On March 27, 2015, the State of Illinois enacted Public Act 99-0001 and Public Act 99-0002. The legislation will close gaps in the state budget for Fiscal Year 2015 by sweeping $1.3 billion from various special funds and applying a 2.25 percent reduction in appropriations to line items funded by General Funds. The fund sweeps in particular deposit dedicated transportation user fees into the General Revenue Fund, redirecting a key source of transportation funding to non-transportation purposes. The legislation is intended to balance the state's budget for the remainder of FY15, which ends on June 30, 2015; the budget passed in 2014 approved for FY15 did not account for the January 1, 2015, expiration of the temporary income tax rate increase.
Provisions of the Bills
Under Public Act 99-0001, appropriations for FY15 are reduced by 2.25 percent across line items funded by General Funds (i.e., the General Revenue Fund, Common School Fund, and Education Assistance Fund). The reductions affect state support for many programs, including General State Aid to elementary and secondary education, higher education, job training, health care and human services, grants to Pace paratransit under the Americans with Disabilities Act, and the Department of Natural Resources.
Public Act 99-0002 sweeps 106 special funds, resulting in transfers to the General Revenue Fund totaling $1.3 billion. The bill also transfers $48 million from the Federal High Speed Rail Trust Fund to the General Obligation Bond Retirement and Interest Fund. Among the special fund sweeps are several accounts important to transportation programs, including $250 million from the Road Fund, $70 million from the Downstate Transit Improvement Fund, $50 million from the State Construction Account Fund, $50 million from the Motor Fuel Tax Fund, and $10 million from the Grade Crossing Protection Fund.
Fiscal Impacts
The fiscal effects of Public Act 99-0001 are relatively straightforward, reducing appropriations for the remainder of the state fiscal year by a reported $300 million. In contrast, Public Act 99-0002 fiscal impacts are less clear cut. Some of the funds identified for sweeps may have more funds than are necessary to make planned expenditures or disbursements, which would mean that the law's provisions would not change current policy.
Further, Public Act 99-0002 includes provisions to allow the fund sweeps to be reversed in certain circumstances. Under the act, if the transfers result in insufficient cash to make expenditures under FY15 appropriations (which were not reduced for special funds), then the Governor's Office of Management and Budget (GOMB) is authorized to allow transfers back to the special fund from the General Revenue Fund to satisfy the expenditure. Not all expenditures from these special funds are made via appropriations (e.g., the disbursement of state sales tax revenue and state use tax revenue to local governments), so it is unclear how this provision will affect some of the funds. GOMB may also reverse the transfer if it determines that the transfer would jeopardize federal funding or violate a court order.
Looking Ahead
Public Act 99-0001 and Public Act 99-0002 balance the state's budget without relying on new taxes or debt. While the fiscal impact of Public Act 99-0001 and Public Act 99-0002 on the activities supported by individual funds is unclear at this point, the overall intent is to reduce expenditures. Similarly, the Governor's budget proposal for FY16 would result in a 9.7 percent overall decrease from originally enacted FY15 appropriations.
Public Act 99-0001 and Public Act 99-0002 reduce funding levels for many program areas that support GO TO 2040 policies, including natural resources and workforce development. Notably, the legislation sweeps over $400 million from various transportation funds. These sweeps may not cause immediate reductions in spending or affect ongoing projects, because the legislation protects previously authorized expenditures and limits the cuts' potential to jeopardize federal funding. However, they could affect future transportation projects, as significant reductions could make it difficult for transportation agencies to continue moving projects through the planning and engineering processes.
Critically, sweeps of these transportation funds violate the user-pays principle that is a hallmark of GO TO 2040's strategic investment recommendations and CMAP's legislative principles. Users of the transportation system have traditionally paid for its upkeep and expansion via motor fuel taxes and vehicle fees, thereby connecting costs imposed with benefits received. Further, dedicated transportation funds are critical in planning for complex, multiyear capital projects. By sweeping these dedicated funds and applying them to cover the state's day-to-day operations, the state sets a troubling precedent that runs counter to the prudent management of transportation resources.
At its January 2015 meeting, the CMAP Board approved a set of legislative principles and agenda for the 99th General Assembly. CMAP will advocate for the positions outlined in those documents, including support for user fees, while continuing to monitor legislative activity in Springfield throughout the session.