Week in Review for 1/25/16 - 1/29/16

State of the State address
Governor calls for General Assembly to enact laws to bring prosperity to all citizens and all parts of Illinois. In his annual address to the General Assembly, Gov. Bruce Rauner told lawmakers that “Illinois’ economy has been split in two – one part with modest growth, the other in decline.” Some neighborhoods, suburbs and workplaces located within 90 minutes of O’Hare Airport have partly participated in global recovery from the severe economic downtown of 2008-2009. Gov. Rauner reminded lawmakers that the remainder of the state, including areas traditionally oriented towards industry and manufacturing, have not benefitted from this global recovery. These regions need to see changes in Illinois laws and policies that will be sufficient to help communities throughout the state share in economic growth and opportunity.

Pointing out that “factory workers in Texas are now making more than Illinois folks, even without adjusting for the cost of living,” Rauner renewed his call for serious discussion, debate and enactment of his Turnaround Agenda. Job-creating elements of the Agenda include (but are not limited to) workers’ compensation reform, mandate relief for local governments, changes in relationships between the public sector and labor unions and property tax relief. Striking a bipartisan note, the Governor called attention to elements of the Agenda that have, in the past, been supported by a wide variety of leaders.

Department of Innovation and Technology
Illinois consolidates its redundant information technology functions into new Department. After studying existing redundancies in State of Illinois management operations, Governor Bruce Rauner issued an executive order. The order directs that State information-technology (IT) operations be moved from the various departments of which they were parts to form the new Illinois Department of Innovation and Technology. These operations currently employ approximately 1,700 State personnel specializing in information technology solutions and maintenance. Executive Order 16-01 was issued on Monday, January 25.

Under the State’s charts of organization that existed up until this week, each of the more than 100 State departments, bureaus, and agencies that operate under the overall supervision of the Governor had the right to operate separate, free-standing IT offices. Over time, this created significant barriers to operational productivity. Different offices developed more than 1,000 separate and incompatible software solutions, at least one of which dates back to 1974. Once adopted, these platforms became embedded into operations.

The Governor has instructed the executive personnel of the new Department to centralize and consolidate all information technology decisions and spending. This is the standard model recommended by IT management professionals and utilized by 29 other U.S. states. With Rauner’s executive order, Illinois has become the 30th state to set up a consolidated department of information technology. The head of the new Department, Hardik Bhatt, is Illinois’ Chief Information Officer.

Rauner and Bhatt have stated that one of their first priorities will be to use this consolidation as an opportunity to reduce the vulnerability of the State’s electronic infrastructure to hacking and other cyberattacks, including cyberattacks originating from terrorists and other sources outside the U.S.

Budget – FY16
$6.6 billion in unpaid State bills could lead to further debt downgrade. In a report published on Tuesday, January 26, the credit rating firm Moody’s pointed to Illinois’ $6.6 billion in unpaid bills as of December 31, 2015. Moody’s, the world’s largest debt-rating firm, has previously downgraded Illinois’ credit rating six separate times since 2003. Illinois is currently rated by Moody’s as Baa1 with a negative outlook. This rating, three notches above “junk bond” level, is typically interpreted by markets as signaling that Illinois bonds carry a relatively low investment-quality ranking. Moody’s labeled the unpaid-bills figure “a clear indicator of weak liquidity and governance.”

Illinois is currently carrying $27 billion in general obligation debt in global bond markets. Downgrades to Illinois’ credit rating increase the rates of interest that Illinois is required to pay, further increasing costs to taxpayers of building Illinois’ roads, bridges and other tangible infrastructure. In Illinois’ most recent sale of GO bonds on January 14, the State and its taxpayers were required to pledge to pay interest rates averaging 1.61% (161 basis points) higher than comparable interest rates faced by AAA-rated states such as Indiana.

Budget – FY16 and FY17
House Republican Leader Durkin calls for active enforcement of balanced budget requirement. The Unbalanced Budget Response Act, a new Act introduced by Republican Leader Jim Durkin, creates an alternate cash-flow structure if the FY16 and FY17 budgets are not balanced. Under the fiscal structure outlined in HB 4521, if the General Assembly enacts unbalanced FY16 or FY17 budgets or if no budgets are enacted, the Governor would be given the power to establish contingency reserves using previously appropriated funds. Some of the moneys in these reserves could be transferred to other agencies to meet immediate and urgent spending responsibilities, while other appropriations would remain unspent until the budgets become re-balanced.

Enactment and enforcement of HB 4521 will make it possible for Illinois to fulfill its constitutional balanced budget duties in reality and in real-time. State agencies would be given power to adopt emergency rules as necessary to reduce their spending rates in line with these gubernatorial sequestrations. The powers to be granted to the state agencies are similar to emergency powers that were granted, on a bipartisan basis, to former Gov. Pat Quinn during a budget crisis in 2009. HB 4521 was filed in the House on Tuesday, January 26.

Chicago – red light cameras
Former senior city official convicted. A federal jury convicted former Chicago Department of Transportation senior executive John Bills on Tuesday, January 26. Bills was convicted on all 20 counts. The criminal counts reflected charges that Bills had accepted up to $2 million in cash and non-cash compensation from Redflex, Chicago’s former contractual partner in the operation of the city’s much-disliked traffic enforcement system. “Red light cameras” are used to identify the license plates of drivers who commit traffic violations at a wide variety of Chicago street intersections and speed zones. After the motor vehicles are identified, a letter is automatically generated and mailed to the vehicle’s owner of record. A typical letter includes evidence allegedly backing up the identification and demands payment of a heavy fine. Proceeds from the fines are split between the city of Chicago and the private partner.

While “red light cameras” were originally justified and installed in Chicago and other Illinois municipalities in the 2000s on the basis of traffic safety, studies indicate that busy street intersections do not become safer after an enforcement camera is installed. The cameras are unquestionably successful at raising revenue, however, for both the municipality of record and the private partner. In the case of Redflex and Bills, testimony was presented to the federal court to indicate that Bills was eligible to ask for swinging payments which went up as more Redflex cameras were approved throughout Chicago. After investigations raised questions about the relationship between Chicago and Redflex, the city moved its red-light-camera relationship to a new contractual partner.

Criminal Law – prison reform 
Prison reform offers opportunity for long-term budget savings. With 49,000 inmates housed in Illinois prisons and confinement spaces, the operational cost of the system has become one of the heaviest “fixed costs” in the Illinois budget picture. With each inmate costing more than $22,000 per year to incarcerate, taxpayers must spend approximately $1.3 billion/year on Illinois prison operations. These costs continue even during times, like now, when Illinois does not have a spending budget. The operations of Illinois prisons are defined as matters of essential public safety, and they continue whether or not the money to pay for their operations has been appropriated by law. Illinois prisons are operated by the Department of Corrections.

As part of long-term planning, Gov. Bruce Rauner has convened a Commission on Criminal Justice and Sentencing Reform. The 28-member panel, which includes executive criminologists and representatives of law enforcement, has issued a series of recommendations intended to reduce Illinois’ prison population by approximately 25% over a 10-year period. The recommendations center on three major policy areas: (a) improved classification of prisoners in terms of likelihood that they will commit new crimes after release; (b) improved behavioral-modification services, during and after imprisonment, for subgroups of eligible inmates; and (c) grant more leeway to trial courts and their judges when sentencing offenders for non-violent crimes.

These and other recommendations match policies that are being considered or put into effect in several traditionally tough-on-crime states such as Georgia, Kansas and Texas. Action by the General Assembly will be necessary to implement the Commission’s recommendations.

Economy – unemployment
Department of Employment Security (DES) reports that December 2015 jobless rate rose by 0.2% over November. The yearend unemployment rate of 5.9% was 0.9% higher than the nationwide rate of 5.0%, and reflected a decline of 16,300 jobs in Illinois. This decline coincided with a month in which overall U.S. total employment rose by 292,000 jobs. IDES reports that Illinois had 3,000 fewer nonfarm payroll jobs in December 2015 than were filled by working Illinois residents twelve months earlier. These figures show that the Illinois job recovery from the 2018-14 downturn, after moving forward very slowly for multiple years, completely stalled in 2015.

Cross-tabs contained within the Department’s report made clear that much of the weakness had been concentrated in the retail sector, defined for unemployment-reporting purposes as “Trade, Transportation and Utilities.” Seasonally adjusted trade/transportation jobs declined by 12,100 from November 2015, making this the weakest sector in this Illinois month-to-month report. Retail job creation continued to be affected by the continued transition of significant subsets of Christmas retail activity to non-traditional distribution pathways. On a year-to-year basis, however, the weakest Illinois sector continued to be manufacturing, with Illinois factories maintaining 14,000 fewer manufacturing jobs in December 2015 than had been on Illinois payrolls in December 2014.

The Department also reported on where joblessness was concentrated in the final calendar month of 2015. Metro areas with unemployment significantly higher than the 5.9% statewide rate included Carbondale (6.5%), Danville (7.4%), Decatur (7.4%), Kankakee (7.0%), Peoria (7.0%) and Rockford (7.2%). Joblessness, as in previous months, was disproportionately felt in Downstate cities and metropolitan areas traditionally oriented toward manufacturing and industry.

Illinois’ 5.9% jobless rate continued to be significantly higher than the rates posted in many neighboring states. The December 2015 rates in states that border on Illinois were as follows: Indiana, 4.4%; Iowa, 3.4%; Kentucky, 5.3%; Missouri, 4.4%; and Wisconsin, 4.3%. During the same 12-month period that Illinois lost 3,000 net nonfarm payroll jobs, Indiana generated 57,100 net new jobs, Iowa generated 25,600 net new jobs, Kentucky generated 40,200 net new jobs, and Missouri generated 26,000 net new jobs.

General Assembly – Spring 2016 session
Spring 2016 session opens. The Illinois House reconvened on Wednesday, January 27, to hear Governor Bruce Rauner’s State of the State Address and begin to discuss new bills introduced by members for committee consideration and floor debate during the 2016 spring session. At the top of every list of discussion, however, was the continued impasse affecting the FY16 budget.

On Thursday, January 28, Illinois House and Senate Democrats passed SB 2043. The bill, as amended in the House, was a measure appropriating more than $700 million in unfunded money for higher education. If the bill were to become law, it would add to the existing total of $6.6 billion in State unpaid bills. The bill followed up on the established pattern and practice of Illinois Democrats to ignore their constitutional mandate to enact a balanced budget. Gov. Rauner has stated that he will veto SB 2043. The bill did not break the impasse in the FY16 budget process.

Higher education – College of DuPage
Tax settlement announced. The move came after the U.S. Internal Revenue Service identified nearly 100 instances of wrongful classification of high-end meals at the College of DuPage. The luxury dining experiences at the college’s white-tablecloth Waterleaf restaurant were classified by the college as legitimate operational expenses. After carrying out an audit, the IRS reclassified many of the meals eaten and charged off in 2013 as “taxable employee compensation.” Meal tickets totaling $18,351 were found to have been improperly classified. Under the tentative settlement, the college will pay $4,569 in past-due taxes on these meals.

The IRS audit was only one of several investigations that have centered on the relationship between former College of DuPage senior-level executives and the now-shuttered eatery. In its 3½ years of operation, Waterleaf rang up more than $350,000 in meals and alcohol served to senior administrators and school trustees. These Waterleaf “house accounts” have been subpoenaed for presentation to federal and state grand juries for possible criminal charges. As part of activities that include the permanent shutdown of the in-house restaurant, the College in 2015 turned over the majority of the seats on its board of trustees and dismissed former President Robert Breuder. Responding to news of the settlement, a spokesman asserted that it is the position of the College’s new leadership team to account for all expenses appropriately.

Winter in Illinois – Bird flu
Bird flu monitored in southeastern Illinois. Four counties adjacent to the Indiana border – Edwards, Lawrence, Wabash, and White – are being closely monitored by the Illinois Department of Agriculture for bird flu. A strain of avian influenza has already caused serious consequences in the Evansville, Indiana area, where more than 414,000 poultry – chickens and turkeys – have had to be put down. The highly contagious “H7N8” virus has been found in 10 Indiana farms.

While there have been no reports of bird flu yet in Illinois from this winter’s outbreak, a severe spread of contagion in 2015 led to the deaths of more than 48 million birds in 2015. The event caused significant price increases and a nationwide shortage of packaged eggs in grocery stores. The four counties being monitored by the Illinois Department of Agriculture are counties that border the Wabash River. They are situated along an 80-mile-long frontage stretch that centers on the county seat of Mt. Carmel, Illinois.

Winter in Illinois – Companion animals in heat, cold
Illinois ranked as top U.S. state in protection of companion animals. The ranking by the Animal Legal Defense Fund follows passage by the Illinois General Assembly of new laws to help companion animals, such as dogs and cats, in winter months. The new law, SB 125, applies to the act of leaving a dog or cat companion animal in extreme heat or cold for a life-threatening period of time resulting in injury or death. If the animal is injured or killed by this act of cruelty, a Class A misdemeanor has been committed. If a person is charged and convicted of a Class A misdemeanor, a court may sentence them to serve up to 1 year in county jail and to pay a fine of up to $2,500.

The Illinois General Assembly passed SB 125 in the 2015 spring session and the new law became effective on January 1, 2016 as the cold months of winter began. Owners of companion animals should be aware that under the new law, the crime has only been committed if the animal is genuinely killed or injured. Almost all companion animals are covered with fur, and can be walked about or let out of a house for reasonable, limited periods of time in even the coldest Illinois weather.

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