Week in Review for 8/4/14 - 8/8/14

Budget - Debt Rating
Bloomberg News analysis shows Illinois’ 10-year bonds trading at below BBB level. The actual level of safety and security perceived by global debt markets is set by the bond marketplace, with guidance from the three credit rating services (Moody’s, Standard & Poor’s, and Fitch Ratings). However, after the 2008 financial panic, many investors have become skeptical of credit rating services. A Bloomberg News analysis, published on Thursday, August 7, indicates that this skepticism may be weighing down the prices of Illinois bonds.

The ‘Big Three’ credit rating services have rated Illinois at A-/A3, three grades above the lowest investment-grade level and four grades above junk-bond level. However, analysts find that 10-year Illinois bonds are currently priced to yield 3.94%. This yield, demanded by bondholders who have lent money to Illinois, is comparable to debt issued by entities such as India and the Philippines which are ranked at the BBB-/Baa3 level – three notches below Illinois’ current formal debt rating, and the very lowest rating possible for non-speculative debt. A Bloomberg News headline writer summarized its finding: “Illinois Yields Approach Junk.”

The fall in value of Illinois’ bonds is attributed by the paper to the unbalanced FY15 State budget enacted by state Democrats in May 2014, and the pending expiration of the State’s four-year “temporary” income tax hike in January 2015. Current market interest rates are a piece of circumstantial evidence suggesting that global investors are skeptical of Illinois’ current credit rating and expect it to be further cut soon. Some investors may also expect Illinois’ financial plight to worsen under its current political leadership.

Budget – Obamacare
Possible waste and fraud in Affordable Care Act advertising and promotion. The process used to put the federal Affordable Care Act, often called ‘Obamacare,” into operation in 2013 left many controversies in its wake. One especially questioned move was the use by the federal Department of Health and Human Services (HHS) of taxpayer dollars to advertise and sell the program in order to encourage uninsured American residents to sign up. Reports of HHS waste and overspending were widely circulated, and the Department’s then-Secretary, Kathleen Sebelius, left the agency in June 2014.

In response to a request from State Rep. Darlene Senger, the nonpartisan Health and Human Services Inspector General has announced plans to carry out a review of allegations that federal grant money was used to market and promote Illinois ACA enrollment, including what the Inspector General’s office describes as “possible criminal and civil fraud violations and misconduct relating to HHS programs, operations and beneficiaries.” The review was made public on Friday, August 1.

Public records show that $69 million in federal money has been spent to promote the ACA in Illinois alone. Of this sum, $33 million has been allocated to “Get Covered Illinois,” a promotional program operated by the Gov. Pat Quinn administration.

Illinois State Police will increase presence in Chicago. On Wednesday, August 6, the Chicago Sun-Times reported that Mayor Rahm Emanuel has accepted an offer by Gov. Quinn to assign up to 40 state police officers to help serve fugitive warrants in four unidentified Chicago high-crime neighborhoods. Approximately twenty “surge teams,” whose members will bring together the State Police and Chicago police officers, will be asked to enter these neighborhoods and arrest persons with “known violent criminal histories who are wanted by law enforcement.”

The State Police offer, if it is accepted, will add to the current State Police presence on the streets and highways of Chicago. 180 troopers are assigned to the city under current assignment sheets. The officers patrol interstate highway mileage within city limits, particularly the Dan Ryan and Eisenhower expressways, perform ongoing liaison work with the Chicago Police Department to fight organized criminal drug gangs, and help coordinate the work of the Chicago crime laboratory.

Criminal Law – Search Warrants
Electronic search warrant bill signed into law. The first piece of legislation sponsored by State Rep. John Anthony to be approved by the Illinois General Assembly has been signed into law by the Governor. Senate Bill 2852 modernizes the warrant request process, making it easier for requestors and for judges to issue and execute valid search warrants by allowing search warrants to be issued by electronic mail in addition to by fax machine.

Prior to the signing of Rep. Anthony’s bill, state law did not provide for a search warrant issued by use of electronic mail. SB 2852 updates state law to include e-mail.

“We’re bringing greater efficiency to the process,” said Rep. Anthony. “This simple, common-sense change enhances the ability of law enforcement to execute search warrants.” The bill was supported by the Illinois Association of Chiefs of Police among several other agencies and organizations.

Senate Bill 2852 passed both houses unanimously and was signed into law on Friday, August 1 as Public Act 98-829.

Drug Crime - Heroin
Illinois responds to growing crisis of heroin use among young people. While existing law investigates and fights against heroin sales and use among at-risk population groups that include high school students, reports from affected families and local police indicate that the powerful opiate may be gaining inroads even among young children. While fears in the past that young children may have been sharing and trading addictive drugs as if they were candy may in some cases have been exaggerated, experts in law enforcement believe that no precaution is unnecessary when attempting to protect juveniles from a threat of this intensity.

In response to these reports, the Illinois House passed HB 4542 in April 2014. After further consideration by the state Senate and the executive branch, the new measure became law on Tuesday, August 5 as Public Act 98-861. It directs the Young Adults Heroin Use Task Force to expand its existing scrutiny of the heroin threat to cover at-risk students in grades 6 through grade 8, in addition to the high school students covered by existing law.

Economy – Walgreens
Retail firm announces plans to retain Illinois headquarters status. The major operator of pharmacies, with approximately 11,000 stores counting pending acquisitions, had considered transferring its legal headquarters from Deerfield, Illinois to Europe. The discussions were undertaken in conjunction with Walgreen’s approaching buyout of European chain Alliance Boots, a dominant pharmacy chain in Great Britain. While Walgreen’s earnings are subject to U.S. corporate income tax of 37.5 percent, Alliance Boots has used various European tax minimization strategies to lower its comparable rate to 20 percent.

When a firm historically based in the U.S. decides to maintain existing operations but to reincorporate in a jurisdiction with a lower tax rate, the process is called ‘inversion.” Other U.S. firms, including North Chicago-based biopharmaceutical research giant AbbVie, have announced ongoing inversion plans. Inversions of Illinois-headquartered firms could also reduce taxes paid through the Illinois Department of Revenue.

Walgreens announced its decision on Wednesday, August 6. Read the New York Times story on the decision.

Energy – Romeoville coal plant to close
NRG Energy declares financial loss, announces plans to close Illinois generating plant. The nationwide operator of electrical generating plants declared a financial loss for the second quarter of 2014 and announced plans to shutter a 251-megawatt Illinois facility in Romeoville, Illinois. In addition, the Joliet coal plant will be switched from labor-intensive coal-fired boilers to natural gas-fired. The announcements were made on Thursday, August 7.

NRG Energy is the current owner of four Illinois generating plants acquired from Edison International through bankruptcy sale in April 2014. Two Illinois coal-fired plants will remain in operation in Pekin and Waukegan; they are slated to be extensively modified to reduce emissions of carbon dioxide (CO²) and other pollutants (mercury, NOx, particulates, and SOx). The facility closure and plant rebuilds are expected to reduce NRG’s carbon dioxide (CO²) emissions by 60%, cut mercury releases by 53%, lower NOx ventings by 65%, reduce particulate releases by 70%, and diminish sulphate (SOx) emissions by 90%.

NRG Energy expects to invest $567 million in the three-plant modification project. Read the NRG web release.

The two modifications/closures in Chicago’s southwest suburbs are expected to reduce the operator’s workforce by approximately 250. The Romeoville closure is expected to occur in April 2015.

Guns – Concealed Carry
Legislative panel to look at new State Police rules. The General Assembly’s Joint Committee on Administrative Rules (JCAR), which meets on a 12-month cycle to help oversee the State’s administrative rules, is scheduled to study the State Police’s concealed-carry rules at its meeting in Chicago on Tuesday, August 12. JCAR has publicly questioned members of the State Police’s leadership team several times during the twelve months since the concealed-carry license (CCL) bill became law in summer 2013, seeking to support the complex tasks undertaken by the State Police to implement the measure and to back up public concerns about some specific aspects of the new law.

The August JCAR hearing is expected to focus on reciprocity with concealed carry laws of other states, and the procedures to be followed by the Review Board that scrutinizes CCL applications. State law allows the Review Board, on the advice of local law enforcement, to deny a CCL to an applicant who is seen as a threat to public safety. The Review Board rules, which were filed on July 10 and are already in place, provide some due process rights to persons whose cases come before the Review Board.

The great majority of Illinois CCL applicants win license approval. The application process requires submission of an image, payment of a license fee, and proof of completion of a firearms training safety course taught by a licensed CCL instructor.

Illinois State Fair
State Fair begins in Springfield. The 11-day festival opened at the State Fairgrounds on Thursday, August 7. The Fair’s website and schedule lists all of the attractions of the gathering, which brought 961,142 attendees to the Fairgrounds in 2013. Many fairgoers attend one of the many concerts held at the fair’s Grandstand, Arena, music tents, and other stages.

The Illinois State Fair has showcased Illinois farm progress since 1853. The focus has expanded to a wide-ranging celebration of goods grown or made in Illinois. Livestock, garden, and culinary champions will submit their animals, plants, and foodstuffs for awards. Agriculture Day will be celebrated on Tuesday, August 12.

Traditional State Fair attractions include the 500-pound butter cow, the 100-ride carnival midway, and seven days of live harness horse racing. Ten days of recognition events honor Illinois veterans, senior citizens, farmers, children, and other groups. The State Fair will conclude on Sunday, August 17.

Labor – Wage Payroll Cards
Bill signed to regulate wage payroll cards. The movement, by employers and employees, of many wage payment cycles from paper paychecks to electronic payment continues. For workers who do not have bank accounts, wages may be paid in the form of electronic cards pre-loaded with an electronic cash balance. While this payment method increases the security and control that a worker enjoys over his or her money, it also creates the opportunity to charge fees as the balance moves from card to currency. To control and regulate this new technology, the General Assembly passed HB 5622 in spring 2014. The measure was signed into law on Wednesday, August 6 as Public Act 98-862.

Following extensive negotiations, language was passed that removed most of the opposition to the bill. As approved and signed into law, HB 5622 bans certain wage payroll card fees and requires disclosure of other charges – such as the charges that any cash machine cardholder must pay when using a cash machine operated by a bank where the cardholder does not have an account. The bill also creates a 60-day window for closing out any wage payroll card balance after a relationship ceases between an employer and an employee.

Puppy Mills – Animal Welfare Act
Third-grade students successfully fight to change Illinois law. The Animal Welfare Act, which regulates pet shops, animal breeders, and animal shelters, bans certain types of conduct that is cruel to animals or detrimental to their health. For example, the Act forbids separating a puppy or kitten from its mother for the purposes of selling it until the young animal has reached 8 weeks of age. The Act requires that dogs and cats, if offered for sale, be accompanied with information about their vaccinations, veterinary records, breed status, and fertility or sterility. Parallel information requirements are imposed on shelters that offer animals for adoption. Other provisions of the Act impose similar controls.

Violations of this Act are punished with fines. However, the fine schedule had not been adjusted in many years for inflation. HB 4410 increases the minimum fine for a first-time violation of the Animal Welfare Act from $200 to $500. Similar increases are imposed upon higher fines for a second, third, or subsequent violation. This bill was signed into law on Saturday, August 2 as Public Act 98-855.

The lead sponsor of HB 4410 was Rep. David Harris, who responded to a concern brought to him by three third-grade students from Patton Elementary School in Arlington Heights; the students testified on the measure and won the support of the House Agriculture Committee. After committee approval, more than 100 House members voted in favor of the bill, with the roll call being 104-6-0.

Transportation – Quad Cities
Passenger train service to Quad Cities could resume. The Illinois Department of Transportation announced on Monday, August 4 that it had reached an agreement with the Iowa Interstate Railroad to perform design work to rebuild historic Wyanet-Moline Rock Island trackage to passenger train standards. The agreement will include construction of a new depot in Geneseo, Illinois. A similar agreement will be necessary to enable the future line to use current passenger-train trackage operated by BNSF between Chicago and Wyanet.

The future passenger line is expected to provide additional train services to LaGrange, Naperville, Plano, Mendota, and Princeton, and resume services to Geneseo and Moline. Northwestern Illinois, including the Quad Cities, stopped enjoying passenger train service in December 1978 with the bankruptcy of the old Rock Island Line and retirement of the “Quad Cities Rocket.”

A summary of the agreement can be found in Railway Track and Structures, an online summary of U.S. railway track improvement work and contracts.

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