Week in Review for March 9 - 13, 2015

Gov. Bruce Rauner
State’s chief executive appoints new leader for one of Illinois’ largest agencies. The Illinois Department of Corrections (IDOC) operates 25 prisons throughout Illinois. The Department also operates boot camps, work camps and adult transition centers. Nearly 49,000 persons are residents of State of Illinois confinement facilities. In addition, IDOC supervises about 29,000 men and women who are on parole.

With an annual budget of more than $1.3 billion, IDOC is on the front lines not only of Illinois’ public-safety and security needs but also its current budget situation. Governor Rauner has gone outside Illinois to appoint a new director for the Department. Donald Stolworthy, age 54, will head Illinois’ correctional system. After becoming experienced in corrections management in the Alaska Department of Corrections, Stolworthy moved to the federal government and worked at a high-ranking executive level in Iraq and in the international War on Drugs.

Most, or all, of Illinois’ prisons are overcrowded in relation to design residency levels. Governor Rauner has called for the hiring of 473 new correctional officers in an attempt to improve security conditions at Illinois’ existing prisons.

Illinois economy – COGFA forecast
Slow economic growth continues; budget deficit continues to mount a yawning challenge. The staff of the Commission on Government Forecasting and Accountability (COGFA) presented their FY16 Economic Forecast to COGFA members at the Commission’s meeting in Springfield on Wednesday, March 10. COGFA is the nonpartisan economic think tank of the Illinois General Assembly, and their Revenue Update for FY15 and numbers for FY16 will be key background data to be used by the General Assembly as they modify the State’s FY15 budget and craft a FY16 budget to meet the urgent fiscal needs of the State.

COGFA’s numbers confirm that the post-2009 Illinois “recovery” has been the slowest economic expansion of the post-World War II period. In each previous recession, not only were the rates of decline in economic output less severe, but the ensuing recoveries were faster and steeper. Illinois economic trend lines, starting in 2010, show steady but very shallow, palely upward-trending movements. New jobs are created in relatively low numbers and are being created, in Illinois, in sufficient numbers to force increases in median overall wage rates.

The pale post-2009 “recovery,” combined with the pushdown of State income tax rates in January 2015 are two forces that continue to combine to create a worsening State of Illinois budget crisis. A spreadsheet presented to staff by the Commission shows net income tax revenues dropping more than $4 billion in FY16, below what would have been paid to the State under the tax rates in effect in FY14. Growth rates in tax revenues attributable to underlying rates of growth in the Illinois private-sector economy are expected to make up only $500 million of the lost income, leading to a structural deficit of $3.5 billion in FY16. To this number is supplemented accumulated past-year deficits and unpaid State bills of many billions of additional dollars, plus the spending pressures created by many “entitlement” lines within the State’s budget.

Illinois economy – Unemployment
Unemployment remains higher than U.S. as a whole, but drops another 0.1%. The figures for January 2015, reported on Thursday, March 12 by the Illinois Department of Employment Security (IDES), show that Illinois’s jobless rate fell from 6.2% to 6.1% in January 2015. The same number was 8.2% in January 2014, down 2.1% over the 12-month period.

Soft spots in the statewide economic picture complicated the continued trend toward lower unemployment. Illinois employment – the number of Illinois residents with nonfarm payroll jobs – also dropped by 7,100 jobs in the same month. The declining employment and unemployment numbers reflected a stagnating Illinois population and the continued movement of many Illinois residents out of the labor force altogether. Movement out of the labor force is often correlated with a stagnant statewide economy, and with possible despair on the part of individuals of working age that they will be able to successfully find a job. “It’s clear Illinois has more work to do,” said IDES Director Jeff Mays, “to catch up with other states.”

Specific sectors that showed strength in Illinois included leisure and hospitality (up 3,300 jobs) and educational and health services (up 2,300 jobs). Areas of weakness included manufacturing (down 2,100 jobs), construction (down 2,500 jobs), government (down 2,700 jobs), and professional and business services (down 5,500 jobs).

State of Illinois – budget
Clock is ticking on FY15 budget crisis situation. The decision by the General Assembly and former Gov. Quinn to pass and sign an unbalanced FY15 budget in spring 2014 continues to endanger many Illinois residents. These are persons who are paid from, or dependent on, budget lines in the FY15 State budget where the amounts set aside were not enough to fully fund the expense item until the end of the fiscal year on June 30, 2015.

Examples of groups affected by unfunded FY15 budget expense lines include providers of subsidized Illinois child care, Illinois prison guards and circuit court reporters. These are individuals and contractors who have been told of a fast-approaching date when Illinois must find more money to pay them. Gov. Bruce Rauner has presented a proposal to the Illinois General Assembly to move money around within the budget to cover these anticipated urgent needs, but factions in the General Assembly who are politically opposed to the Governor have so far refused to allow this plan to come to the House floor for a vote.

Chicago – budget
State’s largest city slides closer to serious financial trouble. Under ongoing contractual relations between Chicago and its lenders, including Wells Fargo Bank, the city has pledged to make-whole payments to its financiers whenever its credit ratings fall below certain benchmarks. The “Chicago Tribune” described the city’s current status on Thursday, March 12.

Under the “swap contracts” signed by Chicago and its banks, the city co-signed a series of derivatives contracts, of the type called “swaps,” with the bankers. These contracts allowed Chicago to simultaneously enjoy the low interest rates charged by a borrower who borrows at an adjustable rate of interest, with the cash-flow stability enjoyed by a borrower who borrows at a fixed rate. A feature of the “swap” is a contractual element in which the borrower (in this case, Chicago) promises to pay a market interest rate, and then ‘swaps’ this promise with a secondary lender or financier. One feature of many of these swap contracts was a series of penalty payments Chicago promised to make should the city’s credit ratings drop down toward junk-bond status.

The re-rating of Chicago debt to Baa2 by Moody’s, the world’s largest credit-rating firm, on February 28 triggered at least one of these swap penalties. Financial experts have told the “Tribune” that the city now owes Wells Fargo a one-time fee of $38 million. Other potential termination payments to other lenders and financiers, which have been postponed or otherwise avoided for now by the city, total an additional $123 million. Chicago is currently on the hook with respect to 24 separate swap contracts, and the potential taxpayer liability on these contracts should the city’s credit rating drop down to junk bond level at today’s market conditions and interest rates is estimated to be almost $400 million.

Chicago’s taxpayer-backed debt now totals $8.3 billion, or more than $3,000 for each resident of the city. Two other credit rating firms, Fitch Ratings and Standard & Poor’s, did not reduce Chicago’s credit rating at the same time that Moody’s did so.

Drugs – Grant Wehrli
Naperville freshman lawmaker pushes bill through committee that could save Illinois lives. Opioid overdoses are a grim fact of life for emergency medical responders, emergency medicine physicians, law enforcement, and families throughout Illinois. In some cases, persons who have taken overdoses of opioid substances can be saved by the prompt administration of a specialized antidote drug such as Naloxone. In some cases, these urgent antidotes must be administered to people who have happened upon the drug by chance, or who are not familiar with the danger of these substances. In some cases, young adults and even children are the victims.

The hope of saving young lives pushed Naperville’s Rep. Grant Wehrli into action this spring. Appearing in House committee with DuPage County Coroner Dr. Rich Jorgensen, the sponsor and witnesses urged House members to support HB 438. This 2015 measure authorizes schools to administer an opioid antidote should that action be necessary to save a life. On Tuesday, March 10, the House Special Committee on Substance Abuse approved the measure by a vote of 8-0-0.

This Special Committee is also considering other measures to halt the scourge of opiate addiction and opiate overdoses throughout Illinois. House Republican members of the Committee are Spokesperson Michael McAuliffe, Rep. Jeanne Ives, and Rep. Christine Winger.

Education – PARCC tests
Many parents call for allowing their children to opt out of PARCC tests. PARCC standardized tests, which utilize an online platform that students are expected to interact with as they take the test (rather than the format, familiar to their parents, of filling in bubbles on a piece of paper) began to be administered throughout Illinois on Monday, March 9. The testing cycle is expected to continue for approximately four weeks. Data from the test will be used to evaluate Illinois public and charter school students, teachers, schools and school systems.

Many parents are concerned about the new PARCC system, which from their point of view was sprung on their children without recourse and without sufficient warning. No current law allows parents to withdraw their children from the PARCC test, which is supposed to be given to every eligible child in order to generate statistically significant results that can be used to gauge everyone’s performance. Furthermore, the federal government has sent warning letters to Illinois’ State Board of Education to remind educators of the nexus between federal school aid and compliance with the order that students all take the test.

Attitudes by parents toward the PARCC mandate is becoming increasingly coordinated with resistance toward other mandates imposed by schools upon children, such as mandated sex education and compliance with certain health benchmarks. Bills have been introduced in the Illinois General Assembly to discuss the issue. The “Chicago Sun-Times” describes the issue from the standpoint of concerned parents.

Income Tax – Tax Refund Alerts
Comptroller Munger urges Illinois individual income taxpayers to register. The Illinois Tax Refund Alert system, rolled out this spring by new Illinois Comptroller Leslie Geissler Munger, allows taxpayers to monitor the status of their Illinois tax returns, including an automated text-messaging system. Similar to the familiar warnings that many of us get when our phone or cable bill is due, the test message will tell eligible taxpayers of their payment notifications. Registration is free through this portal: https://myrefund.illinoiscomptroller.com/.

Supreme Court hears oral arguments. The Illinois pension reform law enacted in December 2013 faced questions before the Illinois Supreme Court at oral arguments on Wednesday, March 11. The Illinois Solicitor General, advocating for the law, stated that the controversial law had been enacted to solve a fiscal emergency. Established constitutional law authorizes a state, in furtherance of its constitutional duty, to exercise what are called “police powers” that potentially override other considerations. Plaintiffs seeking to strike down the law say that it improperly violates a section of the state Constitution. Illinois has the worst-funded pension system of the 50 states. A decision by the state Supreme Court, which is expected later this spring, could affect budget and pension law policies that will be before the General Assembly as it approaches the May 31 adjournment date.

Road safety – Cabello 
Rep. John Cabello uses his police experience to fight for road safety. HB 1516, Cabello’s bill to increase penalties for truck accidents that inflict great bodily harm or worse, was approved by the House on Thursday, March 12. The floor vote of 85-23-2 sent the bill to the Senate for further action.

HB 1516 was a response to road accidents where a truck driver commits a willful violation of the Illinois Motor Carrier Safety Law, such as sleepy driving with a forged logbook, and the act causes a motor vehicle accident that hurts or kills an innocent person. Under this bill if passed by the House, if the truck-crash accident causes great bodily harm, permanent disability, or disfigurement to another person the conduct is a Class 3 felony; and if the accident causes the death of another person, the conduct is a Class 2 felony. A Class 3 felony is punishable by a term of 2 to 5 years in the Department of Corrections, and a Class 2 felony may be punished with a term of 3 to 7 years.

Cabello’s advocacy was a response to several tragedies throughout Illinois. The lawmaker told his colleagues on the House floor of the tragic death on January 26, of tollway maintenance worker Vincent Petrella and severe injuries inflicted upon State Trooper Douglas J. Balder by the same crash on Interstate 88 near Aurora. A driver of a commercial semi-trailer truck was arrested and charged with operating a commercial motor vehicle while fatigued or impaired, driving beyond the 11-hour rule, driving beyond the 14-hour rule, and keeping false records. Cabello’s bill is supported by the Illinois State Police Command Officers Association.

University of Illinois – medical school 
University moves forward with plans for new medical school at Champaign-Urbana campus. The facility for specialized medical education would be physically separate, and separate in its mission statement, from the existing “U of I” school on the Medical Campus of the West Side of Chicago. University President Robert Easter announced on Wednesday, March 11 that he would recommend that the Board of Trustees approve the Champaign-Urbana medical school project.

Under the proposal, the University of Illinois’ Downstate hub campus will become the center of a cooperative center of medical education and bioengineering research and development. The proposed medical school will leverage the University’s established Champaign-Urbana presence in engineering sciences. The medical school is expected to work in financial and clinical affiliation with the Urbana-based Carle Foundation Hospital System. The Carle alliance could create a platform to test new medical devices and therapies in a clinical setting. This potential Champaign-Urbana operating model contrasts with the traditional teaching-hospital role of the Chicago-based University of Illinois-Chicago medical school and hospital.

President Easter’s staff and consultants will present a spreadsheet binder to the trustees that will indicate that the injection of additional Illinois taxpayer funding to operate the new medical school will not be required. The new (2014) Western Michigan University medical school in Kalamazoo offers a financial model for a bioengineering-driven, self-supporting medical school complex. The trustees will be asked on Thursday, March 12, to approve the University of Illinois proposal.

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. For news about the 2015 spring session, Illinois’ budget challenges and the leadership of Governor Bruce Rauner, the Week in Review is more essential than ever as a way to follow major Illinois issues, questions, and trends.