Wednesday, July 25, 2007

Revenue, health care and electricity rates

The House and Senate advanced different pieces of legislation — a cigarette tax and a health care plan in the Senate and an electricity rate relief plan in the House — but there’s no clear indication that these individual pieces could actually converge into the much-delayed state budget. House Democrats spent about three hours in what felt like an end-of-session gathering behind closed doors Wednesday afternoon. And each of the pieces is expected to be heard on the floor in their respective chambers Thursday, but their futures in the opposite chambers are murky. The same goes for their future in Gov. Rod Blagojevich’s office. As House Speaker Michael Madigan said of the cigarette tax advance in the Senate, “We’ll see.” Here’s a recap of the different measures:

Cigarette tax
Seven days before a possible government shutdown, lawmakers moved a bill out of committee that would generate additional revenue for the state by taxing smokers.

The measure would increase the tax on cigarettes by 75 cents a pack. If approved by both chambers and signed by the governor, the proposed tax on cigarettes would generate about $328 million a year.

It’s unclear how the money would actually be spent, but its sponsor, Chicago Democratic Sen. John Cullerton, said that so far, the money would go into the state’s general revenue fund and be intended to fund a road and school construction plan. Cullerton also said legislators have their own wish lists for the money, such as education funding, capital and health care. However, he assured the final decision would be made collectively by the General Assembly.

Sen. Chris Lauzen, an Aurora Republican, wasn’t so quick to jump on the cigarette tax band wagon. He said Democrats would control where the money goes. “What’s happened to the rest of us who serve a quarter of a million people back home is truly disgraceful,” he said, mentioning unfunded projects for school and road construction in Republican districts.

“Somebody’s [going to] have to take a chance,” Cullerton said. “I know one thing. We can’t fund it at all if there’s no new revenue. This is new revenue, and it’s the easiest way I can think of to get support of three-fifths.”

Opponents voiced concern about small businesses losing revenue from people crossing the borders to buy cigarettes. Coincidentally, Indiana increased its cigarette tax by $1.01. In Washington, the U.S. Senate also approved a $1 tax on cigarettes.

The Illinois Department of Revenue said it supports the proposed cigarette tax, straying away from the governor’s campaign pledge not to sign any legislation that would increase sales tax. “This is different than the sales tax,” said Larry Doll, spokesman for the department. “It’s an excise item. It’s different than a general sales tax. A sales tax is applied to all items including necessities. People need food, clothing, what have you, whereas I don’t think you can make the same argument for cigarettes.” Doll also said it’s his understanding that the governor would sign the legislation if it wins approval.

The governor’s office hasn’t confirmed that yet. If approved, the legislation would immediately go into effect.

Revamped health care proposal
Despite a weird afternoon of goofs and misunderstandings, the governor’s scaled-back Illinois Covered health care proposal moved out of a Senate committee with a 7-4 vote along party lines.

The governor wants to pay for the $1.2 billion initiative with a 3 percent payroll tax on businesses that employ at least 10 but that don’t provide comprehensive health benefits to them. The biggest question of the day was how many businesses would actually be subject to the tax. The committee will have to wait for that answer because no one had those numbers on hand.

The $1.2 billion would go into a trust fund, and the General Assembly would be limited to spending 90 percent of the cash per year to curtail overspending.

Some Senators voiced concern that almost 500,000 of the 1.4 million uninsured and underinsured Illinoisans wouldn’t qualify for either of the two health care packages the governor proposed. Eligibility would be modified as the program moves forward, depending on the revenue generated. Sen. Carol Ronen, the measure's sponsor and Blagojevich ally, estimates that 300,000 people will qualify for one of the programs, and 600,000 would qualify for a second option.

Todd Maisch of the Illinois Chamber of Commerce said the payroll assessment tax would “target the most vulnerable employers.” He also called the tax erroneous and excessive. “The major change is funding,” he said. “This is not a scaled back proposal.”

The proposal will most likely be called for a vote in the Senate this week.

Electricity rate relief
The $1 billion in electricity rate relief for Ameren Illinois and Commonwealth Edison customers is one step closer to becoming law. It’s not without controversy, however, as House Republicans aren’t happy that they weren’t part of closed-door negotiations for most of the past month. If Wednesday night’s House committee hearing was any indication, House Republicans could protest by voting “no” or “present” when the legislation reaches the House floor. But it would still have enough votes among Democrats to return to the Senate.

House Speaker Michael Madigan seemed to smile as he welcomed the chance of Republican rejection. “If there’s some member of the legislature who wishes to vote ‘no’ against $1 billion of rate relief, be my guest.” In other words, a Republican “no” vote for rate relief would make prime campaign literature for the Democrats during election season — it’s the equivalent of saying their opponent voted against health care for children or meals for the elderly.

One controversial portion of the deal that’s unsettling to some is that the state would dismiss six lawsuits brought against the utilities and power companies as a result of the September power auction. That includes the case filed by Attorney General Lisa Madigan’s office that alleged the power companies colluded to set electricity prices that robbed customers of an extra $4.3 million.

Rep. Jim Durkin, a Western Springs Republican, was one of the skeptics. “How’s the public protected by not following through and getting to the bottom of each one of these lawsuits instead of just dismissing them with the signing of this letter of understanding and the passage of this legislation? How in good faith can the state of Illinois settle those two cases when you have made serious allegations of manipulation and fraud upon the public?” He was the lone Republican to vote “present” in committee because he said he supported offering rate relief but didn’t like the process of coming to this deal.

Susan Hedman, senior assistant attorney general, justified the dismissal of the lawsuits by saying her office believed rate relief was needed now and that the procurement of power needed to be reformed for the future. “There’s a tradeoff between getting relief up front and waiting. If we do not get reforms in the procurement process now, it would mean that every year that we’re litigating that case, there could be another reverse auction with the danger of the same problems that we observed last time.” She later cut someone off and said, rather bluntly, that without dismissal of the lawsuits, “the deal falls apart.”

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