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February 18, 2004

Five key initiatives for fiscal discipline highlight Governor’s Office of Management and Budget Proposals for FY 2005
Proposed legislation would reform “Business as Usual” in state’s spending habits

SPRINGFIELD, IL – Spend only what you have. Pay your bills on time. Save for a rainy day. Budget for emergencies. Balance your checkbook regularly.

Those are basic principles of household money management. And under a legislative package of fiscal reforms proposed by the governor and developed by the Governor’s Office of Management and Budget (GOMB), those concepts will become the basic principles for Illinois budget process.

These legislative reforms – The Balanced Budget Amendment Act, the Responsible Spending Act, and the On-Time Payment Act – would write into law a series of spending reforms introduced in last year’s budget by Governor Rod R. Blagojevich, and would add new fiscal restraints designed to avoid the massive structural deficits that amassed under previous administrations.

By bringing accountability and restraint to the state’s budget process, GOMB was able to recommend additional funding for the Governor’s top priorities – education, health care and public safety – without raising sales or income taxes.

The cornerstone of these fiscal reforms is the Balanced Budget Act, which would require that all proposed budget amendments that would increase spending must include a corresponding plan for new revenue measures or spending cuts.

Currently, the Illinois Constitution requires the Governor to present a balanced budget, but All the spending bills that end up being passed exceed the estimated revenues.

“In Illinois, we have to stop thinking of the budget process as an annual event,” said GOMB Director John Filan. “This Balanced Budget Act will help to ensure that revenues match spending throughout the entire year.”

Further fiscal reforms will be made permanent under the Responsible Spending Act. For all agencies and state officials the Act includes a number of reforms implemented last year, including a requirement that the state of Illinois deposit $50 million in its Rainy Day fund for every $1 billion increase in the budget.

“When spending increases, cash reserves must increase, too,” Filan said.

In other words, new spending bills get passed without a reduction in spending or increase in revenue of an equal amount.

Under the Act, state agencies will be required to allocate budgets quarterly and to prepare and execute monthly spending plans. The act also will require every state agency to set aside at least 2 percent of all appropriated state funds in case of emergencies or downturn in revenues. In the last fiscal year, the 2 percent reserve requirement amounted to nearly $700 million.

Finally, the On-Time Bill Payment Act will make sure that bills from organizations providing goods and services to the state of Illinois are paid in 30 days on average, but not later than 60 days.

Currently, the state pays a 12 percent penalty for late payment of bills by not having ready access to working capital. By establishing a line of credit for bill payment, Illinois will pay only 2 percent in interest. So the Act would improve cash flow for vendors that do business with the state, and would also save money for taxpayers.

GOMB’s priorities for FY05 also include initiatives to hold state agencies and their directors accountable for the achievement of stated priority goals and objectives.

To ensure that state spending focuses on each agency’s core mission and priorities, GOMB has instituted a performance review system. These reviews compare Illinois agencies’ performance to those of other states and to independent benchmarks, and tie spending to results.

GOMB also continues to work closely with the Governor’s Council of Economic Advisors in reviewing revenue estimates for FY04 and developing projections for FY05.

GOMB’s own recommended budget reflects the Governor’s emphasis on efficiency and doing more with less. Its recommended FY05 budget totals $274,094,500 – more than $5 million below last year’s appropriation, and nearly $8.5 million below FY03.

GOMB prepares the Governor’s annual state budget and advises the Governor and the availability of revenues and the allocation of resources to agency programs. The office coordinates and controls the Governor’s management and budget priorities by analyzing state agency programs, personnel, and operating needs. The office issues bonds and plans and monitors the capital programs of the state. GOMB works closely with agency directors and chief financial officers to improve services at lower cost.


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