Week in Review for 11/25/13 through 11/29/13

Pensions – General Assembly
General Assembly to meet in session on Tuesday, December 3.  The session is expected to deal with the ongoing Illinois pension crisis.  Many State lawmakers and statewide elected officials have called for action to deal with at least $97 billion in unfunded liabilities reported by four major pension systems managed by boards of directors appointed by the State of Illinois, and partly funded by taxpayers.

Discussions have centered on changes to be made to the cost-of-living increases previously guaranteed to beneficiaries of State-managed pension systems, such as payouts to educational personnel and State workers.  Adjustments could also be made in worker contributions, retirement ages, and retiree health benefits.

Illinois Tornadoes – Federal Disaster Declared
White House declares 15 counties eligible for federal disaster relief.  The declaration, made by President Obama on Tuesday, November 26, opens the door for owners of storm-damaged properties to apply for targeted federal aid.  The counties are Champaign, Douglas, Fayette, Grundy, Jasper, LaSalle, Massac, Pope, Tazewell, Vermillion, Wabash, Washington, Wayne, Will, and Woodford.  Aid programs administered by the Federal Emergency Management Agency (FEMA) include temporary housing subsidies, grants for home repairs, low-cost loans to cover property damage not fully covered by insurance and additional recovery programs targeted to specific groups of people and entities such as farmers, local businesses, local governments, and non-governmental organizations.

Cleanup continues as assessors found that more than 3,400 homes were damaged or destroyed by the storm front that roared through Illinois on Sunday, November 17.  The twister count included extremely severe EF-4 tornadoes.  The preliminarily storm assessment has counted nearly 1,000 houses rendered total losses, as well as more than 2,400 houses that suffered significant damage.

Anyone impacted by the Nov. 17 tornadoes should register for the grants and low-interest loans they may be eligible for.  The Federal Emergency Management Agency (FEMA), which administers the assistance program, has a toll-free telephone number (1-800-621-FEMA (3362) or 1-800-462-7585 (TTY) for hearing and speech impaired) for victims to apply for assistance. Registration can also be done online at www.disasterassistance.gov.

For more information about disaster recovery resources, including shelters and ways to help tornado survivors, visit www.ready.illinois.gov.

Comptroller Topinka reports the State had $8.8 billion in old bills on file in the third week of November 2013.  This was an increase of $3 billion from the $5.8 billion reported six months earlier in May 2013.  This backlog means that suppliers of goods and services to the State, especially medical care providers, will once again have to wait additional months for bill payment.  The Comptroller’s office had predicted the reported increase.

Economic conditions continue to slowly improve in many parts of the United States, which has a secondary effect on Illinois.  Some Illinoisans are enjoying more income and buying more goods.   The nonpartisan Commission on Government Forecasting and Accountability (CGFA) has projected an increase of $369 million in its revenue projections for fiscal year 2014 (ending June 30, 2014).  These added funds, if applied to the back bills inventoried by Comptroller Topinka, would be sufficient to pay down about 4.2% of the backlog.        

Proposed compromise may keep live horse racing in business through 2014.  The five Illinois racetracks that operate thoroughbred and harness-horse racing had been threatened with sharp cutbacks to their schedule of live racing in calendar year 2014.  The prospect was an outwash of a glitch in racing activity in the first half of 2013, when a type of gaming registration (“advance deposit wagering”) that allows approved individuals to watch horse races and place bets from home was temporarily suspended by the State.

The partial loss of tax revenues from 2013 advance deposit wagering (ADW) racing activities caused a series of revenue shortfalls that have grown to threaten the entire live racing industry.  New legal language, currently being drafted in bill form, to extend the life of ADW gaming and stabilize the industry’s revenue streams should make it possible to enable the State to license and oversee a schedule of live racing in 2014 that will closely approximate the races that were run in 2013.  The General Assembly may consider this language in December.  

Health Care – Affordable Care Act 
Confusion increases as Illinois splits away from other states.  Many states and their insurance departments, including states politically controlled by Democrats such as California, have dropped away from the proposed Obamacare “fix” under which existing health insurance plans can be extended for up to one year by agreement between a covered person and his or her insurance company.   However, Illinois announced on Friday, November 22 that the Prairie State has green-lighted transactions of this type.

The announcement further highlighted the Quinn administration’s support for the Affordable Care Act, combined with muddled operational cooperation with the controversial new federal law.  Another right that had been possessed by Illinois’ state government was the right to set up a separate, statewide insurance sign-up sheet and website for the section of the ACA that allows (or pushes) American citizens to sign up for private-sector health insurance.  However, Illinois decided not to do this and, instead, has begun to shunt its residents to the troubled national website, “Healthcare.gov.”  As of October 31, only 1,370 Illinois residents and households had used Healthcare.gov to select a new private insurance plan for themselves, compared with more than 200,000 Illinois residents and households who had signed onto public-sector Medicaid expansion.  The expansion of Medicaid is also part of Obamacare in the states, including Illinois, which have opted into that segment of the massive new program.    

Questions asked after key state Supreme Court decision last week.  The verdict in the sales-tax case of “Hartney vs. Hamer” struck down not only a basket of state sales-tax enforcement rules, but also the disputed sales tax doctrine that many private firms had used to justify their lack of compliance with the rules.  As a result, many observers are predicting that General Assembly statutory action will be necessary to restore clarity to the situation and enable full enforcement of State sales tax laws.

Illinois sales tax laws, which began in 1933, are written based upon the assumption that the way something is bought is by going to a retail store and having it rung up at a cash register.  To simplify a very complex family of laws into one sentence, the sales tax is (in the eyes of the law) a tax on the occupation of being a retail salesperson, and the tax is charged at the cash register and collected by the operator of the cash register from the customer.   This assumption, and the doctrines that flow from it, do not take full account of the technology behind Illinois sales made by a telephone operator or through a computer server.

Many business firms, basing their actions upon these doctrines, have moved a substantial volume of retail sales activities (especially business-to-business sales) to telephones and computer servers located in Downstate towns and cities that have low sales tax rates.  The Supreme Court in this decision found, however, that if the majority of a retailer’s actual retail labor force and back-office sales activity is located in town A, the State is authorized to develop new laws to authorize the sales tax to be charged in town A, even if the sale beeped through a computer that is located in town B.  However, the decision by the state’s highest court also made clear that these laws and rules have not yet been fully perfected in a legally enforceable manner, and this new enforcement system will have to be enacted and promulgated.  Chief Justice Rita Garman, in her unanimous decision, asked the General Assembly to clear up the confusion.   Further work on this issue is expected in December 2013 and spring 2014, as millions of dollars in sales tax revenues are at stake.