Week in review for 12/9/13 through 12/14/13

Pensions – Illinois credit rating
Moody’s, Standard & Poor’s issue positive statements about Illinois pension progress.  After pension reform bill SB 1 was signed into law on Thursday, December 5, global credit-rating firm Moody’s labeled the move a “credit positive.”  Moody’s currently ranks Illinois’ general-obligation (G.O.) debt as A3 with a negative outlook, the lowest ranking among the 50 states, and this rating did not change this week.   The statement by the New York-based debt watchdog described itself as awaiting independent actuarial confirmation of the proclaimed $160 billion in savings “clawed back” from pledged future pension payments by the controversial measure.   The statement was issued on Friday, December 6.

On Tuesday, December 10, Standard & Poor’s raised Illinois’ A-minus credit rating with a negative outlook, to A-minus with a “developing” outlook.”  The removal of the negative outlook was seen as a positive move that matched the action taken by Moody’s.

Moody’s and Standard & Poor’s positive statements followed a similar judgment issued last week by credit rater Fitch Ratings.  Moody’s is #1, Standard & Poor’s #2, and Fitch #3, among credit rating bureaus nationwide.  Their judgments play strong roles in determining the future interest rates that Illinois will pay when it sells debt into the marketplace to build roads and meet other necessary infrastructural responsibilities.

Illinois tornadoes
Disaster Recovery Centers open in Brookport, East Peoria, and Rantoul.   Illinois was affected by a line of twisters that passed through our State on Sunday, November 17.   Disaster Recovery Centers, affiliated with the Federal Emergency Management Agency (FEMA), opened in Brookport on Friday, December 6; in East Peoria on Friday, December 6; and in Rantoul on Tuesday, December 10.

The centers offer help with applying for disaster assistance and finding out about other disaster programs available from the U.S. Small Business Administration (SBA), state and local agencies, and voluntary organizations.  Local residents affected by the storms must apply with FEMA even if they already provided damage information to local officials, other agencies or organizations.  Based on information released on Wednesday, December 11, federal relief spending as a result of the November 17 tornadoes and squall line has topped $1 million.

FEMA’s website describes the addresses and phone numbers of these Centers, and the work they expect to do.  These are temporary facilities that will only stay open as long as eligible people are using them, so FEMA advises potentially eligible people to come in as soon as possible.  The website describing the Brookport and East Peoria Centers is http://www.fema.gov/news-release/2013/12/05/disaster-recovery-centers-open-east-peoria-brookport, and the Rantoul center is described here: http://www.fema.gov/news-release/2013/12/09/disaster-recovery-center-opens-rantoul.   All persons who live in disaster-declaration counties affected by the November 17 storm event are eligible to work with FEMA through these Centers to determine their aid eligibility and status.

House Republicans renew call for Medicaid redetermination.   This budget item has strained State general funds to the limit, with billions of dollars in unpaid bills from medical care providers piling up annually.  General funds tax receipts continue to grow more slowly than the growth in approved rates for pharmaceuticals, medical devices, and professional services that are mandated to be provided as part of the overall entitlement of all Illinois residents to enjoy basic medical care.

One factor leading to out-of-control Medic aid cost growth has been the inability of Illinois administrations to scrutinize eligibility rolls and take steps against persons who have enjoyed changing life circumstances that make them no longer eligible for Medicaid.  Representative Patti Bellock (R-Westmont) is the chief General Assembly sponsor of the Redetermination Project, a multi-year program to carry out this scrutiny.

However, while the Redetermination Project has been enacted as part of the operating authority governing the State’s Medicaid program in fiscal year 2014, the Project has not yet been fully implemented.  Legal snarls have brought to a halt the relationship between the State, its workers, and expert outside contractors that most feel will be necessary to continue and complete this project.  Meanwhile, a typical Medicaid patient continues to establish the eligibility of his or her family by discussing household income with a social worker.  Once enrolled in Medicaid, the patient and his or her household tends to stay on Medicaid.  House Republican Leader Jim Durkin (R-Burr Ridge) called on Monday, December 9 for the State to re-start its stalled Redetermination Project and take a look at the status of 2.8 million Illinoisans who are in Medicaid-eligible households.

Concealed carry
State Police moves toward implementation of the concealed carry law.   Illinois’s statewide law enforcement agency is required by law to make concealed carry license (CCL) applications available to the public no later than January 5, 2013.  The State Police are issuing permits to instructors who will provide the required training to applicants.  The rules governing issuance of these licenses are being finalized.  Illinois residents following the new law are invited to read the State Police’s CCL website overview at https://ccl4illinois.com/ccw/public/home.aspx.  Frequently asked questions are answered by the State Police at http://www.isp.state.il.us/firearms/ccw/ccw-faq.cfm.

The State Police has begun to advise prospective CCL applicants to take some steps that could speed up processing of their applications after January 5.  The master CCL website contains a link to a signup page where prospective applicants can establish an individualized digital identification password.  This is important because applicants will find that their digital ID will be a necessary step in the signup process.  Prospective applicants are also advised to learn more about the fingerprinting requirements contained in the law.

Some advocates for firearm rights are concerned about some aspects of the new law and rules.  The State Police plans to shunt key parts of the application process, including establishing and using a digital ID, online.  This could burden persons without access to a computer or who are not fully comfortable with submitting information on computer screens.    In another area of concern, and contrary to what some participants believed to have been the understanding at the time the concealed-carry law was passed in spring 2013, very little leeway is created to grant or for citizens to enjoy reciprocity with the concealed-carry licenses, qualifications, and training procedures of other states.  49 other states already had some form of concealed carry law in place as of mid-2013, and some of the persons granted rights under the laws of these 49 other states had hoped these rights would be transferable to Illinois.  

More news is expected to be generated as the application availability deadline approaches.  Interested person may want to monitor the Illinois State Police concealed-carry website and the “In the Know” website operated by the Illinois House Republican Caucus, http://www.intheknowillinois.com/.

Health care
Health Alliance announces 21.8 percent price hike for Affordable Care Act rollovers.   Persons with existing individual health care insurance policies have greeted the phase-in of the federal Affordable Care Act (“Obamacare”) with confusion and dismay.   In some states, many policies are being cancelled.  In other states like Illinois, some policies are being offered for renewal at much higher prices.  On Monday, December 9, Urbana’s HealthAlliance – a key provider of health insurance to thousands of Downstate residents – announced that 20,000 policyholders would be offered a one-year extension.  However, these individual health insurance customers would have to pay premium increases averaging 21.8 percent.

In addition to the price increase, covered individuals in this class will face uncertainty about their status in 2015 and following years.  The individual policies are not compliant with one or more of the lengthy list of mandates imposed by the ACA, and the waiver granted by Washington to these insurance firms and their customers is for one year only.  Persons who plan to buy Affordable Care Act-compliant health insurance plans from HealthAlliance or other private insurance firms may face even greater increases in their bills, deductibles, and co-payments.  

Only 7,043 Illinois residents sign up for Affordable Care Act private-sector health care policies during first 60 days of operation.   The months of October and November, 2013, were the last full months before a series of “deadlines” are scheduled to kick in, starting on December 15.  Plans purchased no later than December 15, 2013 will be authorized to provide coverage starting on January 1, 2014, the effective date of the cancellation notice of many existing American health care plans.

Hypothetically, persons with cancelled individual health insurance plans who do not purchase new plans prior to December 16 will have to go without health care insurance for an indeterminate number of days.   In addition, reports indicate that “glitches” in ACA websites may mean that a substantial number of people who think they have qualified for, and begun to take steps to purchase, a health insurance plan have not yet submitted all of the required data, perfected their purchase, and solidified the legal status of their coverage.  Significant news coverage is being allocated to problems of uncovered patients on and after January 1, 2014, and persons in this category should continue to research their options.  

The new “Obamacare” numbers were released by the federal government on Wednesday, December 11, 2013.

OfficeMax announces closure of Naperville headquarters; approximately 1,600 Chicago-area jobs to be affected.  The retailer sold more than $7 billion in product annually, mostly office supplies and related goods.  The firm performed much of its inventory control and logistics duties from its DuPage County headquarters, necessitating a significant employee headcount of highly-qualified and executive-level professionals.  1,250 OfficeMax employees worked in Naperville, with approximately 850 additional employees filling executive-level positions at other locations within the Chicago area and Illinois.

After OfficeMax merged in November 2013 into another office-supply retailing firm, Florida-based Office Depot, questions were asked where the merged firm would place its consolidated headquarters.  One of the primary reasons given on Wall Street for the successful completion of the merger was the operating savings that would be enjoyed by the surviving firm through the elimination of redundant executive staff.    This created an incentive for Illinois to take steps to compete with Florida to retain this major economic asset.

However, the Illinois House adjourned on December 3 without taking up a bill (Senate Amendments #3 and #5 to HB 3271) to grant tax benefits to Office Depot as a condition of the firm choosing Illinois as its consolidated headquarters.   This move was followed by Office Depot’s announcement one week later, on Tuesday, December 10, that they had chosen Boca Raton, Florida to be the headquarters location of the consolidated company.  Observers expected that some of OfficeMax’s Illinois logistics professionals would be offered the opportunity to transfer to Florida and continue their work with the new firm.  While observers predicted that some other Illinois OfficeMax employees would continue to work for the merged firm in regional management positions, it was expected that approximately 1,600 positions would be lost by the Chicago area.

Labor and commerce
New Workplace Violence Prevention Act approaches effective date.   This 2013 law is aimed at enables employers and their employees to work together to reduce workplace violence, particularly domestic dispute-related violent acts in workplaces.  It grants a new category of standing to employers to seek orders of protection against a named person for the benefit of a person who is regularly present in the workplace.  The workplace person must have suffered violence or a credible threat of violence from the named person, and the court must find there is a reasonable construction that the violet act may be carried out at the workplace by the named person against the person at the workplace.

HB 2590 (Sandack/LaHood) was enacted in spring 2013.  It was written so that it would not become effective until January 1,2 014, to give the courts a reasonable period of time to familiarize themselves with the new law.  Previously law did not clearly grant standing to employers to work with their employees to protect them through the avenue of a workplace order of protection.   The existence of this new law is of obvious significance to victims of domestic violence, or potential domestic violence, whose partners or former partners know where they work.  Representative Ron Sandack (R-Downers Grove) played a leading role in getting this bill through the House on a vote of 107-0-0.  It was co-sponsored by ten other House members of both political parties, and approved by a vote of 107-0-0.

Teachers’ Retirement System (TRS) terminates relationship with key hedge fund advisor.  Connecticut-based K2 Advisors LLC had overseen the reinvestment of $537 million in TRS hedge-fund pension investments.  K2 Advisors was not itself a hedge fund, but a consulting firm that advised TRS on which hedge funds would accept their capital for investment purposes.  Hedge funds, also called “private-equity funds,” are equity partnerships that make investments that are not publicly traded.  

The private equity field is well known for operating on a “don’t call us” basis, and relationships with facilitators such as K2 Advisors are often seen as essential elements for a pension fund management that has been advised by its board to get involved in private equity.  However, the fees charged by both private-equity funds and their affiliated advisors, such as K2, are sometimes blamed for lowering the returns pension funds can earn from investments in this sector.  Disappointing, below-market returns by Illinois-controlled pension funds, including pension funds reinvested in private equity, are one of the factors blamed for the pension shortfall that spurred the enactment of SB 1 (the pension reform bill) earlier in December 2013.

TRS, the largest State-managed pension fund, described the move as a “restructuring” of their $2.1 billion hedge fund portfolio.  Pointing out that they expect to receive a return of no more than 2.5% on their fixed-income investments over the next four years, TRS stated they expect to maintain a significant commitment to the private equity sector.  TRS announced their investment repositioning on Friday, December 6.      

RTA/Mass transit
Blue Line overhaul will upgrade line connecting Chicago’s O’Hare Airport with the Loop.  The Chicago Transit Authority (CTA) overhaul, scheduled to cost $492 million, will consumer four years of reconstruction work from 2014 through 2017.  Improvements to the line, particularly the installation of “smart” track line safety signals, will enable engine drivers to cut the time required for a train to move from downtown to O’Hare Airport by up to 10 minutes.  

The Blue Line also serves Chicago’s Division Street,  Logan Square, Jefferson Park, and many other neighborhoods paralleling the Kennedy Expressway.  The Blue Line is expected to remain in operation throughout the renovation.  Overhaul plans were announced on Thursday, December 5.