SPRINGFIELD – Halfway through the state’s fiscal year, Illinois’ top financial officer is warning state agencies that they need to put the brake on spending or face the prospect of running out of money.
Also, State Senator Sue Rezin (R-Morris) said the day after the state dodged a financial bullet from one major credit agency downgrade, another weighed in and dropped Illinois’ credit ranking, putting the state in a tie with California for the worst credit in the country.
Illinois Hit with Credit Drop
Standard and Poor’s rating services announced Jan. 25 that they were downgrading Illinois to an “A-/negative outlook” rating, which is the lowest rating the state has ever received from S&P. The rating drop is now the 11th downgrade since Gov. Pat Quinn took office and is more than any other governors combined. The “negative outlook” is a warning that further credit rating cuts are likely.
The company cites the state’s $95 billion unfunded pension liabilities as the main reason for the downgrade, and also mentioned that despite the 67% income tax increase, little has changed with the state’s deficits. In issuing it’s rating, S&P gave a bleak outlook, warning that the best the state can hope for is to hold its ratings at the current low level given the size of its accumulated deficit and the liability challenges it faces.
Another Credit Downgrade Ahead? Unions Call for Summit
Fitch Ratings Services, one of three major credit agencies in the nation, held Illinois’ credit rating steady Jan. 24, despite an earlier declaration that they were putting Illinois on a “negative watch” in anticipation of lowered credit ratings. However, the rating agency cautioned that if there is no action to address the state’s massive pension debt in the next six months, the state will suffer a downgrade.
Meanwhile, a coalition of labor unions has asked for a Pension Summit with the Governor and the four legislative leaders in February. Controlling pension costs, Sen. Rezin said, is the single biggest challenge currently facing Illinois, which has the worst-funded pension system in the nation.
‘Erin’s Law’ Aims to Prevent Sexual Abuse
In other action during the week, Gov. Pat Quinn signed a law requiring schools to offer age-appropriate sexual assault and abuse prevention and awareness programs for children from pre-kindergarten through high school.
Previously in Illinois, only secondary schools were required to include sexual assault and abuse awareness education.
Known as Erin’s Law, House Bill 6193 is a bipartisan measure named after Schaumburg native Erin Merryn, Sen. Rezin said. A victim of sexual assault and abuse as a child, Merryn quit her job three years ago to dedicate her life to helping victims break their silence, educating children about sexual assault and abuse, and preventing them from becoming future victims. She is an author and activist currently working to get Erin’s Law passed in all 50 states.
Comptroller Warns State Running out of Funds
On Jan. 21, Illinois Comptroller Judy Baar Topinka warned that at the current spending rate, Illinois is on track to run out of funding for essential state services, Sen. Rezin said. Topinka estimated the shortfall at $1 billion and said funds for some agencies, including the Department on Aging, the Department of Children and Family Services, the state’s workers’ compensation program, and the state employee group health insurance will dry up before the end of the fiscal year on June 30.
Topinka’s warning focused only on the current year’s budget. The previous week, the Governor’s own budget office issued dire predictions for state budgets over the coming three years, Sen. Rezin said.
GOP Warned of Budget Problems
The budget shortfall comes as no surprise to Senate Republicans, Sen. Rezin explained. At the time the budget was passed by legislative Democrats in May 2012, Senate Republicans warned that it was out-of-balance and unaffordable.
That budget deliberately underfunded some areas of government, such as the cost of public employee health insurance, and also relied on the Governor aggressively implementing other cuts, particularly in the state’s Medicaid program.
Despite a bipartisan agreement for major cost-cutting reforms in the Medicaid program, the Quinn Administration has been slow to implement those reforms, making it unlikely that original savings targets will be met. Similarly, the budget assumed savings from a new union contract that the Governor’s office has been unable to negotiate to date.
Topinka recommended that state agencies create reserve funds from financially-sound programs to offset the anticipated costs. She said funds needed to fill the projected shortfall should be redirected from state agencies that have more cash on hand.
Health Insurance Case Set for Hearing
While it may seem hard to imagine, the state’s budget problems could get even worse depending on the results of a court case set for a Feb. 20 hearing. A judge in Sangamon County will then hear arguments from four lawsuits challenging a new law that requires state retirees to pay premiums for their health insurance.
Senate Bill 1313 repealed the state’s health insurance subsidy of up to 100% (for retired employees with 20 years or more of service). Four lawsuits were filed challenging the constitutionality of the law. Those suits were consolidated into a single case in September 2012.
‘We are One Illinois’ to Host Pension Summit
On the pension reform front, the “We are One Illinois” Coalition has asked the Governor and four legislative leaders to a summit Feb. 11, at the Illinois AFL-CIO offices in Burr Ridge.
The group’s invitation said it “is intended to serve as a forum to share perspectives, as well as to initiate a structured process by which we can work together to develop legislation that addresses our state’s intertwined problems of inadequate revenues and underfunded pensions.”
New Revenue Could Help with Repairs at Starved Rock State Park
After years of cut budgets, funding could improve for Starved Rock State Park and other state parks due to the new $2 annual license plate fee. The Illinois Department of Natural Resources expects to receive between $18 and $20 million this year from the fee.
Starved Rock State Park superintendent Mark McConnaughhay said that he hopes to be able to fund road repairs, trail upgrades, and bridgework.
Lawmakers Continue to File New Proposals
More than 1,150 new legislative proposals were filed in the Senate Jan. 23-24; however, only a handful of measures represented actual legislative proposals. The vast majority are “vehicle” bills, including more than 1,000 bills filed by the Senate President that contain no substantive language.
In recent years, it has become customary for hundreds of measures to be filed that contain nothing more than references to sections of the Illinois statutes. The bills are generally held until later in the legislative session should the need arise to amend them to address special issues.
Among the measures filed that were not “vehicles,” are bills on the following topics:
Advanced Practice Nurses (SB 73): Removes requirements for written collaborative agreements with doctors and grants advanced practice nurses the ability to write prescriptions within their specialty.
“Crime-Free” Housing (SB 1151): Allows non-home rule counties and municipalities to adopt “crime-free” rental housing statutes that would require renters to obtain a license and submit to background checks and periodic inspections of rental property, as well as attend crime prevention training programs.
Gay Marriage (SB 110): Reintroduces a much-publicized measure legalizing gay marriage, that was not called for a vote in the recently concluded lame duck session. At the time, the sponsor said that absences of some members left the measure short of the votes needed for passage.
Hydraulic Fracturing (SB 105): Contains no substance, but is simply a placeholder for regulations that may be proposed during the legislative session. Hydraulic fracturing generally refers to the use of pressurized water to create cracks or fissures in underground rock layers to allow the release and recovery of natural gas. It is estimated that Hydraulic fracturing will account for nearly 70 percent of natural gas development in the future. The National Association of Manufacturers estimated that high recovery of shale gas and lower natural gas prices will help U.S. manufacturers employ 1,000,000 workers by 2025. America’s Natural Gas Association (ANGA) estimates that lower gas prices will add an additional $926 of disposable household income annually between 2012 and 2015, and that the amount could increase to $2,000 by 2035.
Overtime (SB 104): Clarifies that overtime pay is not required for an alternative shift schedule when that schedule has been bargained by a union and management.
Real Estate Auctions (SB 92): Changes licensing requirements for auctioneers who conduct real estate auctions.
Renewable Energy (SB 103): Require Illinois Power Agency plans to include purchase of renewable energy credits. Also requires electric utilities to purchase renewable energy credits including alternative retail electric suppliers.
Sexually-Violent Offenders (SB 93): Requires that sexually-violent offenders be separated from other residents of the Chester Mental Health Center. Clarifies that those sentenced to be confined at mental health centers as sexually-violent offenders are not granted the same rights and treatment as other residents of state mental health centers.
Truck Fleet Fees (SB 1158): Imposes a $40 per vehicle fee statewide on anyone registering 10 or more vehicles of specified types. Fees would be deposited into an alternative fuels fund.