Week in Review for 11/2/15 – 11/6/15

FY16 budget – CGFA
General Assembly watchdogs chart continued budget picture.  The nonpartisan Commission on Government Forecasting and Accountability (CGFA), the in-house budget agency of the Illinois General Assembly, released their October 2015 fiscal report this week. The CGFA “Monthly Briefing” covers ongoing State revenues, particularly key State General Funds revenue numbers, and ongoing trends likely to affect future State revenues. For example, the October briefing includes a discussion, based on nationwide trends and economic models, of the likely health of the 2015 Christmas retail selling season and its expected impact on State sales tax revenues.

CGFA, working in conjunction with the Illinois Department of Revenue, uncovered continued dismal trends in State revenues this October. Illinois general funds revenues were $319 million lower in October 2015 (fiscal year 2016) than they had been in October 2014. General Funds revenues come from income taxes, sales taxes, and other sources. As in previous months, the decline was paced by a year-over-year shortfall in State personal income tax revenues and corporate income tax revenues. The accumulated deficit for the four months of FY16 so far experienced is $1,456 million. The current fiscal year began on July 1, 2015.

Governor Rauner issues amendatory veto of DON score legislation.  Governor Bruce Rauner issued an amendatory veto Friday of House Bill 2482, legislation that would lock into statute that an individual with a particular threshold score on the Determination of Need (DON) assessment tool would be eligible for both institutional and home and community-based long term care services.

Similar to Senate Bill 570, the proposed legislation concerning the Child Care Assistance Program, HB 2482 would have unintended consequences that would negatively impact the state’s long-term ability to serve individuals in need.

“These bills may be well-intentioned, but they are ultimately harmful to the programs they are trying to help,” Rauner spokesman Lance Trover said. “The governor understands and shares the frustration of members who want to fund these programs, but the appropriate way to do so is in the context of a truly balanced budget. As drafted, both pieces of legislation would create serious problems that jeopardize the future of the Child Care Assistance Program as well as services for the elderly.”

House Bill 2482 would lock into statute that an individual who qualifies for assistance is entitled to institutional care. Additionally, the approach contemplated by this legislation puts the state’s compliance with Medicaid waiver regulations and ability to maximize federal match funds at serious risk.

As noted in the governor’s veto message House Bill 2482 “takes a step in the wrong direction… For too long, Illinois has over-prescribed institutional care to lower-need individuals when less expensive and more appropriate care options are available. In order to provide the best particular care for each individual, to ensure that our support services remain affordable, and to maximize the number of individuals served, we must rebalance the services being provided with greater precision. Prescribing institutional care for individuals who do not need it is wrong for the individual and wrong for taxpayers. Moreover, over-prescribing institutional care is inconsistent with the direction being taken across the country.”

Obamacare Premium Hikes
Double-digit hikes in some Obamacare insurance premiums.  The Affordable Care Act, the federal health-insurance mandate law passed in 2010 and often called “Obamacare,” requires most American households that include persons too young for Medicare, who do not get health insurance through their workplace, to obtain health insurance or pay a tax penalty. Complex regulations govern what kinds of insurance the households must buy and how to sign up for the policies. In addition, the required health insurance policies are often expensive. Prices of ACA-compliant Illinois health insurance policies are monitored by the Illinois Department of Insurance (DOI).

The costs of Obamacare-compliant health insurance policies have grown in the years since enactment of the law and imposition of the mandate. An increasing number of physicians and health care facilities are affiliated with only a limited number of health insurance providers. In many parts of Illinois, Obamacare customers have only a limited number of health insurers to choose from. These insurers re-price their policies annually, as allowed by law. Public documents show that providers of ACA-compliant health insurance policies are increasing their 2016 premium rates by 20 percent or more in parts of Northern Illinois.

Rate increases, as tracked by DOI, exceed 20% in a crescent-shaped group of counties in northern Illinois that stretches west and southwest from suburban DuPage County, in Chicago’s western suburbs, to Hancock and Henderson counties that border the Mississippi River. Metropolitan areas affected by this pattern of disproportionate price hikes include DeKalb, the Quad Cities, and greater Rockford metro areas, as well as DuPage and Kane counties in metro Chicago. The counties affected by these increases are closely correlated with areas where a particular firm, the Health Care Services Corporation (HCSC), made a major market push in calendar year 2015. In fall 2014 for calendar year 2015, HCSC offered cost-attractive bronze and silver plans in many affected counties. For 2016, however, HCSC has withdrawn some of their plans and raised prices on others. Other changes in market activity and pricing have affected ACA health care customers elsewhere in Illinois.

Chicago Public Schools
Declining neighborhood populations and charter-school competition empty out some public high school buildings.  Some traditional high school powerhouses of Chicago’s South and West Sides, such as Fenger High School, have been hit hard by new competition and demographic changes to Chicago’s school scene. The Chicago Tribune reports that some building facilities have enrollments of only one-third of capacity.

In many cases, the remaining students at under-attended Chicago high schools ask to transfer to other, more viable educational institutions. These requests are often granted. Unionized Chicago teachers tend, however, to resist pushes to close a school building even after many of its former students have left. Continued use of underutilized school buildings is increasing the operating expenses of the system. The underused buildings must continue to be heated, maintained, and kept secure. Chicago Public Schools face an annual operating deficit of more than $1 billion during the 2015-16 school year.

Small-business growth tracked in Illinois.  The payroll-software firm Paychex, whose work includes continued nationwide monitoring of small business employer-employee job numbers, reported this week that Chicago ranks 7th among the 20 largest cities in the U.S., and Illinois ranks 7th among the 20 largest states, in job creation and growth so far in 2015. The Paychex numbers supplement informal perceptions of post-recession economic growth in Illinois, especially in booming neighborhoods and real estate immediately surrounding Chicago’s downtown and on the city’s North Side.

The Paychex numbers are reported on a year-over-year basis, and may not predict future trends. Furthermore, the small-business numbers generated by Paychex’ nationwide database do not reflect job activities among larger and more established U.S. firms; there have been major layoff announcements by large Illinois firms, such as Caterpillar, in recent months. Some sections of downstate Illinois may be underperforming Chicago at this time.

Future seen in high-tech food and agricultural science.  As Illinois moves towards its economic future, an increasing number of lenders and financiers are looking at the “Silicon Valley model” and seeking to pinpoint one or more areas where the greater Chicago area can demonstrate global economic leadership. One such area, leveraging Illinois’ existing position in farm production and technology, could be food production and agricultural science. The Chicago Tribune this week published a profile of one group of Chicago venture capitalists active in this sector. A Chicago emphasis on farm-to-table science and logistics could help “bring together” the economic interests of Downstate with Illinois’ largest city.

Oscar Mayer headquarters to move to Chicago.  The headquarters of the well-known brand family of processed meats, currently located in Madison, Wisconsin, will move to downtown Chicago. The decision by brand owner Kraft Heinz was announced on Wednesday, November 4. Illinois could gain as many as 250 jobs as a result of the move. Oscar Mayer’s headquarters move is associated with Kraft Heinz’s decision to close its Madison packing plant no later than 2017.

Kraft Heinz remains a net subtractor of jobs from the greater Chicago area in 2015. The international consumer-goods firm’s announcement this week followed its decision in August to reduce by 700 its Chicago-area headcount. Kraft Heinz is shifting its Chicago-area headquarters operations to the city and out of the buildings used by formerly autonomous Kraft in suburban Northfield.

Energy – Illinois Coal
Researchers, advocates fight to keep Illinois coal alive.  As the outlook darkens for the energy-rich coal mined in southern Illinois, the SIU-affiliated Advanced Coal and Energy Research Center has begun implementation of a $4.6 million Energy Boost grant-based program to improve the efficiency of coal-consumption cycles. Improving the productivity of burning coal will mean that more energy can be harvested without releasing more carbon dioxide.

Meanwhile, advocates for coal and coal miners are speaking out in opposition to proposed new federal administrative rules that are meant to discourage the future use of coal. The “Clean Power Plan,” a package of rules announced by President Obama in August and currently under discussion within the federal Environmental Protection Agency, calls for a 32% reduction in U.S. carbon dioxide emission from 2005 base levels by 2030. Implementation of these proposed rules by the 50 states could lead to the shutdown of much of Illinois’ current coal-mining and coal-based electrical generating capacity. The U.S. EPA will accept comments on this proposed rulemaking until January 21, 2016. The current situation facing Illinois coal was described by the Southern Illinoisan on Thursday, November 5.

Illinois Historic Preservation Agency (IHPA) 
State preservation agency seeks new director.  Amy Martin, director of the IHPA since 2012, was terminated by vote of the Agency’s board of directors on Monday, November 2. The personnel move followed a sharp clash between former Director Martin and Eileen Mackovich, the former director of the Abraham Lincoln Presidential Library and Museum.

Although the Lincoln Presidential Library is the Historic Preservation Agency’s largest single asset by budget and personnel count, the IHPA also operates more than 50 memorials, retired courthouses, and state historic sites throughout Illinois. Key IHPA sites include Cahokia Mounds, the prehistoric Native American city east of St. Louis, and Lincoln’s New Salem, the reconstructed pioneer village northwest of Springfield.

Lottery – Neighboring States
As Illinois State Lottery hands out IOUs, neighboring state lotteries hand out winning ticket opportunities.  Based on the current lack of an enacted FY16 balanced budget, the Illinois State Lottery has ceased to make payouts on game tickets that bear prizes of $601 or more. Instead of cash, holders of winning Illinois tickets are being handed certificates of promissory scrip that bear a legal promise of future payment. Seeing opportunities, the operators of lotteries in neighboring states, such as Indiana, are increasing their advertising and selling activities. They are targeting Illinoisans, especially customers who live in counties that border state lines. Well more than half of Illinois’ 12 million people live within 25 miles of a border with a neighboring state.

Autumn in Illinois 
Illinois harvest nears end.  The weekly crop report from the U.S. Department of Agriculture (USDOA) indicates that as of Monday, November 2, harvests of two key Illinois cash crops – corn and soybeans – were 96% completed. Relatively dry October weather smoothed the harvesting chores. In some sections of Illinois, winter wheat is grown; the USDOA report indicated that 89% of Illinois wheatfields intended for the winter grain crop have now been planted. The seed wheat will now sprout and then remain dormant over the winter before forming heads and readying itself for harvest next spring.

No Capitol dome Christmas lights this fall.  In a holiday tradition celebrated for decades, State workers have hung strings of colored lights from the lantern of the State Capitol dome in Springfield every November, creating a beloved annual Christmas decoration. However, the lack of a State budget has made it impossible to spend State money for a wide variety of non-essential and unappropriated services and programs. In an announcement made on Tuesday, November 3, the office of Secretary of State and State Capitol custodian Jesse White confirmed that no Capitol dome lights will be strung this year.

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