Week in Review for week of 11/3/14 - 11/7/14

Energy – Fracking
Fracking rules approved; jobs and opportunity coming to Southern Illinois. The rules, from the Illinois Department of Natural Resources (DNR), are a legally essential element for engineering teams to enter Illinois properties and drill for fossil fuels. Up until now, Illinois has not had rules or a permit structure in place to cover horizontal drilling in sedimentary beds of shale rock. A newly-invented segment of oil drilling technology, “fracking,” has sprung up to puncture these tightly-bound particles of rock and force them to yield their crude oil and natural gas. A significant deposit of New Albany shale, believed to be oil-rich, lies underneath many counties of southeastern Illinois.

More than one year ago, the General Assembly directed DNR to adopt fracking rules and start granting permits. The new state law was passed by both houses as SB 1715 and became law in June 2013. However, fracking technology is complex, and the Department took significant time to publish their rules proposal. During this waiting period, advocates pushed DNR to take steps to effectively ban fracking altogether, despite the existence of the new statutory law.

During this time of negotiation and conflict, House Republicans – headed by Rep. David Reis, lawmaker for many New Albany shale counties – stepped in. Working with the members and staff of the Joint Committee on Administrative Rules, a General Assembly panel that oversees the rulemaking process, Republican lawmakers negotiated with DNR to adopt key changes and modifications to the proposed fracking rule to bring its text into compliance with the intent of the General Assembly as passed in SB 1715. JCAR co-Chairman Tim Schmitz helped lead these negotiations. Representatives David Leitch and Don Moffitt, the other two House Republican members on JCAR, also participated in the rule-making process.

JCAR’s approval of the modified rules, granted on Thursday, November 6, marked a key step in unlocking Illinois’ oil-bearing shale for drilling and production. The new rules will soon be filed with the Secretary of State’s office in their final form, which will in turn green-light the Department to begin accepting and granting permits for drilling. Actual Illinois drilling activity will remain contingent on the fluctuations of global prices for crude oil. In addition, anti-fracking advocates have pledged to try to stop the new rules by filing lawsuits in Illinois courts, and tying up the new industry in litigation.

For more on the approval of the new fracking rules, please visit The Caucus Blog.

Rauner Transition
Governor-elect Bruce Rauner names transition team; prepares for 1/12/15 inauguration. Preparing for his inauguration as the 42nd Governor of Illinois, successful candidate Bruce Rauner “hit the ground running” this week by naming the five leaders and 26 committee members of his transition team.

Chaired by winning lieutenant governor candidate Evelyn Sanguinetti, Rauner’s running mate, the transition team will examine the credentials of the men and women of all parties who want to help lead Illinois’s troubled state government in 2015-2019. The team’s director will be Rauner deputy campaign manager Mike Zolnierowicz. Names familiar to Illinois on the full transition team include former Governor Jim Edgar, Congressman Aaron Schock, former congressman Glenn Poshard, and former presidential chief of staff Bill Daley.

Naming a transition team is traditionally one of the first things done by a successful candidate for executive office. Bruce Rauner was elected Governor of Illinois on Tuesday, November 4, defeating incumbent Pat Quinn. The inauguration day, which is set in Article V of the Illinois Constitution for the second Monday in January, will be held on Monday, January 12, 2015.

Ebola Virus
General Assembly continues to plan Ebola preparedness. The Appropriations – Human Services Committee will hold a hearing on epidemic preparedness on Monday, November 10, in Chicago. Asked to testify will be leaders from public-sector agencies tasked with containing Ebola, the Illinois Hospital Association; and representatives from the Illinois primary healthcare sector. Dr. LaMar Hasbrouck, director of the Department of Public Health (DPH), has been asked to testify and present an overview of Illinois’ existing preparedness efforts.

The Department is posting their Ebola preparedness initiatives online. Initiatives include cooperating with the federal Department of Homeland Security to identify and isolate potential patients arriving at O’Hare International Airport; rapid transport of potential patients to places of isolation and diagnosis; and, if necessary, compulsory home quarantine of patients and potential patients. DPH is cooperating with the Illinois Emergency Management Agency should this virus become contagious in Illinois, and IEMA’s director, Jonathan Monken, has also been asked to testify before the Committee.

The hearing is expected to contain calls by affected professionals and healthcare sectors for more funding to fight Ebola and related healthcare challenges.

Illinois Income – Food Stamps
One Illinois household in five is eligible for food stamps. Eligibility standards are overseen by federal guidelines. When combined with state law, these guidelines count more than 2,000,000 Illinois residents whose household income and family size, when plugged into the food stamp eligibility formula, make them eligible for nutritional aid under the costly program. The food stamp program is operated by the Illinois Department of Human Services.

Illinoisans continue to add their numbers to the food stamp program, with 17,000 new enrollees since January and 5,000 new recipients registering their eligibility in the thirty-day month of September.

Illinois Income – Public Schools 
More than half of all public-school students are “low-income.” Household income categories are used to determine eligibility of a school system for subsidized school meals. Title I schools are public schools that qualify, under federal income guidelines, for federal poverty funding for their lunchrooms.

Hard economic times have swelled the number of low-income students in Illinois public schools, and a report card issued by the Illinois State Board of Education in compliance with state law reports, for the first time, that the count of “low-income” pupils made up more than 50% of the total 2013 Illinois public-school headcount. This percentage has increased from 36.7% in the 1999-2000 school year, to 51.5% in 2013 and 52.5% today.

In Illinois, the number of qualifying students is 1.05 million. Other states’ school-age populations have also passed the 50% mark, including Texas and California.

Jobs – Amazon.com
Warehouse plans announced. The Seattle-based universal retailer Amazon.com has announced plans to open a mega-warehouse in Illinois. Site selection will soon begin for the Chicago-area facility, which will require a large footprint to meet expected expansion plans. The $75 million facility, which will be designed to provide for next-day delivery of a wide variety of products available on the firm’s website, could create as many as 1,000 jobs by 2017.

While Illinois will welcome the jobs and economic activity created by the new facility, a quirk in existing sales tax law could lead to changes in the Amazon store-customer relationship. Under existing law, if a customer buys something through Amazon.com that is shipped from a warehouse located outside of Illinois, it is the responsibility of the customer to pay sales tax on the item purchased. The Department of Revenue prints a line on its annual income tax forms for sales taxes due. If Amazon.com builds a warehouse that is physically located in Illinois, however, the firm will take on the responsibility of charging and collecting sales tax on items purchased for shipment to an Illinois address. The tax will be identical to that charged by physical brick-and-mortar retailers in the customer’s municipality.

Public Health – Raw Milk
Proposed rules would severely discourage transfers of raw milk within Illinois; comment period extended. The administrative rules, which are aimed at the sale of milk that has not undergone a pasteurization process to heat the milk and destroy microorganisms, are in the process of being developed by the state’s Department of Public Health. Current law bans the sale of raw milk in grocery stores and supermarkets, but contains a loophole that is believed by proponents to allow the private transfer and sale of the beverage by farmers to consumers. Some public health experts believe this loophole allows for outbreaks of food-borne illnesses. It would be closed by the proposed rule.

As part of the rules development process, state law requires the rules to be published for public comment. After more than 800 commentators expressed their views, the Department extended the comment period.

Revenues – FY15 Update
Key General Assembly commission reports mixed cash flow numbers for first four months of FY15. The State of Illinois’ fiscal year began in July 1, 2014, and will end on June 30, 2015. During the first third of this cash flow period – the months of July, August, September, and October 2014 – the Commission on Government Forecasting and Accountability reports that several major flow zones into Illinois general funds have come in with numbers that were higher or lower than had been budgeted by lawmakers for the fiscal period.

The most recent monthly revenue figure, for October 2014, showed a decline of $24 million in comparison with October 2013. This decline reflected weaker returns from federal sources. Net revenue in October 2014 from individual income taxes rose by $83 million and sales tax receipts grew by $58 million. However, federal sources for the month dropped by $93 million.

For the year to date receipts, overall base revenues declined by $398 million. Most of this decline was associated with lower transfers and federal sources. Year to date individual income taxes have performed well, increasing by $155 million (net of required transfers to the fund that covers income tax refunds). Sales tax receipts were up $154 million for the first three months of FY15. Gross corporate income taxes were down by $111 net of refunds year to date.

Federal receipts are expected to rebound when general funds spending is focused on federally matchable spending items. Revenue receipts during the first 6 months of the year will be a key to meeting FY15 revenue estimates, as income tax rates are currently set to begin a statutory phase down on January 1, 2015. The General Assembly may be required to modify its FY15 budget or tax laws in order to meet its constitutional mandate to maintain a balanced budget.

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. As the fall 2014 veto session approaches and Illinois prepares to welcome Governor-elect Bruce Rauner, the Week in Review is more essential than ever as a way to follow major Illinois issues, questions, and trends.