Week in Review for 5/15/16 - 5/20/16

Leaders meet to discuss budget negotiations, but many obstacles remain. The four legislative leaders met with Governor Rauner for only the second time this year on Tuesday, May 17. The leaders agreed to deputize lawmaker working groups, including key members of the House Republican Caucus, to discuss specific issues relevant to an agreement. The Illinois budget process has been stalled by an impasse that has now gone on for nearly 11 months. Illinois began operating without a constitutional balanced budget to control spending on July 1, 2015, and is now the only state not to have a budget for the current fiscal year.

Many issues stand in the way of a durable agreement to craft a constitutional balanced budget for Illinois in FY17. After the meeting, Leader Durkin urged the negotiators to achieve agreements on questions that involve the status of collective bargaining labor-management relations within local governments, public-sector pension reforms, and workmen’s compensation reforms. Many House Republicans believe that lack of progress on these issues has become a very serious threat to future job creation and future tax revenues in Illinois. Current statistics show that Illinois’ economy is generating few if any new private-sector jobs. Our state’s unemployment rate, as of April 2016, has grown 0.7% over the level six months earlier in October 2015, and our state’s most recent 6.6% jobless rate is now 160 basis points higher than the 5.0% unemployment rate for the U.S. economy as a whole.

Democrats advance $1.5 billion in unfunded wage increases. Using a large labor union rally at the Capitol as the backdrop, House Democrats advanced four pieces of legislation this week that would raise wage rates for Service Employees International Union (SEIU) workers and others to $15 per hour. The Democrats’ wage increase package comes at a total cost to Illinois taxpayers of $1.5 billion, at a time when Illinois has $7 billion in unpaid bills.

HB 5764 – SEIU initiative to provide wage increases for homemakers in the Community Care Program for the elderly, as well as an enhanced rate for those agencies that provide health insurance coverage to their employees. Provides at least a $1.25 wage increase in years 2016, 2017, 2018, and 2019. Under both proposed changes, the cost of providing services to the aging population will rise significantly. During the next four fiscal years, the proposed rate increase is estimated to result in $1.1 billion in additional program and administrative costs.

HB 5931 – DSP rate increase to $15/hour for personnel in residential programs (CILAs, ICF/DDs). $330 million annual cost to the State.

SB 2536 – SEIU initiative to increase wage rate to $15/hour for all non-relative providers in the CCAP (child care). Requires mandatory training where SEIU may organize and sign up workers. $30.3 million annual cost to the State.

SB 2931 – SEIU initiative to provide home service program rate increases to $15/hour. Requires mandatory training where SEIU may organize and sign up workers. Codifies provisions of the current collective bargaining agreement. Wage increase for home health workers would cost the State an additional $73 million annually. The training provisions will cost the State and additional $13.8 million, bringing the total annual cost to $86.8 million.

Democrats pass $227 million unfunded higher education bill. HB 4167 appropriates $227 million in general revenue funds to the Illinois Student Assistance Commission for the Monetary Award Program (MAP). Democrats in the House and Senate passed the bill this week despite the fact that Illinois does not have $227 million in available GRF to fund MAP grants. HB 4167 faces a likely veto when it reaches Governor Rauner’s desk.

The Illinois General Assembly worked in a bipartisan manner to pass stopgap higher education funding last month, which included nearly $170 million for MAP grants from a dedicated funding source. SB 2059 passed with overwhelming bipartisan support and was signed into law by Governor Rauner as Public Act 99-502.

Chicago Debt Crisis
One year on, timeline shows that Chicago responded to debt crisis by selling more debt. Twelve months ago in May 2015 , Moody’s Investors Services, the world’s largest credit ranking agency, cut the rating it applies to general obligation debts backed by City of Chicago general obligations to below “junk bond” level. The unwelcome news triggered demands that Chicago offer much higher interest rates to risk-oriented investors willing to take a flier in Windy City debt obligations.

Since the Moody’s move, which was copied by other credit-rating bureaus, Wall Street has tracked the fiscal tactics implemented by Chicago’s City Hall. According to Bloomberg News, the financial books show that Chicago has responded to the markdown action by selling more than $3.3 billion in additional and replacement debt. The high interest rates at which this debt has been sold constitute additional future burdens upon city workers, property owners, and taxpayers.

According to bond market watchers, some of the new Chicago debt sales were necessary to clear out and liquidate previous debt deals predicated upon maintenance of Chicago investment-grade credit rankings. These deals included controversial interest-rate swap contracts. Bond market observers expressed guarded optimism that the city will be able to continue to service its heavy debt load, but have redoubled their concerns about the additional burdens implied by the City’s $20 billion in unfunded pension obligations. The pension and debt obligations of the separate Chicago Public School system constitute an additional area of concern facing persons following the fortunes of Illinois’ largest city.

Energy – Clinton, Quad Cities Nuclear Plants
Exelon nuclear plants continue to be at risk of closure. Exelon announced earlier this month that it will need to move forward with the early retirements of its Clinton and Quad Cities nuclear facilities if adequate legislation is not passed during the spring Illinois legislative session, scheduled to end on May 31 and if, for Quad Cities, adequate legislation is not passed and the plant does not clear the upcoming PJM capacity auction later this month. Without these results, Exelon would plan to retire the Clinton Power Station on June 1, 2017, and the Quad Cities Generating Station on June 1, 2018.

The premature closures of Clinton and Quad Cities would have negative economic and environmental impacts for consumers, local communities and the State of Illinois. According to an analysis by the State, approximately 4,200 direct and secondary jobs and nearly $1.2 billion in economic activity will be lost within four years of the plant retirements.

State Rep. Bill Mitchell, whose district includes Clinton, is backing legislation that would provide a market-based solution to protect the future of the Clinton Power Station and other nuclear plants in Illinois. Mitchell and Senator Chapin Rose brought local leaders to Springfield last week with meet with Governor Rauner to discuss efforts to keep the Clinton plant open.

“The Clinton power plant is a major economic engine for Central Illinois,” Mitchell said. “Families throughout the area depend on it for good-paying jobs and our schools and other units of local government receive significant tax revenues from the plant. Not only are the jobs important, but with Illinois’ nuclear plants producing about half of our state’s power, any closures would result in capacity issues and much higher electric rates for Illinois working families and businesses.”

On Thursday, the Illinois Senate held a subject-matter-only hearing on SB 1585, legislation currently being negotiated between Exelon, renewables and carbon energy producers to add nuclear to the Low Carbon Portfolio Standard in an effort to keep Illinois’ nuclear power plants in operation. Illinois’ 11 nuclear units and 6 stations produce 48 percent of the state’s electricity.

Gambling – Fantasy Sports
Discussion of legal, regulated daily fantasy sports betting. The recreational/wagering activity uses the ability of sports fans to put together hypothetical composite “teams.” Participants on sites such as DraftKings and FanDuel can turn to the Internet to register a screen name and back the ability of their “teams” to perform various sports feats. Bills such as Senate Amendment #2 to HB 3655 would explicitly legalize daily fantasy sports betting in Illinois, subject to various strict regulations. These measures are currently being considered by the Illinois General Assembly as the May 31 adjournment deadline approaches. The Illinois Senate voted in favor of HB 3655 on Thursday, May 19; the Senate vote of 32-22-1 continued the discussion and debate in Springfield on this issue. A motion has been filed, however, to hold the bill in the Senate and to delay returning it to the House for final General Assembly approval.

Several U.S. states, such as the neighboring state of Iowa and the populous state of New York, have taken steps to ban the operation of daily fantasy sports websites within their state. In the states where daily fantasy sports are explicitly banned, major sports betting websites face legal penalties for overseeing activity from computers located in the forbidden states. Websites such as DraftKings and FanDuel will not consciously take bets from these locations. The Illinois Attorney General has issued an opinion that daily fantasy sports betting activities fall foul of overall Illinois laws against illegal gambling. If this opinion is upheld through further legal action and, in the absence of legislative action, Illinois could join the list of states where this type of activity is discouraged or forbidden.

Two large gray areas in the discussion of daily fantasy sports betting activity in Illinois are: (a) the effect that legalization – if enacted – would have on existing gaming activities, such as casino riverboats and tavern video poker; and (b) the effect that strict regulation, if enacted, would have on casual neighbor-to-neighbor sports activities, such as weekend fantasy football leagues. These are questions that are being asked as discussion of this issue moves forward in Springfield.

Jobs – 6.6% Unemployment Rate (April 2016)
Jobless rate increased again in April. The Illinois Department of Employment Security reported this week that the State’s unemployment rate had risen marginally by 0.1% in April, from 6.5% to 6.6%. With continued recession-level joblessness in Illinois, the Prairie State continues to support fewer jobs than the number of people who were working here more than 15 years ago in September 2000. Furthermore, Illinois unemployment numbers have increased 0.7% over the most recently-measured six-month period, from 5.9% in October 2015 to 6.6% in April 2016.

Illinois added a net of 5,400 new jobs to its paycheck workforce in April 2016, a marginal number that increased the total number of available Illinois jobs by less than 0.1%. Continued strength in professional and business services (up 7,600 jobs in April 2016) was held back by net weakness in other sectors of the Illinois economy, including construction, financial activities, and other services. Illinois is one of only three states that have not regained the employment levels enjoyed during the 2000s.

Security – REAL ID Act
Illinois moving closer to achieving REAL ID compliance. Illinois Secretary of State Jesse White announced that his office is upgrading security features to the Driver’s License/ID card design and expanding the central issuance process for driver’s licenses and ID cards to all applicants. With implementation of these changes, Illinois has moved closer to achieving full REAL ID compliance which is a federal mandate of the U.S. Department of Homeland Security (DHS).

By the end of July, applicants visiting Driver Services facilities will no longer be issued a new permanent DL/ID card at the end of the application process. Instead, they will leave the facility with a temporary secure paper driver’s license, which is valid for 45 days and will serve as their DL/ID for driving purposes and proof of identification. The temporary, secure paper driver’s license or ID card will contain a photo and the basic information that appears on the permanent driver’s license or ID card. In addition, the facility employee will return the old DL/ID card back to the applicant after punching a hole in it.

Meanwhile, the applicant’s information will be sent to a centralized, secure facility in Illinois. After fraud checks have been conducted to ensure the applicant’s identity, a higher quality, more secure DL/ID will be printed and sent via U.S. mail within 15 business days to the applicant’s address.

“These changes are necessary for Illinois to be REAL ID compliant,” said White. In addition, the changes further enhance our efforts to protect Illinoisans from fraud and identity theft.” The upgraded driver’s license and ID card contain a variety of enhanced security features that take advantage of new developments in technology.”

For purposes of air travel, DHS states that it will accept the temporary document in conjunction with the old DL/ID to board an aircraft until the permanent card arrives in the mail. Illinois joins 39 other states that have moved to centralized production of DL/ID cards. This includes heavily populated states like California, Texas, and New York – as well as Illinois’ neighboring states.

For more information on Illinois’ REAL ID compliance efforts, please visit The Caucus Blog.

State Government – AFSCME Mandatory Arbitration
Governor vetoes AFSCME’s mandatory arbitration bill. In a widely-expected move, Governor Bruce Rauner this week vetoed a partisan bill that would have turned key elements of State labor-management relations over to a panel that is widely viewed as being friendly to labor and unfriendly to management. The veto was filed on Monday, May 16.

Governor Rauner explained his veto of HB 580 as a defense of Illinois taxpayers. Rauner believes that some unions that legally represent state workers, especially AFSCME, are using their political clout to try to cut taxpayers’ concerns out and away from the negotiating table. Unanswered questions concerning AFSCME workers’ future pay, health benefits and retirement health benefits could represent hundreds of millions of dollars in future expenses to state workers or taxpayers.

HB 580 had been a highly partisan bill when it was debated and discussed by the House in February, with House Republicans standing in alliance with the Governor. The House vote was 68-46-2, three votes short of the 71 votes required to override the Governor’s veto.

Taxes – Sweetened Beverages
Tax-hike advocates look at penalty on sugary beverages. The proposed new Illinois tax, which would be levied on a per-ounce basis, would be levied on sodas, energy drinks, and sweetened beverages. Syrups and powders used to make sweetened beverages would be taxed in line with the volume of beverage created by following the preparation recipe. Advocates say the new levy would not only raise needed revenue but would also improve the health of Illinoisans by discouraging the consumption of what are allegedly “junk beverages.”

The proposed tax could raise the price of a typical sweetened beverage, such as canned or bottled soda pop, by approximately 50%. A tax enacted at this rate could bring in as much as $375 million to $600 million/year. Advocates say the increasing problem of obesity among Americans needs action. In Illinois, 28% of all adults and 20% of all children are classified as obese under criteria published by the federal Centers for Disease Control. Four states (Arkansas, Tennessee, Virginia, and West Virginia) have enacted taxes on the distribution of sweetened beverages.

Plans advance to replace aging Mississippi River bridge near Pittsfield. The Champ Clark Bridge is an aging but vital piece of the infrastructure of west-central Illinois. It carries U.S. Highway 54 over the Mississippi River, connecting Pittsfield, Illinois with Louisiana, Missouri. The existing cantilever bridge, built in 1928, is getting closer to the end of its useful life. Motorists are not allowed to drive faster than 30 miles per hour across the narrow old bridge, and loaded trucks/pieces of farm machinery that weigh more than 40 tons are asked to cross the river somewhere else.

Plans were announced in May to build a new $60 million bridge to replace the old one. The Illinois Department of Transportation (IDOT) will contribute $25 million toward the cost of the new span. Monies will be set aside from State motor fuel tax funds and other capital funds. Missouri will contribute an equal amount. This month’s announcement marked an agreement between senior staffs of the Illinois and Missouri road departments to place their equal shares of the cost of the project in their respective road-and-bridge five-year plans. The federal Department of Transportation has approved a grant to cover the final $10 million required.

The existing Champ Clark Bridge carries about 4,000 vehicles daily. The new replacement bridge will be built in the five-year 2017-21 period.

Summer in Illinois – State Fair
Concert tickets go on sale. A full lineup of concerts will once again be presented at the 2016 Illinois State Fair on August 12th through 21st. Artists will include Jake Owen, Melissa Etheridge and Kiss, and the closing concert will feature ZZ Top and Gregg Allman. Tickets will go on public sale through Ticketmaster on Saturday, May 21st, and will go on sale directly at the Fairgrounds on Monday, May 23rd.

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