Week in review for 12/2/13 through 12/7/13

General Assembly enacts, Governor signs landmark pension reform bill.  SB 1, as amended by conference committee, is expected to reduce future actuarial expenses to State taxpayers by $160 billion.  These savings are subject to many future events, including the outcome of litigation to determine the constitutionality of the new law.  In addition “Tier 1” public-sector employees affected by the policy changes enacted under this statute may change their retirement plans to increase or decrease the savings the State will enjoy under this bill.   The bipartisan House vote on Tuesday, December 3, was 62-53-1.  The Senate vote of 30-24-3 sent the measure to the Governor for his signature.  The Governor signed the bill on Thursday, December 5.

Enactment of SB 1 was seen as a key step towards the stabilization of Illinois’ financial image.  Fitch Ratings, a key global credit-rating firm, responded to the enactment on Wednesday, December 4 by issuing a statement that enactment of the bill was a “positive indication” of the state’s future fiscal stability.  

The enactment of SB 1 as amended followed a staunch debate process that lasted many months.  While the final language of SB 1 was revealed only a short time before the vote, many key components of the legislation, including changes to the cost-of-living increases previously slated for Tier 1 pensioners, had been extensively discussed by interested parties.   An earlier version of SB 1 had been approved by the House in May 2013, further adding to the data available to all sides as the debate continued.

While enactment of SB 1 could help the State and its lawmakers enjoy sharp spending cuts in FY15 and future fiscal years, the ability of the State to implement these cuts may be delayed as interested parties subject the constitutionality of the new law to further litigation.

Illinois tornadoes
Jobless benefits available for people whose workplaces were damaged by November storms.   On Wednesday, December 4, the Department of Employment Security (DES) announced that persons whose jobs were affected by the squall line of 25 tornadoes that affected Illinois on November 17 may be eligible to apply for federally-financed unemployment assistance.

This jobless aid program is separate from the standard unemployment insurance (UI) program and provides up to 27 weeks of benefits to a person or household who is unemployed as a consequence of a storm that has been declared to be a federal disaster.   Fifteen Illinois counties have been declared to be federal disaster areas as a result of the November 17 superstorm.  Meanwhile, the Federal Emergency Management Agency (FEMA) continues to take applications, through a separate process, for aid payments covering some subsets of storm damage in the disaster-designated counties.

Seven people in Illinois were killed by the tornadoes.  

Budget – credit rating
Possible credit rating stabilization if Illinois can continue to make budgetary progress.  Fitch Ratings, one of three key credit-rating firms, currently ranks Illinois’ general-obligation debt at A- with a negative outlook, the lowest ranking of any U.S. state.   In a statement released on Wednesday, December 4, Fitch pointed to a “positive indication” generated by the passage of SB 1 (pension reform), but also called for further State budget work before Illinois’ debt can be upgraded.

Illinois’ general-obligation debt rating is significant because the State continues to borrow to meet infrastructure needs.  Illinois has inked an agreement with Wall Street to float an additional $350 million in debt in December for school construction purposes; the bond issue is currently scheduled to go to market on Thursday, December 12.

Actions recommended by Fitch included closing what the firm calls a “structural mismatch between spending and revenues.”   The New York-based firm noted the pending phasedown of part of the current “temporary” income tax surcharge on January 1, 2015, and hinted that timely action on a permanent budget solution, including further spending cuts, would be a necessary piece of the puzzle.  

Budget – Medicaid 
Approaching dismissal of Maximus could worsen Medicaid budget situation.  Maximus is the private sector firm tasked by the State with a key role in controlling exponential growth in Illinois’ Medicaid costs.  Medicaid costs are exploding in Illinois due to many factors, including the enrollment of tens of thousands of new Illinois residents in the program under the federal Affordable Care Act.

In an effort to hold back this expense line, the General Assembly enacted a package of reforms in spring 2012 and spring 2013.  A key component of the 2013 reform package was the Redetermination Project, a multistage project to enhance the examination, and verification, of the eligibility of the 2.8 million Illinois residents currently enrolled in Medicaid.  Verifying these individuals’ status will help to pinpoint some individuals who, as a result of changes in their life circumstances, have undergone changes in their eligibility.    

Unfortunately, House Republicans have discovered that this essential project is now stalled.  The current State administration is in the process of severing its ties with the private-sector firm, Maximus, which possesses the expertise needed to scrutinize the Medicaid database and question beneficiaries who may be ineligible.  Even though Maximus’ samplings discovered flaws in the eligibility status of almost one-half of the first round of Medicaid beneficiaries that they surveyed, Maximus is now winding down its work and will be required to sever its ties under this contract by December 31, 2013.  State labor unions raised questions about the legal status of contracting this work out to the private sector.   Although the relevant arbitration decision has been appealed, House Republicans have learned that the Maximus shut down is taking place and the future status of the Redetermination Project is unclear.

Press, financial experts warn that Chicago also needs pension reform.  A wide variety of pension systems cover workers and professionals in Chicago public safety, schools, and many other city agencies.  Mayor Rahm Emanuel called on Wednesday, December 4 for the General Assembly to enact legislation, similar to SB 1 for State-managed pension funds, which will allow the city’s government and school board to “claw back” some of the actuarially unfunded pension commitments made in prior years by Chicago.

The Chicago Tribune reported in November 2013 that the consolidated unfunded pension liabilities of Illinois’ largest city have topped $19 billion.  Calculated on a per capita basis, this burden equals approximately $7,222 per resident, or almost $29,000 for a family of four – a per capita number comparable to the number for the entire State of Illinois prior to the enactment of SB 1.  To these numbers must be added the separate unfunded pension liability notched by the Chicago Public School system, totaling more than $7 billion in additional debts.  General Assembly action, which could also affect the separate unfunded pension debts compiled by Cook County, is possible in the spring 2014 session.

State transfers $5.9 million for aid to victims of spring 2013 floods.  The State’s personnel, in partnership with specialists from the Federal Emergency Management Agency (FEMA), fanned out over Downstate Illinois in spring and summer 2013 to assess and provide relief to persons who suffered damage from heavy rains and high water, including families and small businesses.  In order to pay bills from this relief effort, the General Assembly on Tuesday, December 3, moved $5.9 million from State general revenue funds to a dedicated fund to enable these bills to be paid.  The measure, SB 1955, was not an appropriation bill.  It was approved in the House by a vote of 115-0-0.  

Economy – jobs
House fails to take action on controversial bills to offer tax relief to key employers.  Three firms, Archer Daniels Midland (ADM), Office Depot and Univar, are searching for new locations for their global headquarters locations and staff.   Language to provide these three firms with so-called “special EDGE” income tax credits, payable from the income stream withheld by Illinois employers from the income taxes paid by their employees, cleared the Senate on Tuesday, December 3 but failed to achieve passage in the state House.   Both bills are House bills that were amended in the Senate and returned to the House for concurrence; the ADM bill is HB 2536, and the Office Depot-Univar bill is HB 3271.  Many Illinoisans know Office Depot as “OfficeMax,” the former Naperville-based office-supply-retail firm that merged into Office Depot in November 2013.  The House may take up either or both of these bills upon its next session day.

Gambling – horse racing
Proponents of Illinois’ live horse racing express concern as General Assembly fails to take action on advance deposit wagering issue.  A proposed compromise measure, drafted as an amendment to SB 66, contained needed language to keep horses running at Illinois’ five racetracks through calendar year 2014.  The surcharges on winning bets contained in this language will generate operating funds for the Illinois Racing Board, some racetracks, and some horsemen’s associations.  The bill also contains language to extend the legal lifespan of advance deposit wagering (ADW), a pilot platform used in Illinois to allow some approved bettors to place wagers and watch races from home via cable television.   Under current law, authorized ADW bets can no longer be placed after January 31, 2014.

This floor amendment was not taken up by the full House on Tuesday, December 3.  The House is next scheduled to be in full session on Wednesday, January 29, two days before the January 31 deadline.  If SB 66 is considered at this time and enacted with this week’s agreed language, the bill would extend the legal lifespan of ADW wagering in Illinois for thirty-six months, through January 2017.   The bill also makes changes to the rules governing placement of off-track betting (OTB) parlors.

Health care
Representative Mike McAuliffe’s HB 3765 points to warning sign for future monitoring for breast cancer.  The new bill, filed on Tuesday, December 3, creates a standardized warning notification for mammography patients whose tests reveal dense breast tissue.  Mammography clinics would be required to include copies of the notification in all future patient notifications that describe the results when the patient has been scanned and the scans examined by a practicing radiologist.

The appearance of dense breast tissue is not a sign of cancer.  It is a warning sign identified by practitioners of mammography as a sign that future tests, including mammograms, are highly desirable.  Dense breast tissue by itself is very common and is not abnormal.   It can shade out the appearance of a separate tumor on a mammogram or other scanning test. The notification is meant to provide a stimulus to patients to ask their doctor about possibly ordering more tests, or changing the interval time between tests.   Public-health experts want to use the existing United States infrastructure of mammograms to further increase early detection and successful treatment of breast cancer.

HB 3765 (McAuliffe) was referred to the House Rules Committee.

Local government
Rockford-area’s Representative John Cabello files new bill to clamp down on “home rule” tax increases.  Illinois has more units of local government, approximately 7,000, than any other state.   Current law allows many of these units, particularly units with “home rule” powers, to adopt ordinances to impose a wide variety of tax and fee increases without referendum.

HB 3759 (Cabello), filed on Tuesday, December 2, would amend the Municipal Code to provide that no city, town, or village in Illinois would be authorized to impose any tax increase, or impose any new or additional tax, without approval by the people via referendum.  Cabello’s ground-breaking bill was a response to constituent concerns about the abuse of public-sector taxing authority by some units of local government, especially in home rule municipalities that possess a wide variety of statutory pathways under current law to evade the overall assumption (by most Illinois taxpayers) that most new taxes require approval by the people.

HB 3759 (Cabello) was referred to the House Rules Committee.

Transportation – airlines
Final preparations for merger-acquisition by one of O’Hare Airport’s top two airlines.  Following the recent resolution of remaining legal interactions between the two airlines and the U.S. Department of Justice, American Airlines is scheduled to complete its merger with Phoenix-based USAir on Monday, December 9.

The merged airlines are scheduled to begin operating reciprocal frequent-flyer miles in January 2014 and to make progress throughout the year to mesh their operating patterns and begin to combine their operations.  The merger could lead to consolidated flight takeoff and arrival times from O’Hare to airports used by USAir as hubs: Charlotte, Philadelphia, Phoenix, and Washington/Reagan National.

Transportation - highways
Many State limited-access highways preparing to transition to 70 mph in January.   The transition will be effective on many stretches of limited-access highways located outside Illinois urban areas.  SB 2356, enacted by State law in May 2013, was granted a delayed effective date to enable the State to paint new highway speed limit signs, and make other transitional changes.  The new signs should start going up by mid-January.

37 states, including four states adjacent to Illinois – Indiana, Iowa, Kentucky, and Missouri – already allow drivers to move at 70 mph or faster.  The House vote on SB 2356 in May 2013 was 85-30-0.