University of Illinois: declining State credit levying a cost on taxpayers. Illinois is ranked 50th of 50 in terms of its financial probity and ability to repay its debts, according to the collective judgment of the three New York-based credit rating firms (Moody’s, Standard & Poor’s, and Fitch Ratings).Despite this poor rating, Illinois infrastructure needs continue to demand an urgent response and, on January 14, Illinois sold $480 million in new bonded debt backed by tax revenue. The interest rates demanded by bond buyers reflected the State’s sub-optimal credit rating. As some of the bonds are denominated with maturity dates as far out as 25 years from now, these interest rates will be paid by Illinois taxpayers for many years.
It is possible, by comparing Illinois’ credit rating and interest rates with the credit ratings and interest rates enjoyed by higher-rated states, such as Indiana, to estimate the costs of Illinois’ current fiscal situation upon future taxpayers. The nonpartisan University of Illinois Institute of Government and Public Affairs (IGPA) estimated that Illinois taxpayers will pay an additional $53 million on the January 14 bond sale over and above what would have had been pledged to be paid had the State kept its fiscal house in order.
Chicago Public Schools
Republican Leaders seek Independent Authority for CPS, “lifeline” for troubled school system.
Senate Republican Leader Christine Radogno and House Republican Leader Jim Durkin paved the way Wednesday for a state-created Independent Authority to assume control over the Chicago Public School system. The proposal is consistent with current state law governing all other school districts in Illinois.
“We don’t come to this position lightly,” Leader Radogno said. “But the track record of Chicago and its public school system is abysmal. Despite a $600 million financial advantage provided by the state, Chicago continues to dig their financial hole deeper. It is constant crisis. The result always ends up a plea for more state money for Chicago at the expense of school districts in our suburban and downstate communities. It has to end. Taxpayers and school children deserve better. This is a lifeline” she said.
“CPS is facing massive layoffs and a possible teachers strike. And despite credit downgrades to junk status, CPS is now looking to long-term bonds to pay for hundreds of millions of dollars in short-term operating expenses. CPS and the City of Chicago are in a state of crisis, a crisis that they have had years to prepare for and that could have been averted,” said Leader Durkin.
In the face of continued financial mismanagement and near-collapse, the two Leaders are also considering giving Chicago the financial tools to declare bankruptcy, if necessary, and to give CPS the power of bankruptcy protection as well.
Two dozen other states have enabled struggling municipalities to file for bankruptcy. As recently as 2012, Sen. Kimberly Lightford (D-Westchester) and Rep. John Bradley (D-Marion) introduced bills (Senate Bill 3679, House Bill 5609) to allow for municipal bankruptcy in Illinois.
State intervention into CPS governance was introduced in the Senate and House of Representatives on Wednesday. The legislation specifically:
- Recognize CPS’ financial difficulties and amends current state law, established by HB5537/PA 98-1155, to include the Chicago Public School system in the Illinois State Board of Education District Intervention law
- Specifies the process for the Illinois State Board of Education to establish an Independent Authority (IA) to run the school district and the removal of the current CPS Board of Education
- Specifies the State Superintendent of Schools must appoint 5-7 members to the Authority, who shall be selected based on expertise and knowledge in education policy and governance including local community members, in cooperation with local officials;
- Authority members must not be CPS employees or have a financial interest
- Authority members will serve without compensation
- Grants the Authority the power to serve as the School Board, with the same powers and duties; specifics the Authority cannot unilaterally cancel or modify existing collective bargaining agreements
- The Authority would serve until the State Board of Education determined CPS is no longer in financial difficulty; Provides the phase-in process for an elected CPS Board of Education and prohibits union contributions to those candidates
- Establishes that the state is not liable for the school districts’ debt.
“This is not a bail-out. Taxpayers statewide should not and will not be held responsible for historically wrong decisions made by Chicago politicians,” said Durkin.
“There is a serious lack of confidence in the city leaders who are making the decisions. We have thought long and hard on this, and for the sake and protection of the school children and taxpayers, changes needs to be made,” Radogno said.
“The city doesn’t need a bail-out, it needs a renaissance,” she concluded.
House Republican bills to implement the Chicago Public Schools “lifeline” were filed on Friday, January 22. HB 4498 (Durkin) would allow CPS to come under state supervision. HB 4499 (Sandack) would allow CPS to undergo a neutral evaluation to determine whether a bankruptcy filing is an essential last resort. HB 4500 (Sandack) would allow local public entities and school systems throughout the State to undergo a neutral evaluation to determine whether a bankruptcy filing is an essential last resort.
Criminal Law – Prison Reform
Prison reform proposals announced. The 14 recommendations from the Illinois State Commission on Criminal Justice and Sentencing Reform are aimed at targeted, strategic reductions in incarceration rates for non-violent offenders. The recommendations were released on Friday, January 15.
Key recommendations parallel programs that are already being implemented in other states, such as Texas. They include the expanded use of alternative sentencing, electronic monitoring of an increased percentage of persons adjudicated to serve an alternative sentence, and better pathways to release for incarcerated felons. Pathways to release include installation and improvement of cognitive behavioral therapy and substance-abuse treatment programs in Illinois prisons.
The Sentencing Reform Commission was convened in 2015 by Governor Bruce Rauner, who asked it to look at ways to maintain Illinois public safety while reducing the burden of incarceration on State taxpayers. The Commission believes that its recommendation package, if fully enacted and implemented, could reduce the Illinois Department of Corrections prison population by 25% over a 10-year period.
Economy – Minority Entrepreneurship
Governor Rauner calls for increased capital access, networking access for Illinois minority small businesses. The initiative, which will be spearheaded by the new Advancing Development of Minority Entrepreneurship pilot program within the Governor’s office, is aimed at reducing intangible barriers to entry that affect minority businesspeople.
A successful financier before his 2014 election as Illinois’ chief executive, Gov. Rauner announced the initiative on Tuesday, January 19 and criticized the exclusion of historically under-included groups from “the web . . . of business relationships that gets transactions done.” The pilot program will target at least 15 young businesspeople in 2016 for insertion into networks that include potential venture capitalists.
Higher Education – University of Illinois
U. of I. trustees freeze tuition for new in-state undergraduates. The move, made on Wednesday, January 20, was seen as a response to increasing percentages of college-ready high school graduates choosing to pursue higher education in other states after many years of above-inflation hikes in tuition and campus fees. Increasing headcounts of highly-credentialed Illinois high school graduates have been choosing to pursue higher education out of state.
Under the new tuition schedule, new Illinois in-state students in the 2016-17 academic year will pay the same base tuition rates as 2015-16 freshmen and first-year students: $12,036 at Urbana-Champaign, $10,584 at the Chicago campus, and $9,405 in Springfield. These tuition rates will be maintained throughout the four-year coursework of a student who studies continuously at the campus to which he or she was admitted. To these base rates will, however, be added significant supplemental student fees for housing, activities, and course work in STEM programs and other programs in high demand. Most other schools also charge fees of these types.
Under the new tuition schedule, incoming Illinois in-state freshmen/first-years would enjoy a growing discount from out-of-state students. International students would be asked to pay a base tuition rate of $28,502 per year at Urbana-Champaign.
Pension Reform
Governor and Republican Leaders call for meaningful Illinois pension reform. The proposal, issued by Governor Bruce Rauner, House Republican Leader Jim Durkin, and Senate Republican Leader Christine Radogno on Thursday, calls for the State to offer a choice to pension-eligible State and education-related employees.
Under this proposal, the State would narrowly define wages in the Illinois Labor Relations Act to exclude any future salary increases as pensionable. Eligible individuals would be then able to examine their personal financial circumstances and the circumstances of their families, to irrevocably decide whether they would like to keep a 3% compounded cost-of-living adjustment and forfeit future wage increases as part of their pension calculation, or move to a lower cost-of-living adjustment (lesser of 3% simple or ½ CPI) and use all future wage increases for purposes of a pension calculation.
The most recent actuarial valuation of a similar proposal, SB 2404 (Cullerton/Hoffman) in the 98th General Assembly, indicated that if this choice was offered, the State could save as much as $1 billion per year in ongoing, actuarially-required pension payments.
Illinois’ pension crisis continues to worsen. Its unfunded pension liability has ballooned to $113 billion, giving Illinois a lowest in the nation 41% funded ratio. In the next fiscal year, the State’s required pension contribution will rise to $7.8 billion, taking money away from schools and social services. This pension crisis is unsustainable and is perhaps the biggest challenge facing efforts to pass a balanced budget.
Public Health – Raw Milk
Illinois residents can legally sell raw milk for the first time. The new raw-milk rules were worked out in a compromise process overseen by the Illinois Department of Public Health (IDPH).At the bargaining table as the rules were written and modified were representatives of Illinois medical doctors, local public health agencies, and dairy farmers.
The IDPH rules will require all legal transfers of raw milk to take place on the physical farm location where the animals live and are milked. This restriction will allow both customers and public-health enforcement officers to witness how the milk is produced, stored, and sold. Federal law forbids the sale of raw milk except under close state inspection in the states where it is legally sold. The new rules will allow for the creation of an inspection system that will comply with federal law and allow the legal sale of raw milk in Illinois.
Public Health – Zika Virus
Two pregnant women test positive for Zika virus in Illinois. The news, announced by the Illinois Department of Public Health on Tuesday, December 19, adds Zika to the list of mosquito-borne illnesses tracked by public health professionals. Tropical mosquitoes are the primary transmitter of the virus, which can cause brain damage to the fetuses of pregnant women who are infected with the virus. The type of mosquito that is infected with this virus is common in South America, especially Brazil and Colombia. Cases have also been reported from Mexico and from Central America.
Symptoms of Zika infection include fever, rash, joint pain, and conjunctivitis (red eyes).There are no known cases of humans catching a Zika infection from any other person; the only known cases arise through a bite from an infected mosquito. There is no vaccine to prevent infection with the virus or treatment for the infection if it develops. The federal Centers for Disease Control has urged all U.S. travelers to tropical countries to exercise caution, and is currently urging women who are or might be pregnant to carefully consider and possibly postpone their travel plans.
Transportation – Real ID Act
Federal government declares Illinois drivers’ licenses to be out of compliance with the federal REAL ID Act. This status means that Illinois residents, as of January 10, can no longer use their drivers’ licenses to enter federal buildings, military bases, and other facilities. Five states – Illinois, Minnesota, Missouri, New Mexico, and Washington State – have been declared to be states in noncompliant status for purposes of REAL ID certification. Residents of these states with passports or passport cards will be able to use these identification devices to enter federal facilities.
The federal Department of Homeland Security, which oversees Real ID Act compliance by the 50 states, has also warned noncompliant states that their noncompliant status will threaten the eligibility of their drivers’ licenses to be used to enter secure areas of passenger airports to board passenger flights. Beginning on January 22, 2018, passengers with a noncompliant drivers’ license will need to show an alternative form of acceptable identification, such as a passport, for domestic air travel. The message to noncompliant states like Illinois: use this final 24 months of waiver time, which will expire in early 2018, to take urgent action to maintain the eligibility of your drivers’ licenses for these purposes.
Winter in Illinois
New 25-cent piece will feature Illinois’ Shawnee National Forest. The commemorative quarter, which will be minted in large quantities for nationwide circulation, will depict a scene from the “Garden of the Gods,” the Shawnee sandstone formation near Harrisburg, Illinois. The local landmark is one of the iconic scenes of the National Forest, which also includes Rim Rock, Tower Rock, and the Bald Knob Cross. The quarter will be publicly released in a ceremony set for Thursday, Feb. 4 at Southeastern Community College near Harrisburg.
Week in Review
Get the Week in Review emailed directly to your inbox! Sign up today to get a first-hand look at the continuing legislative and fiscal challenges facing policymakers in Springfield.