Week in Review for week ending May 26, 2017

With time running out, Democrats resort to old tax and spend playbook. Rather than work together to pass a true balanced budget, Democrats are going back to their old tax and spend playbook.

Every time Republicans asked during negotiations that greater reforms be included, Democrats pulled back and said they’ve gone as far as they can.

In truth, Democrats were merely running out the clock in order to pass their $5.4 billion tax hike.

Contrary to previous public comments by Democrat leaders, the General Assembly hasn't passed a balanced budget in 15 years. In fact, their decade-and-a-half of failed leadership controlling both Chambers is why Illinois is facing this fiscal crisis.

The budget Democrats are advancing, like their previous budgets, is not balanced. This budget will not address the crisis facing our state. This budget puts the burden on Illinois taxpayers. This budget is about headlines, not helping the people of Illinois. This budget is reckless and irresponsible.

Enough with the gimmicks. Enough with the budget sleight of hand.

We are close on a real budget, close on worker’s comp reform, which will make Illinois competitive again.

We need property tax relief as well. Property taxes are crushing Illinois homeowners and businesses. The residents of Illinois want, and deserve, meaningful property tax relief.

House Republicans stand with taxpayers and homeowners in ensuring any final budget agreement is fair.

We can get consensus on a true balanced budget, with property tax relief, which will put Illinois on a responsible path forward.

Lack of budget leads to impending crisis in Illinois debt market. Market prices this week for Illinois-issued securities, including but not limited to general obligation debt, indicated a significant belief among market traders that Illinois’ credit status could continue to decline in the near future. This week, the interest rate paid by Illinois taxpayers to lenders willing to purchase 10-year Illinois General Obligation (G.O.) bonds rose to 4.43%, 245 basis points above the interest rates demanded by lenders to units of the U.S. private sector that are rated triple-A (AAA).

The three largest credit-rating agencies currently rank Illinois G.O. debt at the equivalent of BBB with a negative outlook, only two notches about “junk bond” territory. Implementation of the “negative outlook” posted by Fitch Ratings and its brethren credit measurement firms could lead to Illinois’ G.O. debt being cut to BBB-, the lowest rank available for investment-grade securities, and then to the junk-bond-level BB+. The fact that Illinois taxpayers this week were paying interest rates more than double the 1.98% market rates charged against AAA borrowers indicated a significant belief in credit markets that this was a serious possibility facing the State of Illinois. Market analysts have told clients of key lending coordinator Citigroup that the 4.43% interest rate currently being paid by Illinois and its taxpayers already anticipates, or “prices in,” a further cut in the Illinois G.O. credit rating from BBB to BBB-.

Illinois’ decade-and-a-half of structural deficits are strongly implicated in the current Illinois credit rate crisis, which also affects many private-sector entities in Illinois, including entities that are involuntary creditors of the State due to the $14.5 billion backlog of unpaid bills.

Also affected are units of the Illinois public sector. A wide variety of entities, including State of Illinois public universities, are depending upon funding from the State. Many Illinois public universities have seen cuts in their credit ratings in recent months that track the cuts imposed on Illinois. Credit ratings of units of Illinois local government and public school districts are also seen as being at risk from Illinois’ current budget impasse.

Chicago – Census
Federal census estimate shows thousands of Chicagoans left last year. The U.S. Census estimate indicates that Chicago’s population was 8,638 smaller in 2016 than it had been in 2015. The one-year trend seen in Chicago runs counter to evidence compiled from Census population numbers in each of the other 15 largest cities of the United States. Chicago was the only city in this group to lose population. Other large U.S. cities are making successful efforts to “sell themselves” to young adults as places of creative work and exciting life. The 2016 decline followed up on similar numbers posted in 2014 and 2015.

In 2016, Chicago lost more people than any other large U.S. city. This performance was in sharp contrast to cities such as New York City, Los Angeles, Dallas, Atlanta, and Houston. Many Chicago suburbs also declined in population. The figures not only reduce that stature of Chicago among U.S. cities but also will have a tangible effect upon the city’s troubled public-sector budget. U.S. Census population numbers are the basis for federal revenue-sharing grants to local governments, including grants that help carry the burden of local law enforcement forces such as police departments. The Chicago population figures came during a year when the governments of both Chicago and Illinois came under severe criticism from the press and U.S. private sector for lack of financial responsibility.

Chicago – Schools
CPS to take out $900 million in emergency borrowing. Chicago Public Schools (CPS), whose debt rating has already dropped into junk-bond territory, has announced plans to keep its doors open until the formal end of the 2016-17 school year. Illinois’ largest school system will be forced to borrow approximately $900 million in long-term and very-short-term loans in order to maintain its operations, including a single take-out of $397 million. The $397 million short-term loan is expected to be repaid by pledging $457 million in State “block grant” school aid payments that have not yet been paid. As of the end of this week, no repayment source had been identified for the remainder of the $900 million emergency borrowing.

While CPS is an independent educational unit, its leadership and operations are chosen by the Mayor of Chicago. The nine-figure debt announcement was put together by Mayor Emanuel’s office and announced by the city’s Chief Financial Officer, Carole Brown. The announcement did not clarify what the interest rate on the new debts would be, but “junk bond” debtors typically must pay double-digit interest rates when borrowing more money, if creditors are willing to extend further commitments.

Chicago – Union Station
Iconic passenger rail station to be rebuilt with two 12-story residential towers. Chicago’s Union Station serves Amtrak and Metra passenger trains from downtown Chicago. The passenger station continues in service with most of its operations moved down to track level. A redevelopment plan announced on Thursday, May 25, will allow for the construction of over 3 million square feet of commercial and residential space. The plan includes 24 stories of residential space.

Union Station is located in proximity to Chicago’s financial district, making its location a select place for prime development. The footprints of the buildings contemplated as parts of the $1 billion redevelopment project include the station’s existing train tracks and the roofline of the station’s Great Hall. The project will be chaired by Chicago’s Riverside Investment and Development Co., a consortium of builders with interests in the project.

General Assembly
Illinois House returns for final full week of scheduled session. The General Assembly is scheduled to finish up its spring 2017 work on May 31, 2017. As an incentive to the legislature to complete its work, the Illinois Constitution says that any bill passed after May 31 must be passed by a three-fifths majority in both houses in order to become law immediately (Constitution – Article IV, Section 10). Starting June 1, any bill passed in 2017 by a simple majority will not be allowed to become effective until June 1, 2018.

Unemployment rate drops 0.2%, moves down from 4.9% to 4.7%. The April 2017 report from the Illinois Department of Employment Security (IDES) reflects ongoing monitoring of Illinois residents who are either employed or actively seeking nonfarm employment. The IDES monthly reports are prepared in cooperation with the federal Bureau of Labor Statistics, a branch of the U.S. Department of Labor (USDOL).

While the drop in Illinois’ unemployment rate can be seen as good news, Illinois’ jobless rate remains higher than the numbers posted by other states also monitored by USDOL. The jobless rates posted in April 2017 in the neighboring states of Indiana, Iowa, and Wisconsin were 3.6%, 3.1%, and 3.2%, respectively. Furthermore, total nonfarm employment numbers continued to drop in Illinois in April, with a net loss of 7,200 nonfarm payroll jobs during the 30-day period. The missing Illinois jobs were concentrated in the sectors of construction, trade, transportation, utility services, and leisure and hospitality services. Growing Illinois job numbers in educational, health, professional, and business services have partly made up for these job losses.

Butterball meatpacker to cut 600 jobs near Aurora. The announcement affects the former Gusto Packing plant in Montgomery, Illinois, south of Aurora. The pork processing plant will be shut down in July 2017. The official announcement was made at least 45 days in advance of the anticipated shutdown; the information was released in compliance with State and federal laws governing significant layoff events. The 260,000-square-foot Kane County packing plant had been part of the Butterball meat-and-poultry family since 2013.

As with other sections of Illinois, Kane County is moving away from a manufacturing-based economy and toward an economy based upon specialized services. In another sign of this transition, Caterpillar Inc., the global off-road machinery firm, announced in March 2017 that they plan to shut down production activities at their 5 million-square-foot Oswego Township plant. The Caterpillar move is expected to lead to the loss of 800 headcount jobs. While Aurora and the lower Fox Valley have traditionally looked toward manufacturing and the production of tangible goods for job growth, economic leaders are now urging local municipalities and community groups to look in different directions.

Long-stalled Illinois 53 proposal could move forward as toll road. The proposal to continue the long-delayed extension of high-speed motor vehicle lanes into Lake County, pushing beyond the superhighway’s current northern terminus at Lake-Cook Road in Palatine, moved forward this week. A committee of the Illinois Toll Highway Authority (ITHA) approved a proposal to spend $25 million for a comprehensive engineering and environmental study of a proposal to create a Lake County toll highway system. The proposal was approved on Monday, May 22.

Opinions have long been divided in Lake County on expansion of toll highways, including the expansion of Illinois 53. Traffic congestion and environmental impact are major issues in the communities that would be served by the proposed highway expansion. The current proposal would build a limited-access toll highway northward through Long Grove to Grayslake, where the toll road would intersect with a second toll road to be built westward from Waukegan to Volo in central Lake County. The east-west toll road would be roughly aligned with Illinois 120, which serves Gurnee, Hainesville and the Round Lake communities in addition to Grayslake.

Many Lake County residents strongly support or oppose the highway expansion to be studied under this proposal. The proposal could be financed with a combination of tolls, a supplemental motor fuel tax in locations affected by the proposal, and a capture of real estate tax revenues on properties whose values would be enhanced by implementation of the proposal.

Chicago may change policies on passenger evictions from planes. In a widely publicized incident, a ticketed passenger was removed earlier this year from a passenger airliner scheduled to leave Chicago’s O’Hare Airport. Airport police officers, who are public-sector employees, were a part of the removal situation. The incident has led to discussion of what to do in future passenger situations of this type. Under a proposal being discussed this week in Chicago’s City Council, city employees – including airport police officers – would be barred from taking future steps to assist in the removal of passengers from airliners in non-crime and non-emergency situations. Nothing in the proposed city move would prevent airport police from assisting in a setting marked by a genuine incident of crime or public safety emergency.

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