Last week in Illinois

Budget – FY16
CGFA issues monthly budget report.  The report, which covers Illinois general funds receipts and expenditures for the month of December 2015, was generated by the non-partisan Commission on Government Forecasting and Accountability (COGFA).

With the State’s large single budget source – personal income tax revenues – continuing to feel the effects of the current individual income tax rate of 3.75%, December 2015 general revenues net of refunds were down by $430 million from comparable levels of funds paid to the State in December 2014.  Of this decline, $376 million was accounted for by changes in personal, individual, and corporate income tax flow, net of refunds.

Most other specific revenue items were flat or showed small declines.  However, December 2015 sales tax receipts declined $14 million as consumer retail sales continued to shift online.  There was a sharp decline in Illinois State Lottery ticket sales in the fall of 2015, with effects spilling over into December, as the Lottery temporarily failed to make payments on some winning tickets.  Lottery proceeds credited to Illinois general revenues declined by almost 20% in December 2015 from year-earlier numbers, declining from $65 million to $53 million.  The General Assembly has enacted a special appropriation measure to enable winning lottery ticket payments to resume.

Debt – FY16 
Rauner administration to borrow $480 million for essential infrastructure repairs.  Despite the lack of a FY16 budget, Illinois continues to have the legal right to borrow money.  Money lent to Illinois by creditors becomes part of the “general obligation” of the State and its taxpayers, and is repaid from ongoing tax revenues.  As part of the ongoing need for Illinois to maintain its roads, bridges, and other essential infrastructure, the State is scheduled to sell $480 million in long-term bonds on Thursday, Jan. 14.

Illinois’ low credit rating means that taxpayers will have to pay a higher interest rate on these bonds than are paid by states with higher credit ratings, such as neighboring AAA-rated Indiana.  Wall Street believes that Indiana has done a better job at maintaining fiscal probity and budget discipline than has Illinois.  In contrast to the Hoosier State, Illinois’ credit rating is declining toward “junk bond” status.  The current rate of interest demanded by market investors in our 30-year bonds is 4.67%, about 1.80% (180 basis points) above the interest rate paid by “benchmark” debtors.  

Investment bankers will be closely observing Illinois’ new bonds as they enter the marketplace for signals of the state’s ability to maintain its investment-grade status.  The continued FY16 budget impasse in Springfield could further affect the perceived fiscal standing of the State of Illinois.  Moody’s, the largest New York-based credit rating firm, currently ranks Illinois general obligation debt at Baa1, only three steps above non-investment-grade “junk bond” level.

Local Government Consolidation Task Force
Task Force releases report.  After almost 12 months of hearings and consultations with citizens from throughout Illinois, the Local Government Consolidation and Unfunded Mandates Task Force this week released a 27-recommendation report to reduce burdens on local units of government and taxpayers.  The widely-awaited report and recommendations were publicly released on Monday, January 4.  The Task Force was chaired by Lieutenant Governor Evelyn Sanguinetti.

With 6,963 separate units of local government, Illinois has more autonomous offices than any other U.S. state.  Each office and unit has a separate budget and list of operating expenses.  Illinois taxpayers, who are legally liable for the entire expense list of the Illinois public sector, have asked their elected officials – including Illinois House Republicans who participated on the Task Force – to study ways to reduce these expenses.  One pathway toward this goal, examined by the Task Force, is to remove, repeal, or carve out targeted exceptions to some of the unfunded mandates piled on local governments by Springfield.  These include mandates on local governments that require the use of organized labor and collective bargaining to carry out tasks that are successfully carried out in the private sector through other facets of labor-management relations.  In a key recommendation, the Task Force asked the General Assembly to lift this mandate.

One element identified by the Sanguinetti Task Force is the continued existence of Victorian-era assumptions embedded in one of the State’s oldest laws, the Township Code.  Under the legal provisions of this code, 85 of Illinois’ 102 counties are subdivided into small townships which average 36 square miles in size.  Under current law, none of Illinois’ 1,431 townships can be larger than 126 square miles in size.  This method of organizing the local governments and road districts of rural Illinois made sense when the horse was the key unit of farm-to-market transport, but after motor vehicles were invented the Illinois law did not change much.  Almost all of the township governments now operating in Illinois were created during the horse-and-buggy era, and the Task Force has recommended a series of legal changes to encourage these units to voluntarily consolidate their operations.  In some cases, the residents of townships, township-based road districts, and other units of Illinois local government will be given the chance to petition their election authorities for a referendum election to dissolve the unit.  Under this recommendation dissolved units will be merged into another local government office, such as a county courthouse, that may be more capable of maintaining operations on a 24/7 basis.    

Balanced Budget Law
House GOP legislators call for tougher balanced budget law.  With the State’s budget impasse entering month seven, State Rep. Bill Mitchell and several of his GOP colleagues are calling for passage of new legislation that will require lawmakers to pass a budget that is truly balanced – or not be paid.

“We’re in our seventh month without a budget. The lack of a budget, along with years of unbalanced budgets, is hurting our schools, colleges and providers.” said Rep. Mitchell. “Our current balanced budget provision in the Illinois Constitution has no ‘teeth’, and as a result, some General Assemblies and Governors have used budget gimmicks and accounting tricks to get around it, or simply ignored it altogether with no real consequences to themselves. The consequences to our communities, however, have been devastating.

Representative Mitchell is proposing legislation to put real “teeth” into the state’s balanced budget requirement. It demands that within 30 days of the enactment of a budget, the Auditor General’s Office must certify that the budget will be balanced with expenses not exceeding expected revenue. If the Auditor General declares that the budget is not balanced then the Comptroller will:
  • Stop payment for the salary of General Assembly members and Constitutional Officers; and
  • Within 10 days of the Auditor General’s certification that the budget is not balanced, the General Assembly must convene to enact a new state budget.
“For years now, Democratic majorities have passed budgets that were absolutely unbalanced, leaving billions in unpaid bills,” said Rep. Mitchell. “It’s time to hold state government accountable to the taxpayers. HB 4399 will force lawmakers to put their money where their mouths are. Pass a truly balanced budget or don’t get paid. This is a common-sense fiscal reform that is sorely needed in Springfield.”

Chicago – Police Practices
Chicago’s Independent Police Review Authority (IPRA) to intensify its oversight over law enforcement practices.  The board has come under serious criticism for its activities since its formation in September 2007.  Over a seven-year period, hundreds of cases of law enforcement uses of firearms have been referred to the IPRA, and 409 police shootings have been investigated, but the Authority found only two shootings to be unjustified.

As a response to these criticisms and to intense coverage of recent events affecting Chicago policing, new Chicago IPRA acting chief administrator Sharon Fairley announced this week that the agency was restructuring its senior leadership and establishing a new office for IPRA to conduct community outreach management.  The Authority, if it is successfully rebuilt, will have the capacity to hear directly from non-police complainants and witnesses, and to inform the public of the ongoing status of active complaints.

Economy – Net Outmigration
Illinois ranks 3rd in net outmigration as citizens continue to flee the state.  A recent survey found significant numbers of Illinois residents moving elsewhere within the United States in 2015 and not being replaced.  The typical Illinois emigrant moves to a Sunbelt state such as Texas, Georgia, or North Carolina, but many Illinoisans are moving to colder Western states such as Colorado and Washington.  Net outmigration from Illinois is attributed to the almost stagnant job picture in the Land of Lincoln.  The number of new Illinois private-sector jobs created since the 2008-09 economic downturn has not been sufficient to make up for jobs lost, leading to a bleak outlook for young Illinois adults and new entrants into the labor force.

The Census Bureau’s survey numbers are backed up with data from moving-van firm United Van Lines, which closely tracks the number of runs their trucks are forced to make as a result of imbalances in the numbers of households entering or leaving a state.  In 2015, as in previous years, Illinois was ranked near the bottom of states in terms of net moving activity.  The overall table, published as the Annual National Movers Study, showed Illinois as the #3 net outbound state in 2015.  New Jersey, New York, and Connecticut also had substantial quantities of outbound moving-van activity.  States with net in-migration included Oregon, South Carolina, and Vermont.    

Economy – “Judicial hellhole”
Madison County once again declared a “judicial hellhole.”  As in previous years, the American Tort Reform Association named Madison County, Illinois to its top-10 list of U.S. “judicial hellholes”.  The metro-east county handles about one-third of U.S. nationwide plaintiffs’ filings centering on alleged damage due to the use of asbestos.  The “hellhole” list also includes nearby St. Louis, where civil courts are also seen as a “favorable venue for asbestos litigation with the potential for excessive damage awards.”

Plaintiff lawsuits, especially actions that use novel theories to connect health challenges and tragedies to physically distant hazardous substances such as asbestos, can have a significant impact on the economic life of an overall community.  Expensive regulations, foregone job creation, and expensive rates for various forms of insurance, including workers’ compensation insurance, are often correlated with overall shifts of resources towards patterns of economic activity that are correlated with plaintiff-friendly courts of law.  The U.S. civil justice system handles approximately $246 billion in resources a year, a figure that dwarfs that of any other nation or group of nations.

Taxes – State Income Tax Refunds
Illinoisans must wait for state tax refunds.  Many Illinois individual income taxpayers pay their taxes on a schedule that includes a refund check at the end of the year.  The Illinois Department of Revenue (IDOR) announced this week that the current scheduled goal date for mailing out refund checks will be March 1, 2016.  Refund check mailings are subject to ongoing Departmental due-diligence efforts aimed at combatting tax fraud and identity theft.

The Department advises taxpayers to file their returns electronically rather than on paper.  Taxpayers filing electronically may get their refunds in a more timely manner than paper filers.  The Department has announced a goal of turning around refund payments on e-filings within a 2-to-3-week window for returns submitted after 3/1/16.

Transportation – Sticker Renewals
State continues to e-mail sticker renewal warning notices to Illinois drivers.  A form with information to fill out can be found here.  The owner of a motor vehicle who submits his or her vehicle registration ID and personal identification number (PIN) will get an automated notice from the Office of the Illinois Secretary of State for timely sticker renewals.  Stickers are required in order to maintain the status of a plated Illinois motor vehicle for a 12-month period, and vehicles without an active sticker are liable to be stopped by law enforcement.  In addition, persons who fail to renew their sticker by the required deadline are required to pay an additional penalty fee of at least $20.

Many Illinoisans are disappointed to no longer be receiving the familiar paper renewal notices that used to be sent out by mail.  Sticker renewal letters stopped being mailed out in fall 2015 after the Secretary of State’s office was affected by the FY16 budget impasse.  About 1.6 million Illinois vehicle owners have signed up to be nudged and reminded of their renewal deadlines by state e-mail.  No longer mailing these renewal notices is saving the State an estimated $5.6 million per year ($450,000/month).