As Illinois budget approaches, most are nervous of another impasse

Updated June 2, 2018 at 2:46 p.m. (CSDT)

With an overwhelming bipartisan effort, for the first time during the tenure of Gov. Bruce Rauner, a budget has been passed: 97-18 in the House and 54-2 in the Senate, this past Wednesday.

The  $38.5 billion budget contains no new taxes, since there are true leftovers from last year's tax increase, and does not include the "turn around agenda" that promoted term limits and changes in workmen's compensation, and judicial abrogation.

"The plan is based on an assumption that the state will bring in about $38.5 billion in the budget year that begins July 1, including $300 million from the long-stalled sale of the Thompson Center in the Loop. The total revenue estimate was boosted this year by the higher state income tax rate and changes to tax policies in Washington, D.C., plus unexpected spikes in investment returns" reported the Chicago Tribune.

What remains are $6.6 billion in unpaid bills and the nation's highest unfunded pension debt, as we outlined below. Problematic is that "Moody’s Investors Service analysts warned that the state’s fixed costs for debt service, retiree health care and pension contributions are on track to consume 30 percent of the money it brings in and that “a failure to adopt mitigating strategies soon will greatly increase the state’s risk that these rising costs will become unaffordable without severe public service cuts," added the Tribune.

Public colleges and universities get  $56 million or a 2 percent bump; and $350 million extra for K-12 education.

"Caregivers who primarily work with the developmentally disabled will experience a 50-cent hourly wage increase under the budget, but other social service providers continue to wait for their rates to go up." and one provider "said her organization is pleased with the General Assembly for passing a budget, but the threat of noncompetitive compensation still persists.

According to a news release from FVOAS, the Legislature has not raised the reimbursement rate for adult day services, which are regulated by the state, in more than a decade."

The Daily Chronicle  also reported "Although Rauner introduced a phase-in proposal during his budget address for school districts to start covering their own Teachers’ Retirement System obligations, a move that would add millions of dollars in expenditures to some districts, no such provision was included in the budget bill."

What is left is an imperfect bill, but one that did show that partisanship could be put aside to do what is crucial to the livelihood of any state's finances. -- DG

For those whose memories are not imperiled by the Midwest’s extended cold weather, it’s budget time for Illinois, and with it brings all manner of anxiety, worry, and some justifiable concerns that this state constitution mandated effort could end in an impasse between the majority Democrats and incumbent Gov. Bruce Rauner, much like the absence of one that held the state hostage for nearly two years.

Some lawmakers are saying that it can’t and won’t happen since the tax increase of last year, that stopped the stalemate, still has enough reserves to stem the tide of another fiscal disaster for the Land of Lincoln. That might be so, but it has still given many observers, lawmakers and economists pause, or should we say cause for concern, as Rauner, who was described by The National Review, as the worst Republican governor in the country, has waged war with the opposition, in the form of longtime nemesis and Speaker of the House, Michael Madigan, and who he said in one ill-advised statement that it was not he, but Madigan that was in charge.

The Chicago Tribune reported recently that “The blame game is likely to accompany any budget standoff again this year. This time, though, lawmakers already enacted an income tax increase last summer, so Rauner doesn’t have the prospect of a new one to rail against or leverage to achieve his legislative goals. Rauner has campaigned on a pledge to roll back the new income tax rates and told voters Democratic challenger J.B. Pritzker will raise them. But he hasn’t made lower taxes a condition of budget talks.”

With this budget that all are not looking forward to negotiating, Rauner has proposed that the pensions of public school teachers be redirected to the local school districts; a move that many educators and principals across the state say will destroy any gains from the new school funding proposal last year, that the he signed, under “duress” claiming that he did not want a bail out for Chicago schools, that he once described as crumbling prisons. And, while he later apologized for making it, the die was cast for him as a Scrooge for Chicago schools.

His recent stall on the budget until the tax credit program --- i.e. vouchers - was later wordsmithed to include all private schools; a move that showed a strong reserve of ill-will from the fact that it  was passed over his veto.

Against this drama lies the specter of over $15 billion dollars in unpaid bills from the impasse, and still underfunded pensions, that threaten to eat whatever leftovers can be reheated from the last deal.

A closer look at the details shows that there is more than one sword of damocles hanging over the heads of the governor and the legislature. As Bloomberg News reported in February: “$2.3 billion of deficit spending in the form of unappropriated liabilities held at state agencies as of Dec. 31; $8.4 billion of unpaid bills as of Feb. 7; $1.03 billion of late-payment interest fees incurred as of Dec. 31, 2017 (Note: At least $143m has been paid); and, a $1.7 billion general fund deficit, according to the governor’s office of management and budget.”

‘Still, many of the factors that complicated the budget negotiations of the past remain at play. Even with the extra tax hike money, the state is projected to run a $3 billion deficit . . . . and cutting spending can be difficult because much of what the state pays out is for programs required by law and education funding that neither side wants to reduce,” they also noted.

Still problematic, is that “Illinois also is struggling with $129 billion of unfunded pension liabilities as of June 30 across the state’s five retirement systems, according to the Commission on Government Forecasting and Accountability. Illinois had $26.3 billion of general-obligation bonds outstanding as of July, according to Moody’s Investors Service, and the state sold $6 billion of general-obligation bonds in October to pay down some unpaid bills and $750 million of bonds in November for capital projects.”

The overall budget goal is to save$1.3 billion dollars.

Brian Mackey of NPR Illinois asked the question of another impasse by questioning lawmakers recently, and this is what some of them  had to say:  "That is the question," says state Sen. Chapin Rose, a Republican from Mahomet. And, he said, "'No' is the short answer to your question," Rose says. "But I think the next question you should ask is: 'Will it be a 12-month budget?' And I'm less convinced of that."

Talking the offense, “Rose and some of his Republican colleagues have been repeating this message — accusing Democrats of wanting only a short-term spending plan. The idea, Republicans say, is that Democrats hope to retake the governor’s mansion this fall, then pass the kind of wild tax hikes and spending that Republicans say Democrats would love to do”.

For the Dems, the response is a strong negative: “"No. We've been consistent in saying we need a full-year budget," says Rep. Greg Harris. He's from Chicago, and he's one of the House Democrats' top budget negotiators.”

Wresting away the steam from the GOP prediction, Harris says, "I don't know why the Republicans keep fantasizing about a six-month budget, but they do," or ,"Maybe it's wishful thinking on their part. I don't know."

To further complicate the process, there are other issues, as the Chicago Sun-Times noted, in a recent editorial, when they wrote: “House Speaker Michael Madigan told his caucus last week that he believes the governor wants an overtime session so he can blame the resulting gridlock on the Democrats. But Madigan told his House Democrats that he believes voters will blame both sides. This was taken by some of his members as a sign that Madigan finally realizes he needs to get something done one way or another. We’ll see. That assessment could be overly optimistic.”

Let’s take a closer look, as of this writing, at the following numbers: the nothing to sneeze at $16 billion dollars in unpaid bills that piled up from the impasse, and the aforementioned $129 billion in underfunded pension, a debt that must be met, by the state constitution’s standards and which looms large, and in Rauner's proposed budget is taken care of, in part, by deducting $470 billion in cuts from union negotiations.

Returning to the school pension funding proposal, there are some, like the editors of the Belleville News-Democrat, who agree with the governor, and say: “Rauner is right that school districts should be responsible for their own pension costs. The current system separates responsibility for paying a teacher's salary from paying most of a teacher's pension costs. That leads to inflated final salaries paid by districts encouraging teachers to retire in their 50s so they can bring in younger teachers and pay them less. Then the state pays the retired teacher an extra decade based on that higher salary plus another 4.4 percent bump if the teacher has two years of unused sick leave.”

The skies darken above Springfield when one looks at the impact of the pension change proposals, but especially in contrasting with the long sought school funding bill.

“The shift would cost school districts $490 million in fiscal 2019, with a $228 million hit to the cash-strapped Chicago Public Schools. The Illinois Association of School Boards said this would revoke the promise of higher funding under a school financing law enacted last year.

Ralph Martire, Executive Director of the Center for Tax and Budget Accountability, a bipartisan think tank, said last month on “At Issue”, a radio program on local CBS radio affiliate WBBM that he does not think that this will have a chance of passing, but most importantly that Rauner's label of a balanced budget is fantasy and this it will increase the deficit from $9 billion to $10 billion. And, furthermore that these pensions are protected by the State Constitution, and that there might be a resort to higher taxes, or classroom cuts to pay the pensions.

“With the new pension burden, hundreds of school districts will be receiving a cut in education funding under the governor’s budget plan,” the group said in a statement,” reported Reuters, also in February.

With the bill, that received praise, from many educators across the country for the equal footing that it gave to lower income students, the die seemed cast for a new paradigm.

But, now, that could change.

‘Rauner's nemesis, House Speaker Mike Madigan, backed a similar plan in 2012 that ultimately failed. Rauner's plan calls for moving the cost of pension payments from the state to universities and local school districts over four years. However, the proposed pension shift is a non-starter for some in the governor's own party. State Rep. David McSweeney, R-Barrington Hills, joined with the Illinois Education Association to gather widespread support for a resolution opposing any shift,” reported the Illinois News Network.

State Sen. Andy Manar, D-Bunker Hill, said he’s confident lawmakers will come to terms on various aspects of the governor’s proposed budget before the May 31 deadline. He also said Rauner’s budget tactic is on better footing than previous proposals. "It’s a large moving part of his proposal,” Manar said. “It involves several hundred million dollars and is, of course, very controversial.”

On Friday, in a developing news story, Reuters reported that “The junk-rated Chicago Public Schools (CPS) on Thursday more than doubled a planned bond refinancing issue to $561 million and accelerated its pricing amid rising rates in the U.S. municipal market.”

CPS said it moved up the sale due to market conditions that allowed the debt refunding to meet savings targets.

“Today’s successful bond sale, which will save CPS $30 million next year and reduce debt costs in all years, is yet another product of the historic funding reform that our families and elected leaders worked so hard to achieve last year,” Janice Jackson, the school system’s chief executive officer, said in a statement.

Meanwhile looking at the tax-credit voucher program, a state legislator recently announced a plan for equitable distribution of school funds. State Senator Jennifer Bertino-Tarrant (D-Shorewood) continues to push for proper funding of Illinois’ schools.

“A bill she sponsors will continue that effort by prohibiting the diversion of public funds to scholarship tax programs in any calendar year unless the state has appropriated the $300 million in added education funding required annually by the new school funding formula.”

“The state has a constitutional responsibility to fund public education, and this will do so without hurting private schools,” Bertino-Tarrant said. “The state must meet the minimum funding formula before we hand out tax credits to wealthy donors and corporations.”

Bertino-Tarrant introduced the bill in response to a 5-year tax credit scholarship pilot program which allows individuals and companies that donate to private school scholarship organizations to receive tax credits up to 75 percent of the amount donated.

Senate Bill 2236 prohibits those tax credits in any year the minimum funding level is not met. Bertino-Tarrant stressed this bill does not eliminate the Invest in Kids Act, it simply holds legislators accountable and increases transparency in the use of taxpayer dollars for rebates to wealthy donors.”

In a strongly worded statement on her website she said: “As a mother, educator and a product of Catholic schools, I am a fierce advocate of giving our children the best possible educational opportunities, but we should not be working toward weakening the infrastructure of public schools across our communities,” Bertino-Tarrant said. “This scholarship program, as it stands, is not a tax credit for working families to send their children to private schools – it is designed to incentivize donors.”

In an attempt to harness the unpaid bill, State Sen. Heather Steans proposed that debts 90 days old be paid to clear the state ledger and have the monies transferred back to to the communities that need then; the vote passed by a wide margin and went onto to the House for approval.

Despite these measures, Illinois still suffers from the fate of being rate by the bond agencies with the label junk meaning that any monies raised through bond ventures may be doubtful, at best.

The greatest threat said the Wall Street Journal is the political gridlock that led to the financial debacle, identified as Illinois.

Illinois bonds are considered risky, at best, and Moody’s gave them a shaky Baaa3-, and S+P Global gave them just above junk status at BBB- and BBB-; more than a go slow, a red flag for would be buyers.

Chris Brigati, of Advisers Assets Management said this: “It’s Illinois, and things don’t go easy.”

For local observers, this is understatement, and the state will have, if there is a repeat of last year, or even a budget passed again over his veto, as Martire noted, Gov. Rauner “will never have been able to negotiate a budget with the general assembly in for four years.”

Luis Gutierrez says to NEIU grads to fight bigotry and discrimination

For much of our nation’s history, one of the most inexpressible questions that has been repeatedly asked, is this: “What is an American?” In his commencement address to the 900 graduates of Chicago’s Northeastern Illinois University on Monday,  U.S. Rep. Luis Gutierrez, perhaps gave the best answer, when he described his fifteen year old grandson, who shared his transnational identity by saying, “Grandpa, on this side I am Mexican, and on this side, I am Puerto Rican, and here - pointing to his heart - I am American.”

There was barely a dry eye in the University of Illinois at Chicago Pavilion, after the sixty-four year old Congressman, related this story. And, indeed, much of the nearly hour long speech was filled with references to identity; identity as an attribute, as a verb, and most importantly what being an American means to this fearless defender of immigration reform and the need to unite, not to divide, not only the Hispanic community, but for all citizens in helping to redefine what being an American means now, and in the future.

Is America, a melting pot, or has it become a mosaic? For the latter, the hope behind this, as many a graduate school class would debate, and even eulogize, was that identity, and its cousin, identity politics could be taken into a new context, or even a new future paradigm.

For Gutierrez, a 1977 alumni of the school, this was a homecoming, but also a farewell as he has announced his retirement from Congress,(in November of 2017), and his speech was also, largely, a biography; an atypical trajectory for many Hispanic families, who, unlike Gutierrez was not born in the U.S., but instead traveled to the mainland, for financial security, and other opportunities lacking in their home countries.

He has been a major force in immigration reform and has chaired the Democratic Caucus Immigration Task Force since 2009; but has also made a name for himself, as well as an advocate for LGBT rights, Native American, and worker rights, so much so that his influence with the Illinois Congressional House delegation has given him the official title of dean, of that delegation.

A tag line for the speech, which resonated with his convictions, was to “hold the door open, wide, for others to come in,” a phrase not frequently heard in these divided and partisan times, and as advice for the graduates to also “open the door a little wider for the next person.”

This acknowledged crusader cited his own example, as he exhorted the graduates with the following: “do not allow bigotry and discrimination without raising your voice,” and to once again, remember to “open the door wider to let those in that pray differently, and love differently.”

On the other side of town, ready to fulfill this legacy, was his daughter Jessica, who announced that she is joining the race for Chicago's 30th Ward alderman seat. Local ABC affiliate, Channel 7, reported that “Her father watched teary-eyed as she launched her first campaign and promised to be an independent voice.”

She will face Ald. Ariel Reboyras, an ally of Mayor Rahm Emanuel.

Determined to be her own person, it was also apparent that she took the family pride of hard work as her father also acknowledged, that he relied on the hard work of his mother and father.

In closing, he pledged, to thunderous applause, that he would “not rest until the job is done and you have your U.S. citizenship,“ and showing, for the rest of us, that his leaving Congress is really only the beginning of the journey.