Week in Review For 6/23/14 to 6/27/14

Budget – cuts

Quinn administration has FY15 budget; taxpayers on hook for increased spending while many areas see reduced funding. The FY15 budget, passed by Democrat partisan majorities in the Illinois General Assembly but largely not yet signed into law as of Thursday, June 26, will see reductions in spending in some areas while overall spending increases. The budget bills are on the Governor’s desk and he must sign or veto them prior to the startup of the new fiscal year on July 1st for spending to continue.

Observers say that Quinn, in deciding whether or not to sign the budget bills, is facing a dilemma. Although the numbers will impose spending shortfalls on many specific areas of the overall budget for State operations, the budget continues to call for spending more money than the State will have. In addition, Comptroller Judy Barr Topinka’s June 2014 report to taxpayers, “Monthly Money Matters”, shows that Illinois continues to owe $5.1 billion in unpaid bills (http://www.ioc.state.il.us/comptroller/assets/File/MMM%20-%20June5%202014.pdf).

Anticipated revenue numbers, unlike spending numbers, are hard numbers based upon the overall status of the State’s economy and the tax rates the State has pledged to charge against its citizens and residents in the private sector.

An example of future FY15 reductions can be found in projected spending numbers for the Illinois Historic Preservation Agency (IHPA), operator of 56 visitor sites throughout Downstate and the Chicago area. The IHPA operates most of Illinois’ sites relating to Abraham Lincoln, including the Lincoln Tomb and the future president’s first home in Illinois, Lincoln’s New Salem village northwest of Springfield. Amy Martin, agency director, said on Wednesday, June 25 that the agency plans to complete a list of sites in which hours and days of public operation will be reduced or eliminated in the summer or fall of 2014.

Other Illinois agencies have also had cuts imposed on their FY15 budgets for the fiscal year starting on Tuesday, July 1. If the Governor signs the budget, either as a whole or after making amendatory and line-item veto changes, similar announcements can be expected from these offices and departments in the days ahead to describe the cutbacks they will have to make.


  • Subpoenas issued in continuing NRI investigation; head of the former Illinois Violence Prevention Authority under increasing scrutiny. State auditors, in recent months, have begun checking into the disbursement of $54.5 million in taxpayers’ money by the so-called “Neighborhood Recovery Initiative,” a 2010 program operated by the Illinois Violence Prevention Authority (IVPA) under the close supervision of Gov. Pat Quinn and his office. Audit findings show a comprehensive failure by the Authority to comply with standard record-keeping procedures to track where the money, slated for community social work, actually went.

These audit findings have triggered action by the Legislative Audit Commission (LAC), a bipartisan panel of the General Assembly. Pushed by Representative David Reis, a key House Republican in this investigation, the Commission previously voted to grant itself subpoena powers to pursue this investigation. Continuing this inquiry, a subset of the Commission met on Monday, June 23, to discuss and implement these subpoena powers so that key Quinn administration personnel can respond to these audit findings and answer questions raised by the findings.

The audit findings have raised new questions about the actions taken by the IVPA. This lack of compliance with established norms of conduct in the accounting and spending of public-sector funding has become coupled with individual reports that specific sums of IVPA money were distributed to well-connected Chicago political insiders, such as Benton Cook III. Cook is the husband of the elected circuit clerk of Cook County. Reports, not yet fully investigated, indicate that substantial sums derived from the funding for this program may have been distributed as “walking-around money” during the weeks immediately prior to the November 2010 general election. In November 2010, Gov. Quinn was elected to a full term by a margin of less than 33,000 votes after losing 98 of the 102 counties of Illinois. The winning candidate was not selected by voters in the Chicago suburbs or Downstate, but was pushed over the top by his margin within Cook County.

The Legislative Audit Commission (LAC), a nonpartisan arm of the General Assembly, has pursued the Neighborhood Recovery Initiative audit and investigation. A panel within the LAC discussed this issue at its meeting on Monday, June 23 in Chicago; the Commission has issued subpoenas to seven officials, including IVPA Director Barbara Shaw, former Quinn chief of staff Jack Lavin, and former deputy Quinn chief of staff Toni Irving. The full Commission will meet on Wednesday, July 16, and Thursday, July 17, and investigators hope to get some answers from these key personnel at this time.

Reports indicate that the NRI issue has become a serious embarrassment for Gov. Quinn as he seeks another full term in elected office. Springfield insiders say that the Quinn administration is pushing its political friends on the Commission and in General Assembly partisan leadership to set an internal deadline to abandon the inquiry, even if this move leaves behind an expanding list of unanswered questions. The Commission’s subpoena powers have so far been exercised upon other State officials, leaving behind the key questions of what the Governor himself knew and when he knew it.


  • Federal report confirms soaring value of Illinois agricultural land. Paced by natural resources concerns, wiling buyers have offered increasing sums in recent years for prime Illinois Downstate arable land. A U.S. Department of Agriculture report shows that the overall value of farm real estate in Illinois, including buildings, approached the $200 billion level.

The USDA tabulators estimated the average value of Illinois land used to grow corn, soybeans, and other cash crops was $7,190/acre in 2013, up 59% from 2009 (a compound increase rate of more than 12%). A similar figure for Illinois pastureland was $3,370/acre in 2013, appreciating 21.6% from 2009.

Farmland values are closely tied to crop prices, estimates of future crop prices, and the carrying cost of the investments needed to buy and mortgage land if it changes hands at current prices. Record-low interest rates for good-quality borrowers are a factor in these trends.

Education – bullying prevention

  • Anti-bullying bill signed into law; will affect Illinois public and private schools, including charter schools. HB 5707 mandates that all public and private schools develop and implement policies aimed at stamping out bullying behavior. Public school districts, charter school entities, and private schools are asked to adopt a package of policies that will include mandatory reporting of bullying activity, parental notification, investigations of all reports, and a checklist of potential response actions available to educators.

The move was imposed by the General Assembly as a way to strengthen the State’s existing opposition to bullying behavior. The General Assembly has taken previous actions against bullying; for example, a 2008 law (Public Act 95-849) struck back against “cyberbullying” in which isolated students are harassed or tormented online. Some House members, when they saw HB 5707, were concerned about the ever-increasing burden of State mandates on public and private schools, including charter schools. After full debate and a House vote of 75-40-0, the measure was sent to the chief executive and signed into law on Thursday, June 26. The bill number was Public Act 98-669 (P.A. 98-669).

Education – school safety

  • General Assembly school safety bill signed into law. SB 2710 expands the existing School Safety Drill Act to extend the safety drill requirements to all private schools, including charter schools. Each affected school will be required to conduct at least one annual meeting to discuss and review its safety procedures, including procedures for evacuating or partly evacuating a school should a safety incident arise. Emergency and crisis response incidents include incidents when a person without legal access to school grounds enters a place of education with a firearm.

SB 2710 was agreed to by members of both parties. The House vote to pass the bill was 105-0-0, and it was signed into law on Saturday, June 21 as Public Act 98-663 (P.A. 98-663).


  • Associated Press finds that Illinois’ chief State Lottery contractor is falling far short of revenue promises. Profits from the sale of net growth in Illinois State Lottery tickets, including tickets sold for the popular multi-state Mega Millions and Powerball games, are slated to be paid to schools, charitable organizations and public-sector infrastructure programs. However, the AP finds that Northstar, the chief contractual firm that operates the Lottery, has paid the State approximately $40 million less than anticipated during the last three fiscal years. Another shortfall of more than $200 million is expected in FY14, which ends June 30.

The Associated Press report described the reaction of disappointment expressed by Illinois lawmakers upon news of the shortfall. The transfer of the operational responsibilities over the State Lottery to Northstar had been expected to improve productivity and unleash aggressive and innovative lottery promotions. The contractual firm, as a condition of being granted this status, had promised four years ago to pay a tracked sequence of monies to Illinois over a 10-year period. Failure of the firm to meet this payment schedule could further worsen relations between the State agency responsible for the Lottery and its chief contractor.

Budget – cuts

  • Illinois State Police agrees to $40 million settlement. The State law enforcement agency, which is also the operator of a major Illinois crime lab, agreed to pay the settlement to the “Dixmoor 5.” The five men, arrested in 1992, were exonerated in a process ending in 2011. DNA evidence released by the State Police, and made available to attorneys for the five defendants, belatedly shows they had been innocent of the rape and murder of 13-year-old Cataresa Matthews in Dixmoor in 1991. The agreement was made public on Wednesday, June 25.

Prosecutors had trumpeted their arrest and processing of the five defendants in the notorious case. Press coverage and courtroom evidence included the publicizing of “confessions,” allegedly from three of the defendants that had appeared to implicate all of them. The size of the settlement indicates that forensic evidence, even with the state of knowledge available at the time, should have pointed law enforcement in another direction. The murder case has since been re-opened.


  • Teachers Retirement System (TRS), largest State-managed defined-benefit pension panel, again lowers its estimate of future returns on investments. The expected move from 8.0 percent to 7.5% brings TRS’s actuarial projections closer into line with global projections of future investment returns to be enjoyed by prudent money managers with a substantial presence in high-grade fixed-income assets. Continued economic trends have reduced the rate of interest earned by investors in highly-rated dollar-denominated bond assets down to near zero, and investment of part of a prudently managed defined-benefit portfolio in specific equity investments cannot make up the gap enough to enable professional money managers to pledge 8.0 percent returns in future years.

The TRS move is expected to increase the State’s unfunded pension liabilities by a further $6 billion and to require the annual payment of an additional $500 million/year by State taxpayers to TRS to enable fulfillment of existing pension laws demanding make-up payments to try to get the State’s pension systems back toward “full funding” at a distant future date.

Taxes/Zurich Insurance

  • $20.35 million in State tax breaks for Wall Street-listed financial firm. While the General Assembly once again failed to enact significant tax reform legislation in the 2014 spring session, the Pat Quinn administration has taken steps to grant individualized packages of assistance to favored business firms. Attacked by advocates who point out Illinois’ high tax rates and perceived low stature as a place to make investments and create jobs, the current State administration has dangled targeted tax incentives to companies, including global-sized firms, that are strong enough to ask for them.

In a recent move of this type, Springfield announced on Monday, June 23 that it had awarded a package of tax incentives totaling $20.35 million as compensation for the decision by Zurich North America, the U.S. subsidiary of an internationally known financial firm that writes policies in specialized fields of property/casualty insurance, to break ground on a headquarters facility in Schaumburg. The Zurich Insurance Group is traded on major equities exchanges worldwide. Zurich, which already employs approximately 2,500 in Schaumburg, did not promise to create any new Illinois jobs in exchange for the tax incentive package. Other states, including jurisdictions with higher rankings as centers of low taxes and enterprise, had offered to help Zurich move its headquarters operations out of Illinois.

The tax incentives provided by the Quinn administration to the Zurich Group’s wholly-owned subsidiary is expected to further increase the “structural budget deficit” in which revenues from existing taxes continuously fall short of the State’s urgent spending needs. The “structural deficit” is blamed for the creation and maintenance of the January 2011 Quinn-signed individual income tax increase on Illinois families.

Week in Review
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