Weekly Updates - 5/7-5/11 2012

Weekly Update - Week of 5/7/12 - 5/11/12

Retiree Health Care

• General Assembly passes controversial bill on State employee retiree health benefits. Senate Bill 1313, a measure sponsored in the House by Speaker Michael Madigan and House Republican Leader Tom Cross and supported by Governor Pat Quinn, deletes the statutory formula under which a State employee who retires at the end of his or her service can receive free or subsidized health insurance from the State. On May 9, the House passed SB 1313, as amended in the House, with a vote of 74-43-0. The Senate concurred in the House’s amendments on May 10 with a 31-20-1 vote. Once the bill is signed by the Governor, as many as 85,000 current retirees could be asked to share the costs of their health insurance premiums.

• The rules governing State contributions toward retiree health care will be determined by the Director of Central Management Services (CMS), and must be filed with the Joint Committee on Administrative Rules (JCAR). CMS outlined their proposal for retiree health care in a memo requested by Leader Cross. The proposed retiree contributions will pay a percentage of their healthcare costs on a sliding scale. The scale is based on (1) length of service, and (2) ability to pay. The percent of cost the retiree will pay will also be based on his or her pension level. Pension amounts will be broken up into seven tiers; the higher the tier, the more the retiree will pay.

• There are currently 78,000 retirees who pay no premium for their health insurance (approximately 90% of all state retirees). Another 7,400 pay a portion of their premium. Current law provides a 5% reduction in premium costs for each year of state service. Retirees with 20 years of state service pay nothing for their health insurance coverage. State taxpayer-funded retiree health insurance costs are expected to reach over $800 million this year.

Pensions - Chicago

• Mayor Rahm Emanuel visits General Assembly, calls for sweeping reforms of Chicago pension laws. Echoing longtime House Republican calls to reform Illinois’ public pension laws, Chicago’s mayor visited Springfield May 8 and asked for major changes in the State laws that govern the pension systems offered to City of Chicago officials and employees. Recent revelations of perks, such as the “double-dip” pension collected by Emanuel’s predecessor, Mayor Richard M. Daley, have spurred cries for reforms and have also triggered warnings from the international investment and business community. In talks with lawmakers, Emanuel suggested that legislative inaction could threaten Chicago’s future status as a place for investment and job creation. Chicago’s unfunded pension liabilities are reported to top $20 billion - a figure compared by many observers with the State’s unfunded pension liabilities, which are approaching $85 billion.

Child Care

• State child care funding may be restored. One of the human services commitments made by the State is that of reimbursement to a wide variety of child care providers for services provided to children who come from households whose incomes make them eligible. Funding for these reimbursements in fiscal year 2012 has run out, and $73 million in additional funds will be required for the State to pay the bills of child care service providers. This shortfall is tied in part to an increased case load in the Temporary Assistance for Needy Families (TANF) program, which has had funds redirected to it at the expense of the child care program. Many child care service providers are licensed individual caregivers and small businesses. On May 8, Governor Quinn’s office stated that they had found funds that could be used as a “supplemental appropriation” to fill this gap. Lawmakers continue to work with the administration to ensure that the solution to this problem is revenue-neutral and falls within the agreed $33.2 billion FY12 budget framework.

Facility Closures

• At many State institutions jobs remain under threat as state Senate defeats bill to allow General Assembly to have serious voice in the process. Governor Pat Quinn’s plans to close 35 facilities throughout Illinois, with a cost of up to 2,527 jobs, will hit Downstate Illinois especially hard.  Many of the human services and correctional facilities listed in the closure plan are located in rural Illinois, especially central and southern Illinois. Most of the members of the Commission on Government Forecasting and Accountability (CGFA), a bipartisan General Assembly panel, voted “no” last week (May 1) on most of the closure requests contained in a primary round of facilities closure requests. However, CGFA’s vote is advisory and will not prevent the Governor from padlocking the threatened facilities.

• In a last-ditch attempt to protect these threatened jobs and facilities, state Senators tried to move a bill (SB 3564) to allow CGFA to permanently block these closures. On May 9, however, the bill failed in the Senate by a vote of 29-23-1, allowing the Governor to continue to move forward with his plans to close the threatened facilities.

Enterprise Zones

• House Republicans continue effort to extend lives of Illinois’ enterprise zones. Enterprise zones are great economic development tools to create and retain jobs in Illinois. Between 1984 and 2011, the zones created 354,000 jobs and retained 536,000 jobs in Illinois.

• Unfortunately, without action by the General Assembly, Illinois’ 97 existing enterprise zones will begin expiring in 2013. On May 9, House Republicans made a Motion to Discharge Senate Bill 3688 from the House Rules Committee. SB 3688, which would extend the lives of Illinois’ enterprise zones for an additional 25 years, passed the Senate unanimously in April, but is being held in the House Rules Committee.

• Representative Adam Brown, along with Representatives Pam Roth and Mike Unes, rose in strong support of the Motion to Discharge Senate Bill 3688 from the Rules Committee. Representative Brown explained that the Decatur/Macon County enterprise zone is set to expire in July 2013. He closed by quoting an April 29 Decatur Herald & Review editorial that urged the extension of Illinois’ enterprise zones:

“In recent years, the state of Illinois has spent millions keeping large companies in the state. The state’s business climate is poor, and the competition for jobs is fierce. Neighboring states have been aggressive in luring jobs away.

“Extending the enterprise zone legislation is an important piece of the puzzle to change that trend. It’s difficult to understand why legislators wouldn’t want to extend this commonsense, and locally controlled job creation tool. House Speaker Madigan should at least give his members a chance to vote on the bill approved by the Senate.”

College Illinois! Audit

• Auditor General finds serious conflict of interest problems in College Illinois! program.  College Illinois!, a program operated by the Illinois Student Assistance Commission (ISAC) to provide a tax-advantaged prepaid tuition savings opportunity for Illinois residents, is (like many other funds worldwide) currently actuarially unsound. It has promised investors more returns than it can provide based upon current prudent projections of future investment returns and interest rates. Some of College Illinois!’ investments, made before and during the 2008 economic downturn, have led to significant losses.

• A report released on May 9 by the Auditor General’s office reveals some of the steps that led up to the current situation, including certain actions taken by College Illinois!’ former Director of Portfolio Management. The management audit was initiated by Representative Jim Durkin’s HR 174, adopted in 2011. In responding to this week’s report, Durkin pointed to how it had uncovered “red flags and serious lapses” in former College Illinois! management. The recommendations contained in the report could become the basis of bipartisan action to reform and stabilize the challenged College Illinois! program. The current College Illinois! management team has pledged to take a series of steps intended to reopen the stabilized program to new investors. The full report can be viewed at http://www.auditor.illinois.gov/.

Auditor General

• House reappoints Auditor General for additional 10-year term. On May 8, the House unanimously voted to reappoint Bill Holland for a third 10-year term as Illinois Auditor General. His reappointment now moves to the Senate for final action (the Governor’s signature is not required for this measure). The Auditor General holds a nonpartisan office that works in cooperation with a bipartisan commission of both houses and all four caucuses of the General Assembly. Holland and his office help staff Illinois’ current push for a balanced budget, and are responsible for financial and compliance audits of a wide variety of State agencies and programs. An example of his office’s work is the audit of the College Illinois! prepaid tuition program released on May 9 that revealed serious conflict-of-interest problems among College Illinois!’ former management team.  The Holland reappointment resolution is HJR 84 (Madigan-Cross/Cullerton-Radogno).