Illinois budget deal: Worry about cart first, wheels later

Jan 31, 2017

Editor’s Note: This is Part 1 of an occasional series delving into the details and possible effects of the Illinois Senate’s “Grand Bargain” compromise. Part 2 is here.  A look at college funding under the proposed budget’s spending bill is here.

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I saw a headline last week that referred to the “wheels coming off” the Senate’s “grand bargain” Illinois budget deal after the chamber’s Democratic and Republican leaders decided against putting the package up for a vote.

If you’re going to use the wheels-and-cart analogy, however, I prefer a more optimistic perspective. I’m just glad there’s a cart.

Now that Attorney General Lisa Madigan has filed a lawsuit seeking to halt state employee paychecks until lawmakers and Gov. Bruce Rauner enact a budget authorizing such payments, it’s possible — I’d say likely — that the folks in Springfield soon will have a new incentive to get the cart built and rolling by Feb. 28. That’s when Madigan has asked that paycheck-writing authority for the Illinois Comptroller’s Office be rescinded pending passage of a budget.

The threat of government actually shutting down — releasing a tidal wave of angry constituents and unpaid state workers in the process — has a way of inspiring elected officials to action.

But back to the fate of the “grand bargain.” Last week, as it was altered (soda tax dropped, income tax increase made steeper, minimum wage increase possibly dropped) and ultimately packed away until the Senate returns next week, the budget deal was portrayed in some accounts as damaged and rapidly sinking. I prefer to view it as under construction.

Until Senate President John Cullerton, D-Chicago, and Senate Republican Leader Christine Radogno, R-Lemont, brought forth their package of 13 reform and revenue bills three weeks ago, state government had had no serious, bipartisan budget proposal for the 19 months since the 2015 budget expired. Even as they postponed action on the bills last week pending the Senate’s Feb. 7 return to Springfield, both Cullerton and Radogno stressed the evolving nature of their proposal.

“This is been a terrific process thus far, I, unfortunately, I don’t think we’re at the point of being able to take a vote. That is by no means a statement that we are backing off of this effort,” Radogno said Jan. 26. “…It is hard and none of us are going to like this in the end but we have to get the state on a path with a sustainable balanced budget and the reforms that are going to keep us there.”

Radogno encouraged senators to listen to their constituents in the days to come but to resist pressure from groups that don’t like aspects of the bills.

“There’s going to be a lot of pressure on us when we go home — on (Democrats) from certain elements, on us from certain elements. Don’t succumb to that. We need to do this together for the good of the state,” Radogno said. “…Just because we’re not taking a vote today. Absolutely does not mean that our efforts are becoming unraveled. In fact, I think they’re becoming more real because we realize the complexity of the situation.”

Cullerton called on his chamber to get behind the broad agreement and be ready to vote.

“I also have been encouraged by the progress that we’ve made and it’s really progress that might have seemed impossible just a few weeks ago. So if we need more time to pull this together, I’m going to consider that encouraging. We have a bunch of questions that have been posed by our members in the caucus. We’re going to get those answered,” Cullerton said. “But then it’s going to come time to make a decision. To reiterate: The problems we face are not going to disappear. In fact they’re going to get more difficult every day. So when the Senate returns to session the week of Feb. 7, everybody should be ready and prepared to vote.”

Radogno’s admonition that the budget process “is hard and none of us are going to like this in the end” may be an understatement. But so too is her statement that “we have to get the state on a path with a sustainable balanced budget.”  With those words in mind, here is a look at what’s in the budget bills at this point. Keep in mind that everything here is subject to change and may be significantly different if these proposals get hearings in Springfield beginning Feb. 7.

Remember, too, that the package as currently written truly is a package. If one bill fails, none of the others become law.

    • Senate Bill 1: School funding formula change. This bill has not yet been written and could be arguably the most important of the 13. It seeks to change the way state P-12 education dollars are distributed so that school districts that have low property tax resources don’t get shorted on educational resources. This is a reform that lawmakers on both sides have called for for years. Implementing it, however, inevitably means school districts in the state’s most affluent areas will lose a portion of their state funding. This makes it politically explosive.
    • Senate Bill 2: Minimum wage increase. The state’s minimum wage would increase incrementally to $11 an hour by 2021. As of last week, an amendment had been added to this bill that would remove it from the budget package though there was no vote on the new language.
    • Senate Bill 3: Local government consolidation. This would make it easier for voters to abolish small government bodies, such as townships, that they judge to be unnecessary. Cutting Illinois’ government bureaucracy has been a major goal of the Rauner administration.
    • Senate Bill 4: Would allow the state to borrow $7 billion to pay down a backlog of bills that now stands at $11 billion and finds creditors paid six months late. The idea is to get the state’s creditors paid and stem the flow of hundreds of millions of dollars of late fees the state now pays. The Civic Federation gave this plan a cautious endorsement.
    • Senate Bill 5: Chicago teacher pension funding. This bill restores $215 million for Chicago Public Schools in the current fiscal year that CPS had budgeted for its teacher pension fund. Rauner vetoed this bill in November because he said Democrats had reneged on their promise to pass state pension reform in exchange for his signature. It also puts in place a formula for CPS pension payments in future years. Chicago lawmakers view this bill as putting CPS on an equal footing with all other Illinois school districts, which get state funding to help pay for teacher pensions. Many from other regions of the state have called it a bailout of the financially strapped district.
    • Senate Bill 6: Spending. This is the budget portion of the package. A highlight is its proposed spending for higher education, which would fund the state’s nine public universities this year at their FY 2015 levels. If passed, it would mean that the schools, which endured a reduction in state funding of about 70 percent in FY 2016, will have weathered a 35 percent state funding cut in fiscal years 2016 and 2017. (More detail here.)
    • Senate Bill 7: Gambling expansion. This massive bill would sanction a casino in Chicago and also in Rockford, Danville, Lake County, suburban Cook County, and Williamson County. It also would allow video gambling at horse tracks. Expect opposition from current casino owners and anti-gambling advocates.
    • Senate Bill 8: State government procurement reform. In general, it cuts red tape in state purchasing. Allows universities to bypass state purchasing regulations and establishes a state vehicle management system similar to one in place in California. Also gives vendors greater flexibility in bidding. Rauner last year pushed for this reform, saying it could save the state $500 million.
    • Senate Bill 9: Income and excise taxes. This bill underwent the most profound transformation between its introduction and its first committee hearing. It originally contained a controversial penny-an-ounce tax on sugar-sweetened drinks and proposed raising the personal income tax rate from 3.75 to 4.85 percent. It was amended to strike the soda tax, change the personal income tax rate to 4.99 percent, impose excise taxes on several services (dry cleaning, storage, landscaping, repair/maintenance) and establish an annual “business opportunity tax.” This likely will generate the hottest debate of all the bills in this package as business groups already have voiced strong opposition. But it’s been significantly altered once and could see many more changes as sponsors seek to secure the 30 votes it will need to get out of the Senate.
    • Senate Bill 10: This bill is intended to help home-rule municipalities obtain lower interest rates for their bonds. It’s technical in nature and probably the most uncontroversial bill in the Senate budget package. Essentially, it allows a municipality to earmark a portion of tax revenue — for example, a sales tax or gaming tax — to guarantee bonds. The state then transfers that revenue into a special fund rather than sending it to the municipality’s general fund. For the city of Chicago, this mechanism could save “tens of millions of dollars” in interest costs, Cullerton explained in testimony in the Senate Executive Committee on Jan. 24.  Cullerton explains the bill here:

  • Senate Bill 11: Pension reform. In 2013, the General Assembly passed and Gov. Pat Quinn signed a pension reform bill that was designed to save the state billions of dollars annually. In May 2015, the Illinois Supreme Court ruled it unconstitutional. Senate President John Cullerton had opposed the 2013 pension reform bill because he said it would not survive a court challenge. He favored a more limited approach that would save the state less — about $1 billion a year — but would survive a challenge by offering employees a choice between keeping their 3 percent compounded annual raises in retirement in exchange for a lower pensionable salary. Conversely, they could give up the compounded annual increases in retirement but have a higher pensionable salary. This is a version of that plan. It has Rauner’s support, but House Speaker Michael Madigan has yet to voice an opinion.
  • Senate Bill 12: Workers’ compensation reform. This bill makes several changes, including stronger anti-fraud measures and clarification of when traveling workers who are injured are covered under workers’ compensation. It also proposes to reduce the reimbursement rates for health care providers, whose rates were cut 30 percent in a 2011 workers’ compensation reform bill. The bill does not contain the one thing Rauner and business groups have been lobbying for: a change to the legal standard under which an injured employee can claim workers’ compensation benefits. Trial layers, the state’s main business groups, the medical industry and the insurance industry have voiced opposition. Even the NFL Players Association spoke against the bill. Where trial lawyers and medical interests see the bill as too harsh, business groups — whose views mirror Rauner’s — say it’s too weak. Here is testimony from opponents in the Senate Executive Committee Jan. 24:

  • Senate Bill 13: Property tax freeze. Of all the tax reforms Rauner has sought since his election, freezing property taxes is the most ambitious. This bill would impose a two-year property tax freeze statewide under which property taxes only could be increased if voters approve. But it also contains provisions to help school districts dependent on property tax revenue save money. One such provision is allowing districts to outsource driver education to commercial driving schools. School districts also would be relieved of the state’s requirement of daily physical education classes. The state’s two biggest teachers’ unions spoke in opposition to this bill, saying it will hurt school districts already suffering under a state education system that forces them to rely excessively on property taxes. Cullerton responded that passage of SB 1 to change the school funding formula will nullify that argument.

In the coming days, Reboot Illinois will examine each of these bills in greater depth, talking to experts and advocates about the effects of each. With any luck, there will be a cart, wheels and a map for moving by the time we’re done. For more on the tax increase legislation, click here.

 

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