This week in Illinois

Budget – Illinois Bond Sale
$480 million in new State debt sold on Wall Street. Proceeds from the package of borrowings, or “tranche,” will be dedicated to the physical needs of State infrastructure, such as roads and bridges. Although this is new Illinois debt, it was not newly authorized by the General Assembly; it replaces millions of dollars in old debts that were paid off on or before the end of calendar year 2015, legally clearing the way for new bonds to be sold. The underwriting activity and sale took place on Thursday, January 14.

The sale included bonds set to mature on a variety of dates and bearing a range of interest rates, with higher rates of interest payable on the longer-maturity bonds. The bonds will mature from 2017 through 2041. The average interest rate demanded by investors was 3.9989%, but 25-year Illinois bonds set to mature in 2041 will pay 4.27%. Bond watchers stated this 25-year rate will force Illinois taxpayers to pay a premium of 1.61% (161 basis points) above the interest rate that an AAA-rated issuer would be required to pay for similar top-rated long term bonded debt.

Illinois’ poor debt performance reflects ongoing fiscal and political challenges facing the State, including more than $110 billion in unfunded pension liabilities and the failure of the General Assembly to enact a constitutional balanced budget. However, bond watchers also noted that the 161-point spread notched this week actually indicated the possible stabilization of Illinois’ fiscal standing, at least for now. Late in 2015, Illinois long-term debt traded at a spread of 170 points over AAA bonds in the so-called secondary market. Illinois currently has the lowest credit rating among the 50 states, with Prairie State general obligation (GO) debt ranked by the three major New York-based credit rating firms at only three or four steps above “junk bond” non-investment-grade level.

State Government – Labor Relations
Governor asks Labor Relations Board to determine if AFSCME impasse exists. Since taking office in January 2015, the Rauner Administration has succeeded in writing new labor contracts with a wide variety of labor unions that represent many difference facets of the State workforce. 17 labor bargaining units, organized within 13 separate trade unions, have agreed to fair, reasonable contracts with the State of Illinois. However, no contract has been reached with AFSCME, which represents 30,000 state employees. On Friday, January 15, the Governor announced that his office will ask the State’s labor-management oversight panel, the Labor Relations Board, to examine the state of the negotiations between the State and AFSCME to determine if these talks have reached a point of impasse.

The determination of an impasse, if it is reached, will be legally significant because it will move relations between the State and AFSCME to a different level from where these relations are right now. Currently, based on mutual pledges by both sides, both the State and its largest union have agreed to continue their relations in the absence of a contract, and AFSCME state employees continue to show up for work and be paid.

Under the terms of the signed tolling agreement, the Labor Relations Board must now determine whether the State and AFSCME are at an impasse. During this time, the parties must adhere to all statutory obligations regarding good faith negotiations while the Labor Relations Board is deciding the case. Quoting from the tolling agreement, this specifically means there can be no “strike, work stoppage, work slowdown or lockout” until the Board has determined that the parties are at an impasse. According to the Rauner Administration, it is hard to predict how long the Board would take to rule. It may be months before a final decision is rendered.

DCFS – Uncashed Federal Funds
DCFS admits it may have left as much as $40 million on the table. The federal funds, which are provided as “matching funds” to states that carry out certain audited child-welfare programs and activities, were lost over the last 24 months. The Illinois Department of Children and Family Services (DCFS) now admits that they failed to carry out the necessary paperwork to verify these expenses and to file for these reimbursements, thereby delaying or erasing Illinois’ eligibility to receive the funds from Washington, D.C. Although Illinois taxpayers paid this money to the federal government through U.S. taxes for reimbursement to Illinois, the reimbursement cannot actually be paid until verifiable records have been submitted in proper order.

Current DCFS director George Sheldon, recruited by Gov. Bruce Rauner from Florida, blames a “revolving door of directors” under a previous governor. DCFS tried to operate under eight permanent/acting DCFS agency leaders over a five-year period.

In addition to its record-keeping and financial woes, DCFS is also trying to operate under the scrutiny of a federal court. A judge has ordered the department’s legal counsel to appear before it in late February to explain how to improve treatments of juveniles assigned to residential treatment centers. The revelation that many of these juveniles were unsupervised, and some were even being subjected to physical/sexual assaults, was a major news story in December 2014 during the transition to the new Rauner Administration.

Economy – Layoff Report
Illinois lost more than 1,000 jobs in December 2015. The monthly Worker Readjustment and Retraining Notification (WARN) layoff report of major Illinois job losses in the final month of 2015 encompasses more than 1,000 employment positions throughout the state. The list of shutdowns included the permanent closure of five yards operated by Pure Metal Recycling; the employees of the Chicago-area scrap-metal recovery firm, a number estimated at about 400, were let go immediately. There was a major layoff at the Danville facility of FreightCar America, a Downstate manufacturer of railroad rolling stock, with 180 jobs to be terminated in February.

General Assembly – 2016 Spring Session 
Illinois House cancels expected session this week. Speaker Madigan, who controls the meeting schedule of the House, abruptly cancelled the two-day session previously called for Wednesday, January 13 and Thursday, January 14. House members had expected to get the chance to discuss the ongoing state budget crisis.

In contrast to the House, the state Senate convened on the 13th and 14th, welcoming new members and discussing urgent issues. The two houses of the General Assembly meet on separate schedules, but both meet at the direction of the leaders of the party in the majority. House Republicans have watched over the past six months as the Illinois House has failed to take action to pass a constitutionally balanced budget, and this status continued this week.

Higher Education – Hoverboards
Several Illinois public universities ban or restrict the operation of hoverboards. Owners of the two-wheeled devices have been told not to roll them out at facilities within the University of Illinois at Urbana-Champaign, Eastern Illinois University, Governors’ State University, and Western Illinois University. Some of the bans cover residence halls only, and some are campus-wide. Other universities are considering parallel actions.

A hoverboard is an orthogonal-line motorized skateboard with urethane wheels, a powerful battery, and a computer chip to help the rider of the board shift his or her footing and keep in balance. The regulatory actions and bans follow reports from the federal Consumer Product Safety Commission (CPSC) that implicate hoverboard lithium batteries in a series of ignition fires reported nationwide. The CPSC is currently investigating 37 fires in 19 U.S. states. Many U.S. airlines also ban shipment of the popular toys on their flights.