Week in Review for 7/11/16 -- 7/15/16

Health care – Land of Lincoln
Key provider of Obamacare health insurance must liquidate. Land of Lincoln Health, a health care insurance co-operative set up under the terms of the Affordable Care Act (Obamacare), has defaulted on its payments. The State of Illinois initiated steps on Tuesday, July 12 to wind up the operations of the failing firm and shut it down. 49,000 Illinois residents had purchased mandatory health care insurance through Land of Lincoln, which sold its policies to the individual, individual family, and self-employment markets. They will have to find emergency new coverage before the close of calendar year 2016.

The failure of Land of Lincoln paralleled the failures in other states of Obamacare co-ops, which have been whipsawed by heavy claims rates and mandatory risk adjustment payments. Under the current Affordable Care Act, co-ops are required to pay expensive “risk adjustment payments” to established, private-sector health care insurers such as Blue Cross/Blue Shield. These payments are meant to compensate Blue Cross and other established insurers for the established cost base locked onto these existing insurers by the pre-existing health care conditions of these established firms’ policyholder bases. At the same time, co-ops thought they would be getting federal “risk corridor” payments to compensate them for, among other variables, the cost of the risk adjustment payments. Adequate risk-corridor payments never appeared, however, and the co-ops found that their risk adjustment payments were due in full. They faced a lethal whipsaw. One after another of these co-ops, including Land of Lincoln in Illinois, have gone or are going out of business.

Partly as a result of the ongoing failure of many firms within the ACA co-op industry, increasing numbers of Americans are facing monopoly suppliers of mandatory health care insurance. In whole states, such as Alabama, only one firm will sell insurance to individuals under terms that comply with the myriad requirements and mandates of the Affordable Care Act. In these geographic areas, U.S. citizens are required to comply with the terms and premium rates set by the single supplier.

Budget – FY17
Bills signed into law on June 30 did not enact a full-year budget. The financial markets are reminding Illinois that the current spending patterns being resumed by the State do not represent a stable long-term course for the State and do not constitute an annual, constitutional balanced budget.

The package enacted on June 30 covers some back payments for FY16. It also covers projected spending over a variety of State departments for six months, until December 31. The State’s multi-billion-dollar budget deficit and pile-up of unpaid bills remain untouched by the June 30 budget compromise. As of Thursday, July 14, Comptroller Leslie Geissler Munger estimates the current count of unpaid Illinois bills as being more than $7.7 billion. These factors are expected to hold Illinois’ credit rating down at the bottom of the debt ratings posted for America’s 50 states. Continued slow State payments to public institutions of higher education are also causing credit-rating cuts in the debts issued by Illinois colleges and universities.

Despite these flaws, the Illinois General Assembly enacted the “stopgap” FY17 budget as a way of appropriating money to open Illinois K-12 educational institutions on time and keep operations going in other essential State buildings and points of infrastructure.

Education – Common Core Testing
Significant move away from Common Core Testing. State law requires Illinois public high schools to use a standardized test to evaluate their students’ readiness for college. Until now, the test used has been the Partnership for Assessment of Readiness for College and Careers (PARCC), a test developed in compliance with nationwide Common Core guidelines and standards. PARCC tests were administered to Illinois high school students in spring 2015 and again in spring 2016.

Questions were raised about the performance of Illinois high schools and school districts in enabling their students to meet PARCC guidelines. Many school districts reported that the protocols used to prepare for and administer the PARCC tests were highly technical, cumbersome and resistant to full compliance. They further reported that PARCC preparation and testing interfered with other tests that school districts wanted or needed to administer as an expression of their autonomy and the challenges faced by their pupils, such as AP tests and traditional college entrance exams.

The State Board of Education announced on Monday, July 11 that they would not supervise the administration of a high school PARCC test in spring 2017 or following spring terms. Instead, the State will subsidize and supervise the administration of a statewide SAT college entrance exam in spring 2017. Students in 11th grade will take the SAT. The SAT is administered according to an established nationwide protocol and its results are published in numbers that are relatively accessible and familiar to students and educators. SAT tests will be administered in compliance with the State law evaluating high school student body performance and progress. Students in grades 3 through 8 will continue to take separate PARCC tests geared to their age groups.

Education – School funding formula
Gov. Bruce Rauner establishes School Funding Commission; House Republican Leader Jim Durkin announces names of five panel members. The 25-member bipartisan commission established by Gov. Rauner will study Illinois’ school funding formula, the law used to divide up and distribute Illinois school aid money into payments made to individual Illinois school districts. Illinois’ 863 school districts, the local units of governance that operate public elementary and secondary schools, depend on biweekly school aid payments to keep their doors open.

Increasing concerns about the school aid formula contained in the current School Code has spurred the creation of this commission. The five House Republican members of the bipartisan commission are Representatives Avery Bourne, Sheri Jesiel, Dwight Kay, Bob Pritchard, and Christine Winger. The school funding formula last saw major structural changes in 1997, although the overall distribution of money to Illinois schools has been repeatedly ‘tweaked’ and modified since. The Illinois School Funding Reform Commission has been asked to report its findings to the Illinois General Assembly by February 1, 2017.

Energy – motor fuel
Sharp decline in price of Illinois motor fuel. The essential commodity has been falling in price since mid-June. In Illinois, the price of gasohol – the most-commonly-used motor fuel – declined seven cents in the week leading up to the July 10-16 driving period. The price pattern contradicted established U.S. pricing moves in which motor fuel typically spikes or soars in value in summer months.

Despite the good news, motor fuel price monitor GasBuddy continued to warn Illinois motorists that Illinois motor fuel is priced higher than the pump values charged in several states that border Illinois. Missouri motor fuel was a particularly good value this week, with the Show Me state benefitting from access to both shale oil from Western states and conventional crude oil pumped outside the U.S. Much of the oil burned in Illinois, Missouri, and other Midwest states is produced abroad or from the Gulf of Mexico, and brought up the Mississippi River by tanker barge.

Environment – fish ponds – Rep. Charlie Meier
Representative Charlie Meier clarifies right to fish on private-property fish ponds. Existing catch limit laws, which control the amount of fish a person with a fishing license can legally catch during a 24-hour period, did not contain a loophole for people fishing on fish ponds located on their own private property.

Recognizing this problem, Representative Charlie Meier took action. He worked with his colleagues to pass HB 5796, a new bill that applies to fish ponds and other bodies of water located wholly within a parcel of private property. Fishing catch limits will not apply in these bodies of water. HB 5796 was approved almost unanimously by both houses of the General Assembly (House vote: 113-0-2). Governor Bruce Rauner signed the measure on Thursday, July 8, and the bill took effect immediately as P.A. 99-532.

General Assembly – Rep. David Welter
Representative David Welter appointed to serve Northern Illinois district. Republican leaders in the 75th District have appointed David Welter to represent the district in the Illinois House of Representatives. The district centers along communities close to Interstate 80, including Morris and Seneca, comprising portions of Kendall, Grundy, LaSalle and Will Counties. Welter’s appointment came after former 75th District Rep. John Anthony resigned in June to accept a new job as executive assistant to the Director of the Illinois Department of Corrections.

Under State law, the appointment was made by the four GOP chairpersons from the counties located within the 75th District. The chairpersons cast a weighted vote by population of their counties within the vacant district. The selection of Welter, the current Grundy County Board Chairman, was unanimous. Welter will maintain a district office in Morris, Illinois to serve his constituents. Committee assignments are pending. Welter, who had served on the Grundy County Board since 2010, will also run for a full term as state representative on the November 2016 ballot. Welter was appointed State Representative on Saturday, July 9.

Governor Bruce Rauner – Executive Order
Executive Order 16-08 strengthens State’s affirmative markets initiative. The Executive Order, signed on Wednesday, July 13, affects small businesses owned and controlled by minorities, women, and persons with disabilities. The report of a 2015 study found continued disparities in the treatments accorded by the State between all businesses and affirmative businesses in these enumerated categories.

EO 16-08 directs the Department of Central Management Services (CMS) to reform and reorganize its existing Business Enterprise Program. This reorganization is meant to streamline Illinois affirmative markets policies. Among many other changes, EO 16-08 asks CMS to create a standardized procedure to potentially set aside certain areas of procurement contracts for solicitation to firms with enumerated standing. The “Sheltered Markets” set-aside program is supported by a wide variety of business groups. CMS has been asked to monitor its compliance with the Sheltered Markets Initiative and other changes implemented by this Executive Order, and to report annually to the Governor’s office on July 1 of each year, starting on July 1, 2017.

Higher education – Chicago State University
Chicago-based state university told it faces preliminary accreditation sanctions. The move by the Higher Learning Commission, a permanent panel that accredits Illinois public colleges and universities, took place in a letter to Chicago State University (CSU) dated Monday, July 11. The Commission is asking questions about Chicago State University’s ability to continue to operate as a “bona fide” institution of higher education given the overall budget problems of the State of Illinois.

By placing Chicago State on “notice” in the summer of 2016, the Commission has triggered a two-year period of heightened scrutiny and review intended to generate evidence that the University can address the questions being asked. The Commission is focusing on questions involving Chicago State’s cash reserves, recent cuts to CSU programs, and recent cuts to CSU staffing. For example, 300 former members of CSU’s non-teaching staff were laid off in April 2016. All of these events are related to the current State budget situation and are tied to cutbacks in ongoing funding provided to CSU from State of Illinois taxpayer-financed general funds.

In its notice letter, the Commission labeled Chicago State’s budget situation as “unstable due to the state budget impasse.” While the stopgap budget bill enacted by the General Assembly on June 30 provided immediate funding for the Chicago State University 2016-17 school year, the CSU funding was not enacted as part of a constitutional Illinois balanced budget. The Commission will spend the next twelve months examining Illinois’ budget and Chicago State University’s financial status. In June 2017, the Commission may intensify the sanction or, upon a finding that the identified budget problems are being ameliorated, it may lift the sanction.

In a few cases, sanctions are intensified as part of the latter stages of a two-year process leading to de-accreditation of an institution of higher education. This is a rare event in U.S. public higher education. A member of the U.S. family of historically black colleges and universities, Chicago State University currently serves approximately 4,500 students from its South Side campus.

Housing – refinancing initiative
New I-Refi program from IHDA will help some under-water homeowners. The program, from the Illinois Housing Development Authority (IHDA), is aimed at homeowners who owe more on their mortgages than the home itself is worth. Called “underwater mortgages,” these financial instruments are the targets of the initiative. Eligible homeowners, starting August 1, will be invited to apply for admission to the “Hardest Hit” program. Residents and families helped by the program could see a reduction in the amount of unpaid equity remaining on their mortgages. A mortgage financing data tracker, CoreLogic, reports that approximately 14% of all Illinois home mortgages are currently underwater.

The Illinois program is being backed by $45.7 million in U.S. Treasury funding. It is projected that 1,800 homeowner applicants will successfully apply for admission to the program and will get debt-reduction assistance of approximately $25,000 per home. Applicants to the program, which is targeted towards modest and middle-class home in challenged geographic areas, will be granted a maximum of $50,000 in debt-reduction assistance. The assistance will be credited towards the debt owed on a new, private-sector 30-year mortgage. A list of 25 participating mortgage-finance lenders has been mobilized by IHDA. These firms will refinance the homes of participating mortgagors at market rates.

To qualify, applicants must owe at least 10% more than the value of their home, up to $50,000. Despite being under water, they must have been current on making mortgage payments for at least the past 12 months; and must live in the home. Household income eligibility is determined by a sliding scale keyed towards the number of persons in the household and the geographic location of the household. The maximum purchase price of the home is also one of the variables used to gauge overall potential eligibility for admission to the program.

Jobs – Illinois Job Link
State of Illinois completes rollout of new job opportunity for unemployed Illinoisans. Illinois Job Link is a resume’-posting platform operated by the Department of Employment Security (IDES) that is open to persons seeking employment in Illinois. Under a new policy going into effect on Sunday, July 17, persons filing for Illinois unemployment benefits after being laid off are going to be asked to fill out and post their resumes on Illinois Job Link as a condition of completing their application for benefits.

The Department is aware that some of the people who need to file for benefits will have some questions about how to complete the JobLink process and complete a resume. The JobLink home page can be found HERE. In past years, nearly 60% of Illinois unemployment benefit filings did not include a work history or resume, despite the importance of these documents to potential employers. IDES believes that linking JobLink resume filing with unemployment benefits will speed up the hiring of unemployed persons who may have work experience and credentials of which they are not fully aware, and will reduce unemployment by increasing publicly posted information about the Illinois residents who are motivated to find a job.

State Government – Auditor General
House Republicans sponsor resolution to remove Auditor General for cause. Questions have multiplied concerning the campaign fund of former State Representative Frank Mautino. After his appointment to the post of Illinois Auditor General in late 2015, the former lawmaker and his campaign fund were placed under criminal investigation by a federal grand jury. Charges against Mautino include misappropriation of campaign funds, ethical concerns and potential conflicts of interest. Citing the activities of himself and his counsel before the grand jury, Mautino has refused to respond to questions from the General Assembly relating to the investigation and his fitness to remain in office.

The Auditor General is an office created by the Article VIII of the Illinois Constitution to audit the public funds and operations of State agencies, including the compliance of these agencies with the laws that authorize their operations. In addition, past Auditor Generals have been asked to undertake additional investigations and submit additional reports to the General Assembly on questions involving public policy, including the operations of units of local government that represent parts of the State. Mautino is serving a ten-year term that is not set to expire until December 31, 2025, but he can be removed by a vote of three-fifths of the members of both chambers of the Illinois General Assembly for cause. HJR 158, filed on Wednesday, July 13 by Representative Dwight Kay and more than a dozen House Republican co-sponsors, would remove the Auditor General from office.

Summer in Illinois – Springfield sights
State reopens key historic sites to everyday access. Due to staff changes, visitors will soon be able to see Lincoln’s New Salem, the Dana-Thomas House, and the Old State Capitol seven days a week. Previous closures on days such as Monday and Tuesday disappointed some visitors who had come to the Springfield area to see major historic sights connected with Abraham Lincoln and architect Frank Lloyd Wright.

The seven-day-a-week announcement was made by the operator of the sites, the Illinois Historic Preservation Agency. Donations are requested from the public at each site. The Dana-Thomas House and the Old State Capitol moved to seven-days-a-week access on the week of July 11, and New Salem will move to seven-days-a-week on the week of July 18.

Lincoln’s New Salem is the reconstructed frontier village where future president Abraham Lincoln began his life in Illinois. The Old State Capitol contains the old Illinois House Chamber where he served as a legislator and where he later delivered his “House Divided” speech of 1858 that won national press coverage and attention. With Lincoln’s Home (a federal historic site), and the Lincoln Museum and Library and the Lincoln Tomb (two State sites that have continued on seven-days-a-week operation during the recent slowdown), these sites form the centerpiece of a pilgrimage to Mr. Lincoln’s Springfield.

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