End of Session Review
SPRINGFIELD, IL – State Sen. Sue Rezin (R-Morris) said the 2013 legislative session came to a close on May 31 without any pension reform accomplished. While bigger measures, such as concealed carry and “fracking,” passed the Illinois General Assembly, the largest and most pressing issue – pension reform – failed to garner enough support to pass both chambers.
With unfunded pension liabilities reaching $100 billion by some conservative estimates, the Illinois General Assembly’s main priority for this session was to reform and stabilize the state retirement systems. Nevertheless, lawmakers have left Springfield without accomplishing that task.
Sen. Rezin said the lack of leadership in the state that has been shown this session is astounding, and it is the taxpayers who suffer. House Speaker Michael Madigan and Senate President John Cullerton were unable to come to an agreement on pension reform, despite independent versions passing the Senate and House. After passing his version in the Senate, President Cullerton called Speaker Madigan’s version, Senate Bill 1, for a vote on May 30 only to fail 16-42. Speaker Madigan did not call President Cullerton’s measure, Senate Bill 2404, at all in his chamber.
“The General Assembly made some progress on a number of important issues this session,” Sen. Rezin said. “However, the failure to accomplish pension reform is likely to overshadow all other accomplishments. All parties in the state recognized that pension reform was the number one issue for the state and that it was ours to solve. Yet here we are, returning to our districts, with the problem left unsolved. Now, retirees and taxpayers alike are left to wonder what will happen to their pensions and to the liabilities that face this state. It’s completely unnecessary and truly unfortunate.”
Rezin concluded by saying she wished that she was returning to the 38th District with some better news for retirees and for the taxpayers of Illinois.
“At this time it is unclear what will happen with pension reform,” Sen. Rezin said. “The question is if and when the General Assembly will return to try it again. But as we continue the discussions on how to solve Illinois’ pension crisis into the summer, it will remain my goal to achieve reform that the attorneys feel is constitutional, give assurance that the state will fund the pensions, and protect taxpayers from future liabilities. We need to move forward with a comprehensive, fair and affordable pension reform plan.”
Sen. Rezin also said that comprehensive pension reform should include stronger language for the funding of the pension systems. Without strong language guaranteeing pension payments from the state, they could be shorted or skipped as they have in the past and compound the pension liabilities. Sen. Rezin said that is what happened in 2005 when the General Assembly voted to take a pension holiday and skip paying $4 billion into the pension systems over two years. This happened despite testimony at the time from the Teachers Retirement System (TRS) that the holiday would equate to $50 billion in unfunded liabilities in 30 years.
Strengthening the case to include strong funding language in pension reform is Senate Bill 1920, which would have allowed the Chicago Public Schools to take a $400 million pension holiday over the next two years. Sen. Rezin said this would only add to the $8 billion of liabilities they currently have. The bill ultimately failed in the House, but Sen. Rezin says it is an example of the need for funding guarantees so the state does not authorize further holidays that would only force the state to continue to sink further into the hole.
Similarly, lawmakers shot down a measure that would have shifted almost $800 million in pension costs to Illinois’ state universities and community colleges over the next decade. The cost shift would almost certainly have resulted in significant property tax hikes and tuition increases.
Senate Bill 1687 passed the House but failed to pass the Senate on May 31. If passed, it would have shifted the costs of newly earned benefits each year for those in the State Universities Retirement System (SURS). This would have been phased in at 0.5 percent of the payroll added each year and would have also shifted the cost of any growth in pension liabilities due to low investment returns or other factors to the state colleges and universities. The payments by colleges to the SURS would have been enforced by the state withholding state funding or grants from delinquent colleges, as well as local officials diverting property tax revenues for delinquent colleges to the pension system, which would lead to probable property tax hikes.
“The notion that shifting this cost to the state universities and colleges is going to solve any of the state’s fiscal problems is false,” Sen. Rezin said. “Placing a heavy burden like this on these institutions when the state owes universities all over the state millions of dollars to begin with is going to cause some major hardships for them, not to mention to the home and business owners and working families who want to send their children to college at an affordable rate. I did not support it in the Senate and I hope that it is not called for a vote again in the future. We need a better solution to our pension crisis than this.”
Sen. Rezin added that a few university presidents testified in committee that they would compensate for the costs of Senate Bill 1687 by passing it onto tuition increases. Furthermore, the legislation did not include any new revenue sources, so it would have been a cost to the colleges and universities without any aid from the state.
Despite the disappointment with pension reform, Sen. Rezin said that there were some positive accomplishments during the spring session. After months of negotiation, the Illinois General Assembly advanced House Bill 183 affirming a citizen's right to carry a concealed firearm. The bill will allow Illinois to join the rest of the nation in allowing some form of Right-to-Carry. Illinois was under a June federal court deadline to adopt Right-to-Carry.
The bill imposes common sense safeguards to ensure training and background checks for those who wish to carry a concealed firearm. The legislation preempts all local ordinances affecting concealed firearms and ammunition, including registration, licensing, possession and transportation, for those with a concealed carry license.
An applicant does not have to show a need in order to carry, but they do have to undergo 16 hours of training, which is more than any other state, and pay a $150 application fee. The license will be good for five years.
The legislation also specifies prohibited places a firearm cannot be carried. This includes any schools or child care facilities, bars, hospitals, government buildings, airports, sporting events, and more. The bill also prohibits carrying firearm under the influence of drugs or alcohol and outlines strict penalties for those who are found to be under the influence. Additionally, applicants cannot have been convicted of a misdemeanor and the bill outlines strong mental health standards and reporting procedures.
Lawmakers also approved model legislation covering hydraulic fracturing (commonly known as “fracking”). The technology holds out the promise of new jobs and greater energy independence. Extensive negotiations between environmental groups and industry representatives ultimately yielded Senate Bill 1715, which defines how Illinois will regulate and monitor the practice.
Sen. Rezin noted that fracking is already taking place in the state, but the legislation aims puts standards and practices in place for the companies that come in the state. She said this was important in order to protect the environment and create statutory language for the industry to follow.
Hydraulic fracturing is the process of injecting pressurized water and materials underground to crack rock layers and free up natural gas or oil that can then escape to the surface where it is recovered.
It has been estimated that hydraulic fracturing could create as many as 40,000 jobs in Illinois, many in southern Illinois and other job-starved areas of the state.
Economic Development Omnibus
On the final day of the scheduled legislative session, the Senate also passed a major economic development incentive measure.
Senate Bill 20 paves the way for a long list of public projects through a variety of incentives and authorizations. Projects impacted would include: a new arena for DePaul University near Chicago's McCormick Place, improvements at the Rosemont Convention Center, the proposed third major Chicago-area airport near Peotone, the Cronus Fertilizer Plant near Tuscola, a Brownfield Redevelopment Zone in Chicago's south suburbs, a Chicago Midwest TIF extension for Mt. Sinai Hospital, additional funding for the state's Underground Storage Tank Fund, farmland assessment changes, a Grundy County Economic Development Project Area, a new Riverfront Development Fund that will impact Aurora, East St. Louis, Peoria, Elgin and Rockford, property tax changes needed by the Washington Community Center and changes to the state's Enterprise Zone, Rivers Edge and High Impact Business programs.
Unfortunately, as was the pattern with much of the legislation from the 2013 session, the measure contained anti-small business language that would make it harder to small employers to participate in state projects. Sen. Rezin said this was disappointing, but she supported the legislation considering there were some good proposals included that would create jobs and spur economic growth, especially in Grundy County.
Budget – More Spending
Another disappointment of the spring session was the record spending budget that was passed. With the bulk of the state's "temporary" income tax set to expire in a year and a half, the majority and the Governor again adopted a budget that spends billions more than will be available beginning in January 2015.
The legislature adopted and sent to the Governor a record $35.4 billion state General Funds budget that is $1.35 billion more than in Fiscal Year 12 and $1.7 billion more than the FY13 budget as it was originally adopted.
This budget relies on temporary revenues, diversions and shell games to support permanent spending increases. Once again, the emphasis was on new programs, expanding existing programs and continuing to fund failed programs.
As they have done since the adoption of the 67% tax hike, Senate Republicans called for any additional dollars to be used to chip away at the state's massive backlog of bills and debt, a strategy they believe would have put the state on strong financial footing and allowed the tax hike to expire as promised.
The budget also uses a one-time windfall, driven by federal tax law changes, to prop up spending. That decision will leave the state facing an even larger "cliff" next fiscal year, when the tax hike is set to expire mid-year.
The bi-partisan Commission on Government Forecasting and Accountability (COGFA) has estimated that once the tax expires, Illinois will have $31.5 billion in General Funds revenues, $3 billion less than what the legislature and Governor plan to spend in the coming year.
School Funding Fairness
The budget continues to obscure how the state allocates precious education dollars, a problem documented in a major review of state education funding released earlier in the year.
That report revealed that over the past decade, changes in state school aid policies have consistently reduced the percentage of state dollars that goes to the state's General State Aid formula. Instead, resources have been diverted into special purpose allocations, including grants for property tax equalization and poverty payments.
The issue has been complicated by obscure policy decisions that allow select school districts, most noticeably, the Chicago Public Schools, to qualify for aid that goes far beyond what they would be entitled to under a balanced and objective formula based on student population.
Since Fiscal Year 2009 the core Foundation Level Grant has been reduced by almost $400 million. This grant is designed to equalize resources across the state and fund education fairly, regardless of where a child happens to live. In contrast, special purpose funds that benefit specific school districts, consume a growing percentage of the state's education budget.
Legislation to shine a light on how the state's school aid formula is divvied up in the budget (HB 3133) passed the Senate with strong bi-partisan support. But when it came time to actually draft the budget, majority Democrats kept the same lump-sum allocation for school aid that hides how the money is allocated.
Despite extensive documentation of waste and abuse, the budget continued to fund failed programs. Symbolic of this abuse was the continued funding for the "Neighborhood Recovery Initiative" which was the subject of a major Anderson Cooper 360 report on CNN and is now under examination by the state's Auditor General.
The CNN report revealed that taxpayer dollars were used to pay people to walk in a parade with Governor Quinn, visit museums, hand out flyers promoting inner peace, and attend yoga classes.
The same program handed out thousand of dollars in gift cards as a reward to two subcontractor employees of a community organization.
Despite the obvious embarrassment and abuse, the program was deemed worthy of another $20 million in taxpayer dollars.
Similarly, the budget continues to fund the failed "Grow Your Own Teachers" program – a well-intentioned effort to encourage parents in low-income areas to return to college and pursue a degree in education. But, as laudable as the goal might be, the record has been one of near-complete failure.
That program has spent $20.2 million since it began in Fiscal Year 2006, but has produced only 64 persons who graduated and went on to teach in Illinois schools. That's a per teacher cost of $314,000.
For comparison purposes, Yale University currently places the cost of a four-year education, including all tuition and fees, at about $234,000.
Despite the failures, the program was allocated another $1.5 million in taxpayer dollars for the coming year.
Diverting Road Dollars
The Illinois Secretary of Transportation has acknowledged that by the end of the FY14-FY19 Multi-Year Plan, over one-third of all state roads will be in unacceptable condition and has estimated that Illinois needs a Road Program of at least $2.8 billion to maintain our transportation system.
Shortly before the budget was adopted, Illinois' Auditor General released an audit of the Road Fund that concluded that over the last 10 years, less than half of the money raised from the gas tax and motor vehicle fees, was spent on direct road construction.
Yet, for the third straight year, the budget shifts General Funds costs to the Road Fund – in fiscal year 14 to the tune of $59 million.
Complete list of legislation
To view a complete list of legislation approved by the General Assembly this session, please click here.