Winger's Weekly Wrap-up

Budget – FY17
Governor Rauner renews call for property tax freeze and term limits. Substantial segments of Illinois state spending are scheduled to run dry with the expiration of the so-called ‘stopgap” State budget that is covering the first half of FY17. This period of time will end on December 31, 2016, and further State action will be required to keep those facets of State spending in operation. However, meetings between Governor Bruce Rauner and the four legislative leaders, including House Republican Leader Jim Durkin, have not yet succeeded in achieving the level of agreement necessary for a budget bill to move forward.

Many Republicans believe that structural reforms are necessary in order to justify the investment of additional taxpayer money. Governor Rauner has released a video on his Facebook page describing his call for legislative term limits and a freeze on Illinois property tax extensions. Representative Mark Batinick introduced a property tax extension freeze bill in the Illinois House on Tuesday, December 1.

Budget – COGFA report
Income tax revenues continued below expenditures in November 2016; COGFA looks at State’s bond rating. The Commission on Government Forecasting and Accountability (COGFA), a nonpartisan General Assembly budget watchdog agency, tracks Illinois general funds revenues on a monthly basis. Working with the Illinois Department of Revenue (IDOR) and other State agencies, COGFA counts the money that is coming in during each fiscal year, and matches it to expected revenue streams. The COGFA report for November 2016 can be found here.

As in previous months of FY17, the fiscal year that started on July 1, 2016, Illinois saw less general-revenue money coming in during November 2016 than is needed to cover ongoing general-funds expenses. $1.9 billion in State general funds tax revenues were reported in November 2016. A particular weak spot, which has also shown up in previous months, is the cash flow from corporate income tax payments. This cash-flow line item dropped from $43 million in November 2016 to $2 million in FY17. On the other hand, overall tax revenues for the month as a whole were up by $111 million from the previous year. A key element in the increase was rising revenue from personal income taxes paid by households and individuals, which rose by $75 million in November 2016 over November 2015.

The COGFA report also discussed the State of Illinois’s troubled bond rating. Two major credit rating agencies, Moody’s and Standard & Poor’s, both lowered Illinois’ credit ratings twice in calendar year 2016. The widely-followed Standard & Poor’s credit rating for investment-grade securities is benchmarked by a series of ten letter grades from triple-A (AAA) down to BBB- (the lowest rating for investment-level securities). In 2016, S & P cut the rating it grants to Illinois general-obligation (G.O.) bonds twice, from A- to BBB+ in June 2016, and again from BBB+ to BBB (with a “negative outlook”) in September 2016. Two further cuts would reduce Illinois’ general-obligation credit rating down to “junk bond” territory. The prospect that this could happen is already empowering investor s to demand that Illinois pay higher interest rates. When Illinois sold $480 million in G.O. bonds in November 2016, the interest rate the State and its taxpayers was forced to pay was posted at 4.245%. This interest rate marked a spread of 200 basis points (2.00%) over the interest rates paid by AAA-rated entities such as the neighboring state of Indiana.

General Assembly – Veto Session
General Assembly meets for final three days of veto session. The Constitution of 1970 directs lawmakers to come back twice each fall for the first and second weeks of veto session. The first week was held before Thanksgiving, and the second week was held from Tuesday, November 29 until December 1.

Following the final day of veto session, the House is not scheduled to return until after New Year’s Day. The Illinois House is scheduled to conclude its 99th General Assembly business in a special session to begin on Monday, January 9. After two days, the 99th G.A. will adjourn. The members of the 100th General Assembly will take their oaths of office on Wednesday, January 11, to begin the 2017 spring session in Springfield.

Suburbs – Jane Addams Tollway
Illinois Toll Highway Authority (ITHA) announces key road-widening project nearing conclusion. The $2.5-billion ITHA project to rebuild, widen, and increase road safety on the Jane Addams Tollway neared its conclusion with the opening of new lanes and ramps that had been built as part of the project. The lane opening was timed to coincide with the Thanksgiving Day travel season. At least three lanes will be open in each direction from Chicago to the Elgin Toll Plaza.

The Jane Addams rebuild involves 62 miles of newly rebuilt and widened lanes. Key elements of the project include the rebuilding of the toll road’s bridge over the Fox River in Elgin and a complete interchange with Illinois Route 47 in Huntley.

Taxes – Lame-Duck Tax Increases
Illinois House approves constitutional amendment. The amendment, if approved by the state Senate and adopted in the 2018 general election, would increase the voting margin required to increase an income tax rate or a sales tax rate during the so-called ‘lame duck” session of the Illinois General Assembly. The General Assembly, under current law, can enact “lame duck” tax hikes by simple majority in both houses. If HJRCA 62 were to become law, the margin would increase to three-fifths – the same “supermajority” as is currently required to increase State general-obligation debt, approve amendments to the Constitution of Illinois, and approve amendments to the federal Constitution of the United States.

Lame duck sessions are sessions after Election Day when retiring legislators are still in office. The Thursday, December 1 vote by the House to approve HJRCA 62 was 84-18-2. The Senate has not taken action on this measure.

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