Week in Review for 1/11/16 - 1/15/16

Budget – Illinois Bond Sale
$480 million in new State debt sold on Wall Street. Proceeds from the package of borrowings, or “tranche,” will be dedicated to the physical needs of State infrastructure, such as roads and bridges. Although this is new Illinois debt, it was not newly authorized by the General Assembly; it replaces millions of dollars in old debts that were paid off on or before the end of calendar year 2015, legally clearing the way for new bonds to be sold. The underwriting activity and sale took place on Thursday, January 14.

The sale included bonds set to mature on a variety of dates and bearing a range of interest rates, with higher rates of interest payable on the longer-maturity bonds. The bonds will mature from 2017 through 2041. The average interest rate demanded by investors was 3.9989%, but 25-year Illinois bonds set to mature in 2041 will pay 4.27%. Bond watchers stated this 25-year rate will force Illinois taxpayers to pay a premium of 1.61% (161 basis points) above the interest rate that an AAA-rated issuer would be required to pay for similar top-rated long term bonded debt.

Illinois’ poor debt performance reflects ongoing fiscal and political challenges facing the State, including more than $110 billion in unfunded pension liabilities and the failure of the General Assembly to enact a constitutional balanced budget. However, bond watchers also noted that the 161-point spread notched this week actually indicated the possible stabilization of Illinois’ fiscal standing, at least for now. Late in 2015, Illinois long-term debt traded at a spread of 170 points over AAA bonds in the so-called secondary market. Illinois currently has the lowest credit rating among the 50 states, with Prairie State general obligation (GO) debt ranked by the three major New York-based credit rating firms at only three or four steps above “junk bond” non-investment-grade level.

State Government – Labor Relations
Governor asks Labor Relations Board to determine if AFSCME impasse exists. Since taking office in January 2015, the Rauner Administration has succeeded in writing new labor contracts with a wide variety of labor unions that represent many difference facets of the State workforce. 17 labor bargaining units, organized within 13 separate trade unions, have agreed to fair, reasonable contracts with the State of Illinois. However, no contract has been reached with AFSCME, which represents 30,000 state employees. On Friday, January 15, the Governor announced that his office will ask the State’s labor-management oversight panel, the Labor Relations Board, to examine the state of the negotiations between the State and AFSCME to determine if these talks have reached a point of impasse.

The determination of an impasse, if it is reached, will be legally significant because it will move relations between the State and AFSCME to a different level from where these relations are right now. Currently, based on mutual pledges by both sides, both the State and its largest union have agreed to continue their relations in the absence of a contract, and AFSCME state employees continue to show up for work and be paid.

Under the terms of the signed tolling agreement, the Labor Relations Board must now determine whether the State and AFSCME are at an impasse. During this time, the parties must adhere to all statutory obligations regarding good faith negotiations while the Labor Relations Board is deciding the case. Quoting from the tolling agreement, this specifically means there can be no “strike, work stoppage, work slowdown or lockout” until the Board has determined that the parties are at an impasse. According to the Rauner Administration, it is hard to predict how long the Board would take to rule. It may be months before a final decision is rendered.

Chicago – Red Light Cameras
Star prosecution witness says he was bagman. In the first day of testimony in the trial of former City of Chicago transportation officer John Bills on corruption charges, former associate Martin O’Malley told a federal court that he passed $557,000 in cash to Bills. The money allegedly served as bribery to continually freshen the relationship between the City, its drivers, and red-light camera operator Redflex Traffic Systems. The testimony was offered in Chicago on Wednesday, January 13.

Redflex had won a multi-million-dollar contract with the City based on its assertion that it could operate a $100 million semi-privatized automated traffic enforcement system with fairness and justice. After serious questions began to be raised about the probity of Redflex’s automated cameras and demands for fines, inquirers began to drill into a pattern of relationships between key Chicago officials, Redflex, and other contractual firms. O’Malley testified that Bills also received other items, including a car, a boat, hotel bills, golf outings, plane tickets, and meals, through the Redflex arrangement. The Redflex-Chicago contract was cancelled in 2013.

DCFS – Uncashed Federal Funds
DCFS admits it may have left as much as $40 million on the table. The federal funds, which are provided as “matching funds” to states that carry out certain audited child-welfare programs and activities, were lost over the last 24 months. The Illinois Department of Children and Family Services (DCFS) now admits that they failed to carry out the necessary paperwork to verify these expenses and to file for these reimbursements, thereby delaying or erasing Illinois’ eligibility to receive the funds from Washington, D.C. Although Illinois taxpayers paid this money to the federal government through U.S. taxes for reimbursement to Illinois, the reimbursement cannot actually be paid until verifiable records have been submitted in proper order.

Current DCFS director George Sheldon, recruited by Gov. Bruce Rauner from Florida, blames a “revolving door of directors” under a previous governor. DCFS tried to operate under eight permanent/acting DCFS agency leaders over a five-year period.

In addition to its record-keeping and financial woes, DCFS is also trying to operate under the scrutiny of a federal court. A judge has ordered the department’s legal counsel to appear before it in late February to explain how to improve treatments of juveniles assigned to residential treatment centers. The revelation that many of these juveniles were unsupervised, and some were even being subjected to physical/sexual assaults, was a major news story in December 2014 during the transition to the new Rauner Administration.

Economy – GE Healthcare
GE Healthcare announces HQ move to Chicago. GE Healthcare makes a wide variety of medical equipment, supplies, pharmaceutical drugs, and products. It specializes in equipment, such as CT scanners, PET scanners, magnetic resonance machines, and X-ray machines, used by physician radiologists in hospitals and clinics.

The $18 billion-a-year firm, a subsidiary of General Electric, had been headquartered in southeastern England near London. The move became public on Monday, January 11. Approximately 200 jobs are associated with the move, which will bring GE Healthcare’s headquarters physically closer to its manufacturing hub in greater Milwaukee.

General Electric’s reorganization will also see the parent holding company move its 800-person headquarters from its historic location in southwestern Connecticut. Although Chicago applied to be the parent company’s new home, GE chose greater Boston, Massachusetts.

Economy – Layoff Report
Illinois lost more than 1,000 jobs in December 2015. The monthly Worker Readjustment and Retraining Notification (WARN) layoff report of major Illinois job losses in the final month of 2015 encompasses more than 1,000 employment positions throughout the state. The list of shutdowns included the permanent closure of five yards operated by Pure Metal Recycling; the employees of the Chicago-area scrap-metal recovery firm, a number estimated at about 400, were let go immediately. There was a major layoff at the Danville facility of FreightCar America, a Downstate manufacturer of railroad rolling stock, with 180 jobs to be terminated in February.

Energy – Downstate Coal
Major Downstate Illinois coal firm files for bankruptcy. Industry observers say that Arch Coal was badly hit by new federal environmental rules and a shifting pattern of electrical power generation away from coal and toward natural gas. Arch Coal submitted a Chapter 11 filing on Monday, January 11.

The St. Louis-based firm operates mines in Illinois and six other states. Its production portfolio includes the 300-job Viper Mine, located on the Logan County-Sangamon County border north of Springfield. The Viper Mine produced 2.2 million tons of coal in 2014, the most recent year for which figures are available.

General Assembly – 2016 Spring Session 
Illinois House cancels expected session this week. Speaker Madigan, who controls the meeting schedule of the House, abruptly cancelled the two-day session previously called for Wednesday, January 13 and Thursday, January 14. House members had expected to get the chance to discuss the ongoing state budget crisis.

In contrast to the House, the state Senate convened on the 13th and 14th, welcoming new members and discussing urgent issues. The two houses of the General Assembly meet on separate schedules, but both meet at the direction of the leaders of the party in the majority. House Republicans have watched over the past six months as the Illinois House has failed to take action to pass a constitutionally balanced budget, and this status continued this week.

Higher Education – Hoverboards
Several Illinois public universities ban or restrict the operation of hoverboards. Owners of the two-wheeled devices have been told not to roll them out at facilities within the University of Illinois at Urbana-Champaign, Eastern Illinois University, Governors’ State University, and Western Illinois University. Some of the bans cover residence halls only, and some are campus-wide. Other universities are considering parallel actions.

A hoverboard is an orthogonal-line motorized skateboard with urethane wheels, a powerful battery, and a computer chip to help the rider of the board shift his or her footing and keep in balance. The regulatory actions and bans follow reports from the federal Consumer Product Safety Commission (CPSC) that implicate hoverboard lithium batteries in a series of ignition fires reported nationwide. The CPSC is currently investigating 37 fires in 19 U.S. states. Many U.S. airlines also ban shipment of the popular toys on their flights.

Winter in Illinois – Ag Outreach
Soil and water conservation seminars. The winter months are the traditional time of continuing education in the farm world. The Department of Agriculture has renewed its Conservation Cropping Seminar program for 2016. Free continuing-education one-day events will be held during the final week of January in Champaign, Godfrey, and Milan. Please click here for more information on the seminars.

Winter in Illinois – Youth Hunting Licenses
Age limit for youth hunting increased from 16 to 18. The 2016 increase in the age limit for youth hunting license applicants takes effect on Monday, January 18 when the Department of Natural Resources (DNR) commences the sale of hunting licenses for this year’s sporting season. A youth hunting license authorizes the holder to hunt with a licensed adult hunter who is 21 years of age or older. The youth license bypasses the requirement in adult Illinois hunting law that a first-time adult hunter born after January 1, 1980, but older than 18, present evidence of having attended a safety course.

In the 2015 session, the General Assembly directed IDNR to raise the age ceiling from 16 to 18 through the passage of HB 3234 (P.A. 99-307). The measure was supported by Ducks Unlimited and other hunting-advocacy citizen groups.

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