Education and electricity

Two juicy debates

In downtown Springfield, the Illinois Commerce Commission heard Ameren Illinois president Scott Cisel defend his recent decision to end some of the utility’s electricity rate relief to downstate customers. In the Capitol, Gov. Rod Blagojevich said he’d veto any proposal that would increase income and sales taxes, as stated in a press release handed out during a House committee. House Speaker Michael Madigan, on the other hand, signaled he’s willing to let the so-called tax swap proposal see the light of day by sending his general counsel to moderate debate on an education funding reform proposal.

That legislation has nine lives, but supporters and opponents of the revised version agree on two things: 1) no one at the hearing likes the governor’s revenue idea to replace the corporate income tax with a new tax on business inputs; and 2) there’s lots of room to tweak the legislation. The House committee is expected to vote on the measure when it reconvenes, which could be soon.

In general, HB/SB 750 would reform the way the state funds education by increasing income taxes, expanding sales taxes to apply to services and offering property tax relief.

Supporters of the bill include Ralph Martire of the Center for Tax and Budget Accountability. In committee, he said no schools would lose, and businesses would be “net tax winners” under the legislation.

The opposition includes J. Thomas Johnson of the Taxpayers’ Federation of Illinois, who said the legislation puts “the cart before the horse” because it talks about distributing new revenue before it spells out how the money would improve education (and stipulates that it wouldn't be diverted to other state or local operations). He added that legislators needed to have a clear understanding of the actual property tax relief offered by a tax swap. “We’ll never meet the taxpayers’ expectations,” he said. “Rhetoric will come back to haunt us.”

Johnson, along with the Civic Committee of the Commercial Club of Chicago, said the state should consider at least three ways to save $1 billion before asking taxpayers to pay more. He said Illinois could save by reforming the state’s public employee retirement benefits, such as the retirement age and cost of living adjustments, as well as by using more managed care for state employees and Medicaid enrollees.

Electricity rates
The Illinois Commerce Commission cut off discussion that was leading to Ameren Illinois’ recent proposal to return to a regulated system, where the state sets electricity rates rather than the utilities buying power on the open market. The downstate utility used doom’s day rhetoric in Tuesday’s commission hearing to explain its recent decisions.

Ameren also recently decided to suspend programs that would provide rate relief to its customers. Commissioner Erin O’Connell-Diaz chastised the utility for “not keeping customers in the loop.” Ameren has yet to inform the 7,000 customers enrolled in a deferred payment plan that it has stopped the program.

The utility blamed its decision to halt these programs on the House, which approved a measure that would provide credits to customers and a three-year rate freeze. Soon after the House measure won approval, the company’s credit rating was downgraded to junk status.

According to the company's president and CEO, Scott Cisel, if the Senate approves a separate but similar measure, Ameren Illinois may be forced to lay off employees and contractors. Furthermore, unless the legislative leaders in both chambers ensured Ameren that the General Assembly wouldn’t attempt to refreeze electricity rates, the company would go into survival mode.

“This is a who-blinks-first game,” says Illinois Commerce Commission chairman Charles Box. “Both sides do not want to give up leverage, but whose suffering? It's the citizens that are suffering, especially the elderly and the people who have gigantic bills.”