Senator Rezin’s Week in Review: Oct. 6 – Oct. 10, 2014

Two days of testimony before the bipartisan Legislative Audit Commission provided some answers, but raised many more questions about Governor Pat Quinn’s failed anti-violence initiative, State Senator Sue Rezin (R-Peru) said.

The Commission heard from seven former members of Governor Quinn’s administration, but failed to receive clear answers as to how and why Quinn’s Neighborhood Recovery Initiative (NRI) quickly ballooned from $20 million to almost $55 million seemingly overnight, nor how neighborhoods and providers were actually chosen to participate.

Lawmakers also questioned how the stated objectives of the program meshed with the Quinn administration’s rush to put the program in place in the weeks prior to the 2010 governor’s election.

The program’s director, Barbara Shaw, testified that NRI was based on preventative measures that would not show results for years. But witnesses consistently said it was rushed into place as an emergency measure to stem violence – a goal that the program could not meet even if it had been properly implemented.

E-mails show campaign link

As the hearings got underway, emails surfaced that cast doubt on Governor Quinn’s longstanding claim that the troubled violence prevention program was not linked to his campaign for Governor.

Instead, the emails revealed that the program was a regular topic of discussion between the Governor’s taxpayer-paid Chief of Staff and his campaign manager, including discussions of how the program could be used to boost support for the Governor in African-American neighborhoods.

The emails also showed that one top former administration official, Jerry Stermer, raised questions as to the effectiveness of the program, including one in which Stermer wrote, “…I am not at all persuaded that any of the ideas in neighborhood recovery have any solid evidence to show they achieve their goals.”

Grew out of February audit

The Audit Commission meetings were part of the panel’s statutory authority to review audits of state agencies. In February, Illinois Auditor General Bill Holland released a scathing audit on the first two years of NRI. It found that the program was hastily implemented just before the 2010 gubernatorial election, that Chicago aldermen influenced what agencies received the nearly $55 million, and that the entire program lacked proper oversight.

During the hearings, none of the individuals who testified could provide any documentation showing how neighborhoods were actually chosen for the program.

Audit continues

The commission voted to keep the NRI audit open while more evidence and documentation is collected. The panel has also tasked Auditor General Holland with additional work in regards to an NRI microloan program that was discussed during testimony. An additional resolution is pending to audit the second two years of the NRI program.

In addition to the ongoing LAC review of NRI, multiple grand jury subpoenas have been filed on the program, including two from the US Attorney’s offices in Chicago and Springfield, as well as from the Cook County State’s Attorney.

Illinois ranked 48th

Illinois ranks 48th in the nation in “Economic Outlook” according to the latest edition of “Rich States, Poor States,” an annual analysis of the relative economic outlook of the states, published by the American Legislative Exchange Council.

That’s the same ranking Illinois received the past two years. It’s based on 15 variables, including business tax rates, legal climate, workers’ compensation costs, debt service payments and sales and property tax burden.

The state’s high marginal business income tax rate of 9.5% was ranked 44th in the nation. It’s 11.1% debt service as a share of tax revenue ranked it 43rd in that category. A $2.83 per $100 of payroll cost for workers’ compensation ranked 47th.

Illinois did receive a relatively high score for its low percentage of public employees per 10,000 people, ranking 11th in that category. It also ranked 11th for its sales tax burden of $16.36 per $1,000 of income.

Workers’ compensation costs hurt

High workers’ compensation costs have long been a thorn in the side of Illinois employers and the state’s costs continue to outpace neighboring states. Indiana’s $1.16 per $100 of payroll is the second lowest in the nation and less than half that of Illinois. Neighboring Iowa, Kentucky, Wisconsin and Missouri all have lower workers’ compensation rates than Illinois, with only Wisconsin breaking the $2 per $100 of wages mark and even that state’s rates are more than 75 cents per $100 of wages lower than Illinois.

Illinois also ranked 48th for domestic migration – a measure of the number of persons moving into the state versus the number moving out. According to the study, more than 600,000 persons have fled Illinois since 2003. A similar measure looked at the number of new taxpayers as a percentage of total taxpayers in each state and again found Illinois 48th in the nation.

This was the seventh edition of “Rich States, Poor States.” Its authors are Dr. Arthur B. Laffer, who served as a member of President Ronald Reagan’s Economic Policy Advisory Board and is best known for popularizing the “Laffer Curve” showing that tax revenues decline if tax rates exceed an optimal percentage; Stephen Moore, chief economist for the Heritage Foundation and a former member of the Wall Street Journal’s editorial board; and Jonathan Williams, senior task force director of tax and fiscal policy at the American Legislative Exchange Council.

Court reviews pension changes

A Sangamon County Judge set Nov. 20 for a key hearing on pension changes that were approved by lawmakers late last year, but have been put on hold while the court considers the constitutionality of the law.

Judge John Belz said he will hear arguments that the state’s pension funding problems are so serious that constitutional protections for pension benefits can be set aside under the state’s sovereign or “police” powers.

Both sides of the debate over pension changes have said that the constitutionality of the pension changes contained in SB 1 are likely to hinge on the police powers argument. Earlier this year, the Illinois Supreme Court declared unconstitutional another pension change – that sought to take away a health insurance subsidy for retirees based on length of service.

That ruling set a high bar for the SB 1 pension changes to meet, but did not address the issue of police powers. Most legal experts say that if the Judge, and later the Supreme Court, rejects the police powers argument the pension changes are likely to also be declared unconstitutional.

School aid changes worry suburbs

A proposal that would strip many school districts of much of their state funding continues to generate controversy in suburban areas of the state.

Many local legislators and their local school officials have held or plan to hold public meetings to raise awareness of Senate Bill 16, a measure that would radically reshuffle state education dollars.

Typical of the meetings was a forum held Oct. 7 at St. Charles North High School, where more than 300 persons turned out to learn more about how the measure would impact local schools.

Estimates from the State Board of Education forecast that 73% of Kane County school districts will lose $500,000 to $8 million as a direct result of Senate Bill 16. Some individual schools would lose as much as 80% of their current state funding. As a result, already high property tax rates in Kane County could increase to make up for the lost revenue or local schools might be forced to eliminate programs and lay off teachers.

The prospects are similar in other collar counties and in suburban areas downstate. The issue generated a sense of urgency after it was revealed that House Speaker Michael Madigan (D-Chicago) had convened a group of Illinois House Democrats to meet in closed-door sessions to review the measure.

In the past Madigan has termed state support for downstate and suburban teacher pension payments a “free lunch,” reinforcing concerns that SB 16 would be used to strip suburban schools of state support and channel more money to the Chicago Public Schools.

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