The press mostly treated the event as political payback to a governor who had slashed her operating budget without warning. As you'll recall, Governor Rod Blagojevich forced Topinka to cut 15 percent out of her operating funds with just two days' notice, even though Blagojevich increased overall state spending by more than a billion dollars.
But Topinka's press conference was a far more dangerous shot across the governor's bow than the media recognized at the time, although the governor might have a way around her.
What Topinka really did was set the stage for a fight over short-term borrowing. She even tipped her hand a bit during the press conference by saying she would be hard-pressed to approve any more borrowing unless the guv got his fiscal house in order. State law requires both the comptroller and the treasurer to sign off on all short-term borrowing plans. Topinka approved $750 million in short-term borrowing during the spring session, but her office claims she was assured back then that the state would have a balanced budget and that all overdue bills would be paid.
But during her press conference, Topinka said the budget that eventually passed was "bloated" and revenues were "far too optimistic." She claimed that "borrowing and bonding were too profuse," and said the budget was "obviously not holding up" because, she claimed, "It blew up during the first week of the fiscal year."
An obscure report issued by the comptroller's office last month noted that the state needed $2.7 billion on hand to start the new fiscal year to avoid yet another cash crunch, but only had $275 million.
That means without a huge and rapid revenue infusion in the next four to six months (before income-tax payments start rolling in), the state will have a very tough time paying its bills.
Normally in a situation like this, the governor would just borrow the money and pay it back later. But now that Topinka has stated that the budget is in a free-fall, she can claim that the state won't collect enough revenues to pay back the loans, so she can't, as a fiscally responsible person, sign off on any more debt.
And, sure enough, during the State Fair the governor said the state might need to borrow more money to help out the pharmacists, who have been waiting four months for their state reimbursements. Topinka gave a thumbs-down.
The governor does have a couple of fallback positions to avoid an all-out cash-flow crisis. He can tap into about $700 million in unspent federal bailout funds. And he might be able to speed up the transfer of $1.6 billion in "profits" from his controversial $10-billion pension-bond deal. In July, the state only tapped into $203 million of that cash pile.
But there are other serious problems down the road, and the guv could find himself in a pretty awful position by the fall. Here's a very short list:
• The gravel producers have sued over a new state fee that they claim is really an unconstitutional tax. This could prevent the state from spending any of those revenues while the lawsuit is litigated.
• Most municipalities are paying their new state-imposed wastewater fee under protest, which means the state might not be able to spend that dough until the issue is adjudicated.
• As you might know, the Supreme Court justices aren't exactly card-carrying members of the Blago Fan Club these days, so sympathetic rulings on the two aforementioned issues, and any more that might surface, are not at all guaranteed.
• Riverboat income is showing a "disturbing trend," according to the Economic & Fiscal Commission. The boats' adjusted gross revenues (AGR) fell almost 2 percent last fiscal year, with Elgin's boat taking the biggest hit - 9 percent. The boats' AGRs rose almost 36 percent in Fiscal Year 2000 (after dockside gaming was approved), 7.8 percent in Fiscal Year 2001, and 7.1 percent in Fiscal Year 2002.
Rich Miller also publishes Capitol Fax, a daily political newsletter. He can be reached at (http://www.capitolfax.com).