee have pointed to a
tuition increase as a source for additional funding. Other reductions Cuts were made also in the budgets of
the state executive officers and the
legislature and its agencies. Reductions
were: attorney general, $360,800; comptroller, $135,900; lieutenant governor,
$175,300; secretary of state, $2,000,000; Broad veto power Holding the line "Spending cuts now will be to no
avail if state departments and agencies
return to the legislature later for
deficiency appropriations, which has
become an all too common practice,"
said Lester W. Brann, Jr., president of
the State Chamber, in a statement July
17. "This is particularly critical in the
area of welfare where the Walker Administration continues to seriously underestimate caseload levels. This alone
could cost the state an additional $75
million from state sources during fiscal
'76," Brann stated. During the 1975 spring session,
deficiency appropriations passed by the
legislature for fiscal 1975 totaled $339
million, including $197 million for
public aid. But, the major portion of
this money comes from federal funds, Brann's statement asserted that as a
result of legislative appropriations, the
state would face a possible $412 million
deficit in general funds during fiscal
1976, but the governor's veto actions
had reduced this projected deficit to about $30 million. In a statement that accompanied the
comptroller's July 1975 monthly fiscal
report, Lindberg reported that during
fiscal 1975 "the state spent $138 million
more from the general funds than it received in taxes and from other sources.
The deficit arose as a result of spending
$613 million more from the general
funds than in the previous fiscal year,
This increase is of historic proportions
as the largest single year increase
previously recorded was in fiscal year
1970 following the enactment of the state income tax." Lindberg said the state has only three options when spending exceeds
292 / Illinois Issues / October 1975
The governor's vetoes in funding for
higher education amounted to about 7
per cent of the appropriations made by
the legislature for this purpose. Major
amounts vetoed were University of
Illinois, $14.2 million; community
colleges, $11.1 million; scholarship
commission, $10.3 million; Board of
Higher Education, $7.4 million; Board
of Governors (Chicago State, Eastern
Illinois, Governors State, Northeastern
Illinois, and Western Illinois), $6.3
million; Southern Illinois University,
$5.5 million; and Board of Regents
(Illinois State, Northern Illinois, and
Sangamon State), $5.4 million. When Walker announced these cuts, he
pointed out that if capital appropriations are counted in, the higher education budget still totals over $1 billion for
the first time in Illinois' history.
The governor cut $174 million from
the Department of Transportation
budget. The veto was used principally
against items added on by the
legislature, particularly specified local
projects. His announcement said that
despite the cuts, the road program was
increased by $150 million over fiscal
1975.
As the foregoing illustrates, the
governor of Illinois has extremely broad
veto powers which can be exercised with
considerable precision. He can veto an
appropriation in its entirety or can
single out items in appropriations. For
the General Assembly to override a full
or item veto, a three-fifths vote of the
members elected to each house—36
votes in the Senate, 107 in the House of
Representatives—is required. However,
a simple majority—30 votes in the
Senate, 89 in the House—can override a
reduction veto which is the precision cutting tool the governor used for the
most part. to achieve his goal of reducing general fund spending by 6 percent
The reduction veto was established by
the Constitution of 1970 to permit the
governor to reduce the amount of any
item in an appropriation bill. If the
legislature overrides such vetoes, it will
be openly substituting its judgment for
that of the governor on the fiscal outlook for the state in the months ahead.
From state Comptroller George W.
Lindberg and the State Chamber of
Commerce came separate warnings that
reducing appropriations by the veto
route is not enough. It will also be
necessary, they said, to hold down the
pace of state spending.
revenues: (1) cut spending by cutting services and increasing efficiency, (2) increase revenues through increasing taxes, or (3) borrow. "As Comptroller, it is my position that the only viable alternative is to reduce spending." But borrowing is possible.
State borrowing
Table 2.
Function |
Budget |
Passed by |
Approved by |
Elementary and |
$1,677.7 |
$1,727.6 |
$ 1,556,9 |
Higher education |
724.8 |
740.3 |
679.9 |
Public aid |
1,821.7 |
1,814.0 |
1,763.6 |
Mental health |
369.7 |
360.8 |
345.8 |
Children & family |
|||
services |
109.2 |
114.9 |
104.0 |
Corrections |
93.1 |
91.2 |
91.2 |
All other |
606.4 |
678.1 |
630.8 |
$5,402.6 |
$5,526.5* |
$5,172.2 |
Source: Bureau of the Budget as of July 31, 1975
* Includes $35 million not then acted on by the governor.
Table 3.
Fiscal 1976 appropriations from bond lands in millions of dollars
Fund
Capital development |
Requested $ 802 |
Passed $ 508 |
Approved $ 504 |
||
Antipollution |
346 |
398 |
398 |
||
School construction |
552 |
329 |
329 |
||
Transportation |
|||||
Series A (highways) |
508 |
588 |
544 |
||
Transportation |
|||||
Series B (other |
|||||
than highways) |
148 |
141 |
123 |
||
Transportation |
561 |
— |
— |
||
Coal development |
10 |
10 |
10 |
||
$2,926 |
$1,975* |
$1.908 |
Source: Bureau of the Budget as of July 31. 1975
depression of the 1930's, the state did
issue $50 million in long-term bonds to
underwrite emergency relief needs. The fiscal outlook Up to now, however, inflation has
automatically increased state tax
revenues, and state revenues grew 11
per cent in fiscal 1975, according to the
comptroller's report for July.
Lindberg's report explains, "For example, the state sales tax is collected on the
dollar cost of consumer purchases. As
the prices of goods purchased by Illinois
taxpayers rise, the state collects more in
tax dollars." In fiscal 1975, this was
$112 million more than the previous
year. Other increases in fiscal 1975
compared to 1974 were income tax
revenue up $ 167 million, state corporate
income tax up about 16 per cent, and
the individual income tax up 10 per
cent. On the expenditure side, however,
comparing fiscal 1975 to 1974, public
aid was up $168 million and common
school fund spending was up $189
million—a total increase of $357
million. This expenditure increase is
more than the $279 million gain from
the state's two principal taxes. One other element in the equation is
the balance with which the state begins
a new fiscal year—not cash in the
treasury but the "available balance."
The comptroller said this' was $315 million at the end of June 1975, $138
million less than the previous year. The new state lottery figured briefly
in the comptroller's report. "This new
revenue source yielded a one-time boost
in state revenues of $55 million in fiscal
1975," the report said, but added,
"Such an increase will not be experienced in future years." Capital improvement bonds The administration requested appropriations payable from bond funds
totaling $2,926 million, including
$2,028 million in new appropriations
and $898 million in reappropriations.
(A reappropriation is a continuation of
an appropriation which originated in a
previous fiscal year for a project not
completed in that year.) A reappropriation involves carrying through on a
commitment made at a previous session, but nevertheless represents an
authorization to spend in the new fiscal
year. The legislature approved capital
appropriations totaling $1,975 million,
including $1,200 million in new appropriations and $774 million in reappropriations. During fiscal 1975 $1,136
million had been appropriated in bond
funds, but only a fraction of this
amount was actually spent. Table 3
shows the bond funds, the amounts requested, the amounts appropriated, and
the amounts approved. New appropriations and reappropriations are
merged into totals. October 1975 / Illinois Issues / 293
* Includes amounts not then acted on by the governor.
While the state supposedly can control large elements of its spending, two
major factors in the state's fiscal equation are beyond the control of the administration; welfare spending and
revenue from state taxes at existing set
rates. Both reflect economic conditions.
Welfare costs go up as joblessness rises,
and Illinois' two principal general taxes,
the sales tax and the income tax, are
adversely affected by downturns in
economic conditions.
Almost $2 billion of the spending
authorized for fiscal 1976 will come
from bond funds to be used for capital
projects. Originally, the governor in
January had presented an "Accelerated
Building Program" to the legislature as
a counter-recession device, but the
legislature's refusal to give priority consideration to the administration's
proposals doomed the accelerated
aspect of the program.
The Constitution directs the governor and legislature that appropriations shall not exceed funds estimated to be available. The Walker administration is confident that vetoes have brought the budget into balance
Budgeting for the state government,
now on an annual appropriations cycle,
is an endless process, with a budget being planned in the summer before the
previous budget has been fully approved. The process first "goes public"
in March when the governor unveils his
recommendations for the next fiscal
year beginning July 1 (see Illinois
Issues. May 1975, p. 148ff). The
legislature tries to complete action on
appropriation bills by July 1. The bills
must be delivered to the governor within
30 days, and he has 60 days to act. The
governor usually completes action on
most money bills as soon as possible
because they are necessary for the
operation of the state government as the
new fiscal year begins. But it is possible
for 90 days to elapse between passage of
a bill and action on it by the governor.
In the case of a vetoed bill, the governor
returns it to the house of origin if it is in
session, and to the secretary of state
when the legislature is in recess. The
secretary returns the bill and veto
message to the legislature when it reconvenes. Once the House or Senate
receives a vetoed bill, it has 15 calendar
days in which to act. If the originating
chamber overrides the veto, the second
house also has 15 days to act. No single budget bill A balanced budget Gov. Walker, in announcing his
vetoes, called attention to the "financial
problems plaguing cities and states
across the country . . . walkouts, firing
of police and firemen, garbage piling up
in the streets," and he added, "I don't
want chaos in Illinois and I do not want
a tax increase. To avoid both chaos and
a tax increase, we must cut spending." One way it's a 'tax cut' 294 / Illinois Issues / October 1975
The budget picture in Illinois is complicated by the fact that usually about
200 appropriation bills—three-fourths
new appropriations and one-fourth
deficiency appropriations for the old
fiscal year—are passed and sent to the
governor. There is no single budget bill.
After official action on vetoes has been
completed, the comptroller's office
publishes the text of all appropriation
bills. This, however, is usually not
available until the fifth month of the
fiscal year. At 'about the same time, the
comptroller also publishes a report
covering appropriations for the old fiscal year, comparing how much was
appropriated to how much was spent.
Funds appropriated for a particular
year do not carry over; they must be
spent within that year. The law allows a
grace period of 90 days—until
September 30—to clear bills for obligations incurred during the old fiscal year.
After September 30, appropriations are
said to "lapse," and woe be to the
state's creditor who has been tardy in
presenting his bill for payment. His only
recourse is to go to the state court of
claims and submit the account; after it
is approved by the court, he must wait
until the legislature passes an appropriation for his relief.
The Constitution directs both the
governor and the legislature that appropriations shall not exceed funds estimated to be available during the year
for which the budget is prepared (Art.
VIII, sec. 2). The Walker administration is confident that the governor's
vetoes have brought the budget into
balance.
He said his reductions in general
revenue spending were equivalent to an
increase from 2 1/2 per cent to 3 1/2
per cent in the income tax or a one cent
increase in the sales tax. And he vetoed
seven bills that would have reduced
revenues by decreasing the income tax
and the inheritance tax (H.B. 141, 182,
364, 1146, 2125, 2313 and S.B. 506).