Several factors at play in tax vote

By Jamey Dunn

The House plans to vote for spending before it takes up the issue of revenue, but a vote on extending the current income tax rate is just part of the budget picture.

House Speaker Michael Madigan said today that he hopes to first pass the spending portion of the budget, which would presume an extension of the temporary income tax. He said that the move is needed to help lobby lawmakers to approve tax rates needed to fund the budget. “Our purposes in advancing the budget first is to set the bar against which we will work to convince people to vote for the revenue.” House committees approved budget bills today that are based largely on Gov. Pat Quinn’s recommended budget.

Republicans say that the move “puts the cart before the horse.” Elmhurst Republican Rep. Dennis Reboletti said that businesses and families do not make their budgets by first deciding what they would like to buy and then figuring out how to pay for it. “We know what our income is. We make decisions based off of that. We don’t assume that we can buy a new house because we hope to have more money, but not have the additional revenue to pay for it.” Many Republicans argued today that a vote on a budget that spends more than the state expects to take in under current law would be unconstitutional. “It is on its face blatantly unconstitutional,” said Catlin Republican Rep. Chad Hays. “Who on planet earth budgets in this fashion? This is simply not done anywhere by anybody.”

 But Chicago Democratic Rep. Greg Harris, who is chairman of the House human services budgeting committee, said that moving spending bills along is all part of the process and that the order in which it happens is not as important as getting the whole job done. “There are a lot of pieces of the budget which we have to pass,” said Harris. “I think we have until midnight on the 31st of May to reconcile all of this.” He said that if lawmakers can determine what services they think the state should deliver, then when it comes time to make revenue decisions, they can avoid asking for more than is needed. Harris was clear that he does not think that the state can get by on the current revenue projections that allow the income tax to begin stepping down in the second half of Fiscal Year 2015. Harris called the step down “a terrible financial cliff that we would drive the families of Illinois right off of.”

Republicans argue that Democrats are making the budget scenario under the current rates look muckh worse than it would need to be. “We on our side of the aisle feel very strongly that we can craft a workable budget without devastating extreme irresponsible cuts or reductions. We can craft a responsible budget without having the continuation of the tax,” Rep. David Harris, a Republican from Arlington Heights.

The House is expected to start taking votes on spending bills tomorrow. As Democratic leadership in the chamber works to get the support to stop the income tax rates from stepping down, other issues will likely come into play.

Rep. David Harris said that he expects that a comprehensive business tax reform package will emerge before the end of the month. Harris serves on a House committee that has held hearings over the last year on the business tax climate in the state. (House Speaker Michael Madigan presented a bill with changed to the EDGE tax credit to that committee today. See this blog post for the details.) Madigan said to the committee this morning that he would be willing to allow the corporate income tax rates to roll back if the proposal was tied to other changes. “I’m prepared to advance that bill, but as part of a balanced package,” Madigan told the committee.

Business friendly tax breaks tied to an extension of the income tax rates, or possibly just the individual income tax rate, would serve several political purposes. They could provide cover for Democrats who vote for a tax increase as part of an overall “tax reform” package. They could possibly be used to lure Republican votes on the income tax extension. More likely, Republican “no” votes on business friendly concepts could be used for negative campaign advertising and mailers before the November general election.

But Rep. David Harris says that he believes that the business tax plan will be separate from an income tax vote. He says that he thinks that the package would address such issues, as the franchise tax, incorporation fees and tax credits for manufacturers when the buy equipment. “I think it will be separate from the tax rate bill,” he said. Harris said that if it is tied to extending income tax rates, he does not think any Republicans would vote for it. “I think if it’s a business related package, they’re going to want some Republicans on the package,” Harris says. “I don’t consider an extension of the income tax [to be] tax reform.” He said that any business tax tweaks would likely be revenue neutral. So if some tax cuts are made larger or some taxes eliminated, other tax breaks may be scrapped or reduced. Some would call it closing tax loopholes. Harris, however, would not call it that. “Let’s not call them loopholes. Let’s call them, perhaps, exemptions or credits that we now give that may no longer be beneficial or helpful, or they don’t achieve the public policy that we initially intended them to achieve.”

Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers’ Association, said that he thinks that the work on a business tax package is a mix of policy and politics. “I think it’s a combination of both. I think there’s some legitimate changes being made.” Denzler said that he has not seen a plan yet. “We’ll just see how things play out. We’ll have to look at a final package. ... I think that there can be some positives for the business community.” But he said that coupling an extension of the tax rates with some tax sweeteners for businesses would fall short of being a game-changing move when it comes to the state’s fiscal policy. “Ultimately, we think we need comprehensive tax reform. Making the income tax increase permanent and adding a few tax incentives is a little bit more of a Band-Aid quite frankly to the whole problem that Illinois faces.”

A few more tax issues could also end up in the mix. In his budget address, Quinn called for property tax relief and an incremental doubling of the Earned Income Tax Credit. Both of these options could be used to soften the blow of a tax rate extension and potentially pull some reluctant votes on to it. Under Quinn’s plan, homeowners would lose their current property tax credit and it would be replaced with a flat $500 refund for each owner occupied property. Quinn’s budget office estimates that such tax relief would cost $1.3 billion annually. The current credit costs about $600 million. While some homeowners currently get a tax credit that is larger than $500, Quinn’s staff said that 92 percent homeowners would be better off under his proposal. Quinn’s plan would also increase the EITC from 10 percent of the federal credit to 20 percent at a rate of 2.5 percentage points per year. The increase would cost more than $200 million annually once it reaches 20 percent. At the time of the address, Quinn and his staff were aggressively packaging his pitch to make the tax increase permanent as a reform of the state’s tax system. His proposal also included a five-year budget “blueprint” that calls for spending caps, a rainy day fund and cutting the state’s bill payment cycle down to 30 days.

When all else fails, pork spending—I mean, local construction projects—may also be an option to get votes on a tax rate extension. Democrats acknowledged today that they are also working on a capital construction bill. Quinn has been calling for a capital bill because the current plan, which was the first in 10 years, is about to run out. While Statehouse observers are always (justifiably) skeptical of the way that capital projects appear to be leveraged for votes, nobody can deny that work on Illinois roads and bridges is necessary and that many state facilities are in dire need of maintenance. What the funding stream for a capital bill would be is unclear at this point. Republicans warned today that it could come with more taxation. “There may be additional taxes out there to accommodate some of our other unmet needs,” said Hinckley Republican Rep. Robert Pritchard.

 Madigan told reporters this morning that he is working the roll call for an extension of the tax rates. He said that he is not trying to strong-arm lawmakers. “We’re not in the business of issuing threats. ...We don’t engage in tactics like that. We try to work with people, persuade people, cajole people,” Madigan said. “We talk in terms of their view of where the sate should be, what the state should be doing for its citizens.” Madigan said.

When asked how many voted he still needed, he said that he was not to the point of knowing exactly how many members he still needs to persuade. While Senate President John Cullerton has predicted that session could adjourn early this year, Madigan indicated today that might not be the case. “There’s two and a half weeks left in the session. And we’ll be here. We’ll be on our job,” he said.

Chicago pension changes pass in both chambers

By Jamey Dunn

The General Assembly today approved legislation to address the funding shortfall in pensions systems for Chicago city workers.

Mayor Rahm Emanuel’s proposal to stabilize the two systems fell flat last week, but sailed through the House and Senate today. The key factor that helped spur action was the removal of a provision that would have authorized city council members to approve a property tax increase. The new version of Senate Bill 1922, which is sponsored by House Speaker Michael Madigan, allows the city to pay for the plan with property tax money or any other available revenue.

Gov. Pat Quinn is running for re-election on a budget plan that would extend the current income tax rates instead of allowing them to sunset. The potential upside to his plan for some Illinoisans is that is would also offer a $500 annual credit for homeowners that Quinn has billed as property tax relief. Quinn made negative comments about the highly unpopular tax at most public appearances lately. Needless to say the governor opposed Emanuel’s push for a property tax increase blessed by state lawmakers. He panned it yesterday by calling it a “lousy tax” and saying that the proposal was “a sketch” not a clear plan.

But Emanuel described the proposal to reporters in Chicago as: “an honest compromise between leaders of organized labor and the city to secure the pensions; secure it in a way that city can afford it and make sure that to the 61,000 people who have come to relay on it, that it will be there.” Under the measure, workers would be asked to contribute more toward their retirement and would see reductions to their cost of living increases. Retirees would not get increases in 2017, 2019 and 2025. However, retirees with pension payouts of less than $22,000 annually would receive a minimum of 1 percent increase each year and would still get an increase during the skipped years. “If you do nothing, these plans are loosing money everyday. They’re going to go belly up within a decade,” Emanuel says.

As the legislation made its way through the process today, Quinn was unwilling to say whether he supported the bill. “I have to see the final bill. I’ll take a look at it. That’s what I do with all bills.” He did tell reporters that he was encouraged by the removal of the property tax components. “I think they got the message yesterday that [the] provision in the bill was not the way to go, and I’m glad they recognized that.” However, Quinn conceded that the city would have to find money somehow to cover the cost associated with the plan. “If they have any kind of pension reform, they need to have revenue to pay for it, but there’s many different creative ways to do that.”

Republicans in the House backed the plan, saying that it has to be done. “If we do nothing—we already have the roadmap for that. It’s called the city of Detroit,” said Elmhurst Republican Dennis Reboletti. “We can’t let the city of Chicago fail. And if the aldermen there chose to do nothing or choose to raise taxes, that’s their business.” The systems are governed by state law, so the General Assembly must sign off on changes. However, the revenue component of the plan can be handled at the local level. House Minority Leader Jim Durkin echoed that sentiment. “Doing nothing is not an option,” he said during floor debate. “We can’t ignore the fact that the city of Chicago is the economic engine of this state.” 

Senate Republicans did not see the issue the same way. They called on the Democrats in their chamber to put the breaks on the legislation, which they say moved too quickly. “It will be here in two weeks, and we’re happy to partner with you, but it must be a true partnership,” said Senate Minority Leader Christine Radogno. Senate Republicans say they want to know what the plan is to deal with the city’s other underfunded pensions systems for teachers, firefighters and police officers. “What’s the plan? The place is on fire up there,” Palatine Republican Sen. Matt Murphy said. Murphy said that members of his party are worried that they city might look to the state’s coffers to bail out those systems.

Chicago Democratic Sen. Kwame Raoul, who sponsored the bill in the Senate, said that it is unrealistic to wait around for an omnibus bill that addresses all the systems because different bargaining units are working out their own negotiations with the city. But he said that if the city can work out a deal with labor, like his bill, lawmakers should approve it. “It’s irresponsible for us not to act when...labor and employer, labor and the city, has come to the table [on this bill],” he said. Raoul said that 31 out of the 34 bargaining representing those affected by the plan have offered no opposition to the bill.

Speaker Madigan had a busy day on the House floor today as the chamber also approved a constitutional amendment that he is sponsoring. House Joint Constitutional Amendment Resolution 52 prohibits denying the right to vote based on a person's race, color, ethnicity, status as a member of a language minority, sex, sexual orientation, income national origin or religion. Madigan said the amendment sends the message, “that in Illinois we believe that every legal voter should be treated equally and have the ability to vote for the candidate of their choice.”

Durkin also backed the speaker’s amendment, but others on his side of the aisle panned it as unnecessary. “This is a constitutional amendment looking for a problem,” said Rep. David Reis, a Republican from Willow Hill. Reis is a sponsor of legislation that would require voters to present identification at the polls. Madigan describe such requirements as “voter suppression” during the debate of his amendment.

If the Senate approves the proposal, which seems likely, it will appear before voters on the November ballot. While Madigan has not shared any ulterior motive for the amendment, some see the proposal as geared toward brining out the Democratic base for the general election.

Tweaked plan for tax breaks clears the House

By Jamey Dunn

A package of tax breaks that failed miserably in the House just two weeks ago passed in the chamber today after undergoing some tweaks.

The main change supporters made to the plan was cutting it into two bills. Senate Bill 400 contained tax breaks for individuals, including raising the Earned Income Tax Credit from 5 percent of the federal credit to 10 percent over two years, and linking the standard personal exemption, which is given to all taxpayers, to federal cost-of-living increases. SB 397 included tax breaks tailored to specific businesses, as well as some cuts geared toward improving the business climate in the state.

The two bills passed today with bipartisan support. SB 397 received a whopping 81 “yes” votes, which is a far cry from the 8 “yes” votes that a similar plan passed by the Senate received on November 29. Rep. John Bradley, who sponsored SB 397, said splitting the plan into two bills made all the difference. He said the move allowed lawmakers to vote for the components they felt were most worthy without feeling like they were being log rolled into passing something they opposed.

“These two bills put together are pretty much the same as the single bill that was defeated two weeks ago,” said Rep. David Harris, a Republican from Arlington Heights who worked with Bradley on a lower-cost House plan that was never called for a vote. “I think that such is the nature of Springfield, that we end up having two bills instead of one — two bills that pretty much do the same thing but end up costing more than one.” However, Harris spoke in favor of both bills, saying that the plan was worthwhile, even if it was not ideal.

Bradley said the plan approved today would have no impact during Fiscal Year 2012, would cost less than $300 million in FY 2013 and would cost less than $350 million in FY 2014.

Rep. Barbara Flynn Currie said 2.5 million low-income, working Illinoisans qualified for the Earned Income Tax Credit in 2010. “It’s an incentive; it’s a reward for hard work, not a giveaway.” Currie, who sponsored SB 400, said giving money back to working families would help the state’s economy. “They’re going to spend it and give us back an economic boost.”

Harris agreed but said the increase in the bill was too large when weighed with other budget pressures in the state. “Many on my side of the aisle seem to be uncomfortable with the Earned Income Tax Credit. I would like to remind my colleagues for low-income wage earners … this is not welfare. This is for people who have jobs and who are productive members of society. We on this side of the aisle should not shy away from the Earned Income Tax Credit. At the same time, we should ask the question, ‘How much can we afford?’”

Other Republicans said the tax cuts for individuals simply cost too much and did not include enough relief for middle-class residents. “This state is penniless. I don’t know that anyone disagrees with it. We all want to help people, but I think if we do it we need to do it on a broad-based … basis,” said Rep. Dwight Kay, a Republican from Glen Carbon.

Floor debate on the package was briefly interrupted after protesters in the House gallery unfurled a large banner urging lawmakers not to give in to threats from businesses by offering them tax cuts. The banner hung down into the chamber until House security snatched it away and escorted the protesters out of the gallery.

The push for the bills that passed today started after the CME Group, which owns the Chicago Mercantile Exchange, and Sears threatened to leave the state. The plan includes tax breaks for both companies, as well as southern Illinois manufacturer Champion Labs, which was added to the deal in the last two weeks.

“We spent the summer working on issues regarding reform of the tax code in Illinois, particularly with regards to businesses in the state of Illinois — trying to create a fair system, trying to create a system which made sense,” Bradley said. “Our timeline, though, for acting on this measure was increased substantially by the potential issues with the relocation of two longstanding Illinois companies, Sears and the [CME Group.]”

James Parasi, chief financial officer for CME, told a House committee this morning that the passage of the plan into law would keep the CME group in the state for years to come. And Sears thanked lawmakers for approving the plan. "We thank the House of Representatives for passing legislation today aimed at keeping Sears an Illinois company. This is a major step in the process. We appreciate the House's efforts and are hopeful that when the Senate returns tomorrow, it will follow suit,” Sears spokesman Chris Brathwaite said in a written statement.

Bradley’s bill included some ideas brought up during the summer hearings, including a return of the net operating loss credit for businesses, which lawmakers voted to suspended as part of the recent income tax increase, and an extension of a research and development tax credit. Bradley said those provisions should help small- and medium-size businesses throughout the state. He added that a measure creating a larger exemption for the estate tax would help family farmers when their land and operations are passed down to their heirs. Bradley has vowed to continue legislative efforts to reform the state’s tax code.

Opponents to the tax cuts for businesses said the state cannot spare the revenue in a time when other vital programs such as education are being cut. “I am outraged that the state of Illinois would give the CME group a tax break while education spending in the state is languishing, and quite frankly, in a state of absolute crisis,” said Kit Main, a member of the Chicago-based community organization Northside P.O.W.E.R. and the group Make Wall Street Pay Illinois, told a House Committee this morning. 

House Republican Leader Tom Cross, who worked with Bradley on the bills that passed today, acknowledged that many in the House disliked some parts of the plan. “There’s a lot of angst on this bill today, I realize that.” But Cross said lawmakers will take many difficult votes in the future, especially in regards to the state’s budget. He said $1 billion more in pension obligations due next year, as well as a stack of Medicaid bills that will be pushed into FY 201,3 would result in the need for unpopular budget decisions. We no longer have any easy choices,” Cross said during floor debate. “You think today’s tough? You think today is a difficult vote. I can’t imagine what it’s going to be like next year. … You ain’t seen nothing yet.” Cross called for sweeping reforms to the tax code, including a reduction in the corporate income tax rate. “If we are going to accept the fact that this state is in as bad of shape as it is — and it is — and we want companies to stay, the picking and choosing [for tax breaks] has got to stop.” Cross said he was optimistic about the Senate approving the two bills when they are in session tomorrow because they are much like a plan the chamber approved two weeks ago.

A prepared statement from Gov. Pat Quinn indicates that he is on board with the plan. Quinn originally supported increasing the Earned Income Tax Credit to 15 percent of the federal rate, but he said the deal that passed today provides “help for both hard-working families and employers.” He also encouraged the Senate to “take swift action tomorrow.”

Tax cuts don't add up

By Jamey Dunn

Gov. Pat Quinn has incorporated a new component to his proposal for the state budget: property tax relief.

Quinn’s original budget proposal included a 1-percentage-point income tax increase, which he said would go wholly to fund education. At the time, the governor was proposing a $1.3 billion cut to education as the only alternative to the tax, which he said would be necessary to replace federal stimulus funds that will not be coming this fiscal year. Quinn’s budget office estimated the tax increase would bring in $2.8 billion. Some of the money was also meant to go toward paying down the millions in overdue bills the state owes schools.

Quinn has been bringing up the point for months that cutting school funding could lead to higher property taxes. “If you don’t have the state fully supporting education the way it should, local property taxes go up. That’s a[n] iron law. That happens. If the state doesn’t pay for schools, then local property taxes end up paying for schools,” Quinn said at a Chicago news conference.

When pressed by reporters on the issue yesterday, Quinn said he would require local school districts to cut property taxes if his so-called “surcharge for education” income tax increase passed.

Today, Quinn emphasized a concept that is not new. “I think, from my viewpoint, we’ve got to reduce reliance on property taxes to fund education in Illinois. That is an imperative if we want to have a stronger economy and have better education. The state of Illinois, according to our Constitution, has the primary responsibility for funding schools.”

The idea that education should be funded predominately by state dollars and not local property taxes has long been a topic of debate. It was the thrust of the Senate Bill 750 plan, which the tax increase that passed in the Senate last year was based upon. However, that plan, which stalled in the House, includes a 2-percentage-point income tax increase and broadening sales tax to include some services.

Here is how Quinn explains his plan: “What I would envision is, the amount of money that the school districts get, additional new money from the state, a portion of that would be abated in property tax abatements — reductions — to the families and businesses and farmers of Illinois. … If you get additional new money from Springfield, from the state government, then I think part of the bargain has to be that the local school districts at least roll back a portion of their property taxes. … They end up getting more money. … They’ll get more money for education, and the taxpayers will get lower property taxes.”

But Quinn’s plan is scaled back on the revenue side. Promising more funding for education and a cut in taxes during an unprecedented budget deficit while facing a huge stack of unpaid bills may be unrealistic. Quinn’s proposed income tax increase would barely make a dent in the estimated $13 billion budget deficit.

Quinn’s Republican opponent in the governor’s race, Sen. Bill Brady, has claimed that he can balance the budget in one year, while avoiding mass teacher layoffs and property tax hikes. His plan also includes a billion dollars in tax cuts.

Kent Redfield, an emeritus professor at the University of Illinois Springfield and director of the Sunshine Project, a nonprofit campaign contribution database connected to the Illinois Campaign for Political Reform, doubts that large tax reductions will come if Brady is elected. “We’re not going to have a huge tax cut because we will have a Democratic Senate. And we can’t afford it anyway.”

Requests to Quinn’s budget office for more specifics on his proposal were met with referral back to tape of the news conference that Quinn held in Chicago earlier today, where he took questions on the plan but did not get into the numbers.

While proposals to cut taxes may play well on the campaign trails for both candidates, it appears that the money for such plans is just not there — even with an income tax increase. The state’s budget gap is just too big.

Nonprofit hospital not exempt from local tax

By Jamey Dunn

The Illinois Supreme Court issued a ruling today that could affect nonprofit hospitals across the state and eventually lead to new legislation.

The court ruled that Provena Covenant Medical Center in Champaign County is not eligible for a local property tax exemption it applied for in 2002 based on the hospital’s status as charitable operation. Provena is exempt from paying federal income taxes under that status.

Provena’s request was previously rejected, and it appealed the decision. But the courts sided with the Illinois Department of Revenue, saying the hospital did not provide enough charity care.
The court ruled that Provena only offered charity care as a “last resort” and was critical of the health care provider for turning unpaid bills over to collection agencies.

“As a practical matter, there was little to distinguish the way in which Provena Hospitals dispensed its ‘charity’ from the way in which a for-profit institution would write off bad debt,” Republican Justice Lloyd Karmeier’s opinion said.

Provena contends that its treatment of Medicaid and Medicare payments constitutes charity because reimbursements do not cover the cost of care. The justices did not agree, saying that hospitals have a choice whether to treat patients on those programs. The opinion said that state and federal dollars also provide Provena with a steady revenue stream.

The court’s opinion does note: “Treatment was offered to all who requested it, and no one was turned away by [Provena Covenant Medical Center] based on their inability to demonstrate how the cost of their care would be covered."

Democratic Justices Anne Burke and Charles Freeman disagreed with part of the ruling, saying the court does not have the power to set the standards for defining a charity.

“This can only cause confusion, speculation, and uncertainty for everyone: institutions, taxing bodies, and the courts. Because the [Illinois Supreme Court] imposes such a standard, without the authority to do so, I cannot agree with it,” Burke wrote in her dissent.

It is the possibility of confusion and speculation that concerns some legislators.

“I have a concern now that we are going to see a rush of local governments trying to go after other health facilities. Thinking that this is a way to get some quick revenue from property taxes … the government may get a few extra dollars in property taxes, but then government is going to have to start providing all those services that those health care facilities used to provide,” said Rockford Republican Sen. Dave Syverson, the minority spokesperson of the Senate Public Health Committee.

“Some legislative response is probably going to have to be made to protect those health care facilities,” he added.

Chicago Democratic Sen. William Delgado, the chairman of the Senate committee, agrees that lawmakers may have to address the issue. “[The ruling] triggers a legislative opportunity, they are sending you a message. … That’s a direct way of saying we’d better look at that from our perspective again.”

Justice Thomas Kilbride, a Democrat, and Justice Rita Garman, a Republican, did not participate in the decision.

The elusive standard of charitable care

By Bethany Jaeger

The Illinois Supreme Court has to decide which standard to use when considering a highly anticipated case about what not-for-profit hospitals have to do to qualify for local property tax exemptions. While the case specifically deals with Provena Covenant Medical Center in Champaign County, the court decision has potential to affect about 160 nonprofit hospitals throughout Illinois.

We previewed the six-year-old case in the September edition of Illinois Issues magazine. Provena filed for a property tax exemption in 2002 based on its status as a charitable organization, but the Illinois Department of Revenue denied the charitable exemption two years later. The hospital later applied for an exemption based on its status as a religious institution. (See a timeline of the case here.)

Both sides presented oral arguments before the Illinois Supreme Court this morning with drastically different beliefs about what should count when considering charitable exemptions and what evidence the court should consider in deference when determining whether Provena qualifies for that property tax exemption.

On one hand, Provena’s lawyer, Patrick Coffey with Locke, Lord, Bissell & Liddell in Chicago, argued that the justices should undertake a brand new review of whether the denial of the hospital’s charitable exemption violates the state Constitution. The state charter gives the General Assembly authority to exempt “property of the state, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes.”

On the other hand, the Illinois Department of Revenue, represented by Assistant Attorney General Evan Siegel, argued that the justices should give deference to the lower administrative orders issued by department director Brian Hamer and affirmed by the 4th District Court of Appeals. The thinking is that the Department of Revenue has expertise in property tax matters and was the authoritative body reviewing evidence provided by 15 witnesses and two experts during administrative hearings, so the court should give a high level of respect to the administrative findings when reviewing the case.

Which standard the court chooses affects how it would consider a 2004 recommendation of an administrative law judge. After the administrative hearings, the administrative law judge found that the hospital met the standard for charitable exemption. Hamer, however, disagreed. He had the final administrative opinion to reject the tax exemption. He deemed some of the evidence irrelevant and decided that Provena didn’t qualify for a tax exemption because it dedicated only 0.7 percent of its revenue that year to providing so-called charity care to 302 patients out of 110,000 patients admitted. “I find that the property does not qualify for the charitable institution tax exemption because the evidence is clear that this property is not used exclusively for charitable purposes,” he wrote.

The two sides further disagree about whether a certain percentage of charitable care should be a deciding factor in its tax-exempt status. Coffey argued that the standard for whether not-for-profit hospitals qualify for property tax exemptions should not be whether the hospitals designate a certain percentage of their income to providing free care to needy patients.

“That has never been the requirement, and it shouldn’t be the requirement,” he said to five of seven justices. Justices Thomas Kilbride of Rock Island and Rita Garman of Danville recused themselves and did not participate in the oral arguments.

Instead, Coffey said the determination should be on a case-by-case basis and should count the hospital’s total contribution to the community. “It’s not out of bounds to consider how much free care was given, but they have also gone beyond.” For instance, Provena operates Crisis Nursery, a 24/7 child abuse prevention and support service and provided more than $13.5 million on such “community benefits” in 2002, according to the hospital’s Supreme Court filing.

Siegel, however, argued that the dominant factor when deciding charitable exemptions is the primary use of the property. He refers to a six-point test established by a 1968 Illinois Supreme Court case Methodist Old Peoples Home v. Bernard Korzen. (Read the six criteria for nonprofit institutions in our September issue.)

“It doesn’t matter whether an organization itself … is a charitable organization,” Siegel said. “What matters on that analysis is whether it is using the property for a charitable purpose.” He added that tax exemptions are granted on an annual basis. “Just because you have it for one year doesn’t mean you have it for every year.”

Justice Robert Thomas asked whether the state expected the court to set a minimum requirement of a certain percentage of charitable care. Siegel said no, that the court already determined in 1907 that a hospital must provide a “substantial amount” of free care. “All the court need do in this case on this critical factor is decide that 0.7 percent revenues in a year that only 302 people out of 110,000 admissions obtained free and discounted care is not substantial.”

In addition to the charitable exemption, the two sides differed about whether the religious exemption should be part of the court’s consideration because of a discrepancy in the record.

Chief Justice Thomas Fitzgerald questioned several times how Hamer could have ruled that Provena did not qualify for a charitable exemption based on its religious affiliation when the administrative law judge never addressed that question. “I’m still puzzled at how the director based his finding upon a statement that wasn’t there.”

“Well, it was mistaken, absolutely,” Siegel responded. “But I believe that he read the [administrative law judge’s] opinion as not giving much weight to the religious exemption.”

Coffey argued that the administrative law judge did not address the religious exemption because she already found that an exemption was warranted as a charitable organization, and Hamer rejected the religious exemption without explanation.

In addition to differing over other details, the two sides predominantly argued that their opponents were trying to change the standard of determining whether hospitals qualify for property tax exemptions.

“Provena [provided] free and reduced care to just 302 patients,” Siegel said. “That’s not a large proportion. The primary use of the property is treatment of patients with insurance. By arguing that 0.7 percent is sufficient, Provena is trying to alter the constitutional standard. And it is for this court, not the legislature, to determine what constitutes a constitutional charitable use.”

Coffey countered that the state is the one trying to base a decision on a standard that has never been used by the court, referring to the use of a certain percentage needed to qualify for a tax exemption. He said a proposal to set a minimum percentage of charitable care should go through the legislative process, not the court system.

It is up to the court to decide which standard to use. Although Justices Kilbride and Garman recused themselves and are not required to disclose their reasons, a majority opinion still requires four justices, according to Joseph Tybor, Illinois Supreme Court spokesman.

School funding reform

by Jamey Dunn

Shortly before passing the capital plan, the Senate debated a proposal that would drastically change the tax structure for the state and possibly resolve a pending lawsuit. The bill, which has been considered in different versions for the last seven sessions, would raise the personal income tax from 3 percent to 5 percent and expand the sales tax to specific services.

Sen. James Meeks, a Chicago Democrat, classified some of the services as “luxury,” including limousine rentals, massages and pet grooming. But the bill also includes movies and movie rental, taxis and bowling. It would also double the earned income tax credit to protect low-income families and provide property tax relief for all.

Meeks said the intent of the measure is to create more revenue for Illinois schools and ensure schools receive equal funding because the state would take over most of the responsibility. Currently, school districts heavily rely on local property taxes, so funding can vary greatly among districts depending on how much revenue the local tax generates.

He added that after giving more money to schools and higher education, providing tax relief and putting funds toward capital projects, a large chunk of money (Meeks estimates around $4 billion) would be left over to help plug the state’s budget deficit.

The Chicago Urban League filed a lawsuit last August against the state and the Illinois State Board of Education over the current school funding system. The lawsuit was based on the 2003 Illinois Civil Rights Act and claims that Illinois’ education funding system results in racial discrimination because the student populations of many under-funded schools are predominantly minorities. The Urban League is seeking an injunction, which would force the state to change the system.

Meeks said that it is time for the General Assembly to reform school funding before possibly being ordered by a court to take action. His measure advanced through committee, and he said he plans to call it for a floor vote before session adjourns at the end of the month. “It would be a shame if the court has to mandate Illinois to do what Illinois should have been doing all along,” he said.

"TEA Party" held and historic sites to reopen

by Hilary Russell and Jamey Dunn
Photographs by Hilary Russell

Anti-tax protesters gathered in front of the Illinois Capitol today, shouting the message that they are Taxed Enough Already (TEA) on the last day people can file their income taxes without an extension. Meanwhile, Gov. Pat Quinn launched a new Web site intended to help taxpayers and government employees report corruption.

Today’s protest was one of several TEA parties held around the nation to demonstrate opposition to government spending and rising taxes under President Barack Obama’s administration.

In Illinois, taxpayers face a potential 50 percent income tax increase (from 3 percent to 4.5 percent for individuals and 4.8 percent to 7.2 percent for corporations). The legislature also is considering hiking sales taxes on cigarettes, some flavored coffee drinks and motor fuel as a way to help generate more revenue and plug a budget deficit projected to reach as much as $12.4 billion.

Protesters booed, waved American flags and raised signs that read,“Big government is the problem, not the solution,” “Read my lipstick, no more payments,” and “Vote to raise our taxes, and we will vote you out of office.”

Rep. Lou Lang, deputy House majority leader from Skokie, said he understands why people are angry at the prospect of increased taxes nationally and locally.

“For most of us here, no one wants to raise taxes, or raise fees and costs on people,” said Lang, who was in the Capitol today even though the General Assembly is on spring break. “But as we try to get through the spring session and we have to try and come to grips with a $12 billion hole in our budget and how we are going to deal with that, we may have to bite the bullet and raise some taxes. None of us would like to do that; we’d like to avoid it.”


Quinn, at a news conference in Chicago, said he supports citizens taking to the streets to make their opinions known, but he’s still waiting to hear alternatives to an income tax increase.

“We’ve heard a lot of chirping, but nobody has a specific concrete plan that gets the job done, without having to raise revenue in order to pay down the 11 and a half billion dollar deficit,” he said.

Meanwhile, he launched a government Web site aimed at getting people to report fraud that involves taxpayer dollars.

The site is supposed to make it easier for people to take advantage of a 1991 Illinois whistleblower protection law that encourages citizens to expose corruption and theft by offering a financial incentive. The law applies to all levels of government. According to Quinn, the law has already led to exposing Medicaid fraud and crooked highway contractors.

Quinn said that citizens have an obligation to help police their government. “We as taxpayers have, I think, a duty to keep our eyes open. We want anyone who would even think of committing fraud against the taxpayers to think twice about it,” he said.

Historic sites to open soon
Quinn also announced in his press conference today that some of the state historic sites could reopen as early as next week.

Dave Blanchette, spokesman for the Illinois Historic Preservation Agency, said that notices to return to work have been sent to all 33 agency employees who were laid off late last year. He said that the agency has asked them to come back April 22 and that at least some historic sites should reopen by the end of next week.

Blanchette said that all 11 sites that were closed by former Gov. Rod Blagojevich last year will be reopened, but the timing depends on how soon employees are available to come back to work. The governor and the agency will be making a formal announcement sometime next week.

Ready, set, repeat

Reminiscent of last year, a whole host of state policy issues remain up in the air throughout the summer. Inaction mostly rests on the shoulders of Democrats, who are repeating history by agreeing on practically nothing. The main culprits are Gov. Rod Blagojevich and House Speaker Michael Madigan, each of whom blames the other for lack of action. Meanwhile, Illinois is in its ninth year without a capital construction plan, campaign funding reform remains dormant, many state services and agencies are operating with stagnant or decreased funding and long-term costs of health care and pensions continue to compound.

Legislators and the governor will return to Springfield this week with lots to talk about, but little progress is anticipated. Here’s a chronological list of activities with some context.

Today: Comptroller Dan Hynes issued a statement that he would not cut the checks for pay raises for state legislators and officers if they are enacted because the General Assembly never gave him authority to spend the necessary money. “We cannot implement the pay raises without an appropriation. But more importantly, I am of the opinion that this is no time for pay raises,” he said in a release, citing budget cuts for social services and Medicaid providers. The House rejected the pay raises, but the Senate has yet to do so. In the larger scheme of things, the pay raises simply are a battle of public perception. While such state services as substance abuse treatment struggle to meet demand because of $43 million in budget cuts, it would look disingenuous if legislators received their annual 3 percent cost-of-living adjustments at the same time they receive significant pay raises, costing about $1.1 million just for constitutional officers, legislators and top state agency officials, according to the comptroller’s office. That doesn't count pay raises for judges.

Tuesday: Expect Gov. Rod Blagojevich’s idea to move about 140 state employee positions from Springfield three hours south to be rejected by a bipartisan legislative review panel. Expect that rejection to be followed by the governor’s statement that the move is going to go forward, anyway. Lots of union-backed employees will be up in arms again. Meanwhile, they’re still working under last year’s contract with the state while their union, the American Federation of State, County and Municipal Employees Council 31, remains gridlocked (click this link and scroll down) with the administration. Among the key sticking points are employee wages and employee contributions to health care and pension benefits.

Tuesday and Wednesday: Gov. Rod Blagojevich called legislators back to the Capitol to address two major issues: funding for education on Tuesday and funding for capital construction projects Wednesday. But neither session meets until late in the afternoon, giving legislators time throughout the day to attend various events at the annual State Fair in Springfield. Governor’s Day (a.k.a. Democrats’ Day) is Wednesday and Republican Day is Thursday. Watch for political fireworks off stage.

Ongoing: The governor says he’ll “rewrite to do right,” his slogan for changing agreed-upon bills to include his agenda. If the General Assembly rejects his changes, then the underlying bill dies. So far, he’s changed two bills. One would allow all adults up to age 26 to remain on their parents’ health insurance plans. The original intent was limited to college students who took a medical leave or who reduced their course loads to part time because of an illness or injury. They would have been covered for a year on their parents' plans. A second amendatory veto would extend property tax exemptions to all veterans with service-connected disabilities certified by the U. S. Department of Veterans’ Affairs. The original bill regarded a tax increment financing district in the Village of Downs. Blagojevich has said he will continue amending numerous bills in his Rewrite to Do Right campaign, “to take positive action on legislation that has been sent to him by the General Assembly,” according to a statement from Brian Williamsen, his spokesman.

August 29: Later this month marks the deadline for the governor to sign, change or reject ethics reforms sent to his desk in June. His office repeatedly has said he doesn’t think the ethics reforms go far enough. One potential amendment could include banning state contractors from donating to statewide political parties. The original legislation, which received unanimous approval by the General Assembly in May, only prevented state contractors holding contracts worth $50,000 or more from donating to statewide officeholders who sign the contracts.

Also coming up: One of the House Democrats’ point people on education, Rep. Mike Smith of Canton, announced that he’ll host a series of public hearings to consider a proposal to abolish property taxes for school funding by 2010. It’s been floated by Sen. James Meeks, a Chicago Democrat who previously threatened to run against Blagojevich for governor in the absence of education funding reforms. Meeks didn’t run, but he also didn’t get what he wanted. So here we go again. Add education funding reform to a huge pile of politically sensitive Statehouse issues that likely will grab some headlines but will remain stalled, at least before the November elections.

The new "tax swap"

Senate President Emil Jones Jr.’s name appears on the list of sponsors of a version of a “tax swap” that would reform the way Illinois pays for public education. His support is a reversal from the Democratic leaders’ alliance with the governor last year but consistent with Jones’ stances in years before that. Support from the chamber leader is a big boost for Sen. James Meeks and Sen. John Cullerton’s measure, but the bill has two main hurdles: 1) Gov. Rod Blagojevich’s expected veto of anything that increases state income taxes and 2) the curse of gaming legislation, or getting so weighed down by trying to please everyone that the bill implodes and goes nowhere.

The measure advanced today from the Senate Education Committee, the first of many public hearings planned for this legislation before it’s ready for a vote by the full Senate.

Senate Bill 2288 is the new Senate Bill 750, but it has major differences. (Some are mapped out by Senate Democrats here. The main difference is that the new version would raise a lot more revenue — $7.2 billion — to do a whole lot more, funding a statewide infrastructure program and paying down state debt. Specifically, highlights include $633 million for early childhood and primary education, $300 million for higher education, $2.9 billion for property tax relief adjusted for inflation each year, $600 million for a family tax credit adjusted for inflation each year, $1 billion for a road and school construction plan and more than $1 billion for state pension and Medicaid debt.

“The goal of this bill is to pay off our debts,” Cullerton said in the committee hearing. He later added, “Not one penny is going to the operations of state government.”

Some Republicans in the committee found that hard to believe, but Cullerton said the sponsors eagerly seek input from the GOP and the House to codify better language. The sponsors still have the same list of supporters and opponents as 750. Most education and labor groups support it. Opponents include business groups and the Illinois Department of Revenue. (One school board in Chicago’s northwest suburbs of Palatine and Schaumburg opposed the property tax relief portion and said schools across the state can’t trust Illinois government to deliver, but those witnesses also said they supported many funding reform ideas in the legislation.)

The way the measure would raise the money is by increasing the personal income tax rate from 3 percent to 5 percent and the corporate rate from 4.8 percent to 8 percent. It also could, although it doesn’t yet, take back $800 million from the portion of the state income tax revenue that local governments currently receive.

On the spending side, the measure lists general initiatives but doesn’t specify where the money would go. Also absent, so far, are “accountability” measures, or safeguards for how state and local governments spend the money as intended. That’s a necessary component for Democratic Sen. Susan Garrett of Lake Forest. She voted “present” in committee to symbolize her concerns. “There has to be oversight. It’s not going to happen with this magic wand. I could never support this, especially from my area, without some major, major reforms.”

Meeks said those reforms are going to be drafted after collecting ideas in a series of public hearings, which is particularly important when “nobody trusts us to do what we say we’re going to do.”

We’ll have more details as they unfold. In the meantime, it’s safe to say this version isn’t going to advance for a while, maybe months.

The governor’s response is, according to an e-mail from spokeswoman Rebecca Rausch: “The push for an income tax increase isn’t new in Springfield. The governor’s position hasn’t changed. He thinks we should cut taxes, not raise them — especially at a time when families are already dealing with higher gas bills, higher prices for goods and stagnant wages.”

Jones’ spokeswoman, Cindy Davidsmeyer, said the Senate president has said and continues to say that he will not call this type of controversial measure for a vote on the Senate floor unless it has enough votes to pass — that’s 30 to pass and 36 to override a governor’s veto. Considering all the work that needs to be done to complete the legislation and all the GOP recruiting that needs to happen before the measure has a veto-proof majority, it’s optimistic to think that the bill could be called for a vote before May 31, as Meeks would like.

Unlucky sevens

Former Gov. George Ryan could go to federal prison within seven days — correction: by November 7 — pursuant to a decision by the federal 7th Circuit Court of Appeals.

On Thursday, the full court affirmed that Ryan would not receive a retrial for his federal corruption conviction last April. Ryan requested the full panel of judges review an August ruling by a three-judge panel that determined he should not receive another trial. According to Thursday’s court order, even the three dissenting judges wrote that they agreed “the evidence of the defendants’ guilt was overwhelming.” But they disagreed over whether the management of the jury during the six-month trial harmed the case.

Ryan and his friend, Chicago businessman Larry Warner, were found guilty of using public office for private gain during Ryan’s years as secretary of state (1991 to 1999) and as governor (1999 to 2003). The Kankakee Republican has remained free during the appeals process and could ask to remain free if he takes his case to the last resort: the U.S. Supreme Court.

Back to the Capitol in 7
The Illinois House could vote on controversial mass transit funding just two days before threatened service cuts and fare increases.

Members will return to Springfield to conduct business one week from today. This comes after House Minority Leader Tom Cross met with House Speaker Michael Madigan in Chicago Wednesday to discuss ways to save mass transit from financial turmoil. But the leaders aren’t necessarily on the same page about whether a mass transit plan should rely on revenue from increased taxes, expanded gaming, other sources or all of the above.

The minority leader still prefers alternatives to tax increases. “Tom Cross and a majority of our caucus does not feel that now is the time to be increasing taxes on people, especially in light of what is being proposed by the Cook County board president and the mayor of Chicago,” said David Dring, Cross’ spokesman.

Alternatives include allowing a Chicago casino and the expansion of positions at existing casinos to help mass transit and to pay for a major capital construction plan. Dring said Cross also proposed diverting $300 million of the revenue from the state sales tax on gasoline to aid mass transit, and he’s proposing a menu of items to replace that money, such as increasing fees on auto titles and raising transit fares by 10 percent to 15 percent. “That is something we just thought about because that would be less money you would have to take from the sales tax on gas,” Dring said, adding a 15 percent fare increase would be “much more modest” than the fare increases planned by the Regional Transportation Authority if the agency doesn’t receive long-term state help by November 4.

Madigan, on the other hand, “did not seem to warm up to our idea of the sales tax on gas,” Dring said.

The speaker is open to a Chicago casino to pay for a road and school construction projects but only under certain circumstances, such as whether the revenue would stay in Chicago or be divvyed up all over the state, said Madigan spokesman, Steve Brown. However, the speaker still doesn’t want to rely on gaming legislation to save mass transit. “He has said that he doesn’t plan to hold transit riders hostage to the casino interests or the gambling interests,” Brown said.

In fact, Madigan still plans to push for a plan that would include a small sales tax increase in Chicago for the sake of mass transit. Lawmakers could vote for a second time on that measure next week. It previously fell short of the necessary votes in September.

Lawmakers were told to be prepared to work at the Capitol Thursday, November 1, Friday, November 2 and potentially Monday, November 5. And the governor repeated his statement Wednesday that he would call the General Assembly into another special session in mid-December to address the so-called 7 percent solution to Chicago-area property taxes. See the background here.

Tax news and something fun (updated)

The Taxpayers’ Federation of Illinois' board of trustees voted to provide “qualified support” to SB 572, Rep. Julie Hamos’s measure to give a much-needed boost to Chicago-area transit and to give some more money for operating costs of downstate public transit systems. I’ll try to post the association’s position statement as soon as it’s available.

Here's the federation's statement supporting Hamos' legislation:
• "TFI supports the pension, healthcare, and governance reforms in the bill. TFI has taken the position that reforms to spending, such as spending on pensions and healthcare, should be prerequisites to any increases in revenue. TFI believes that the reforms agreed to between the Chicago Transit Authority (“CTA”) and the relevant unions to, among other things, increase contribution rates and increase the retirement age to 65 are positive steps to reining in costs. TFI believes these reforms are an example of the types of reforms the State should undertake in the future to reduce its own cost structure."

• "TFI supports the sales tax increases in the bill as reasonable, targeted increases to fund transit needs. Given that transit use is regional to a particular area, TFI believes an increase in the sales taxes in Chicagoland is a reasonable revenue source since it will be targeted primarily on the taxpayers of the area that is serviced by the Regional Transportation Authority (“RTA”)."

• "TFI previously worked with the Illinois Association of Realtors (“IAR”) to obtain the referendum requirement for home rule municipalities. The provision in SB 572 grants an exception to the requirement for the limited instance of this particular tax imposition in Chicago. While TFI is concerned about this exception, we acknowledge and support the fact that the bill does not rescind the overall requirement for home rule municipalities to seek voter approval of the imposition or increase of real estate transfer taxes."

• "TFI also believes that reasonable fare increases designed to reflect the growth in operational costs should be part of any future fiscal considerations of the RTA and its service boards."

Tax climate
The national Tax Federation also released its 2008 State Business Tax Climate Index, which is supposed to rank states based on how “business friendly” they are. The news release says the index “measures how well a state's tax system encourages investment by maintaining a broad tax base and low rates.” It considers the corporate tax, individual income tax, sales tax, unemployment tax and property tax.

Illinois places 28th overall. Here’s Illinois’ rankings in the sub-groups:
Corporate income tax: 29th
Individual income tax: 12th
Sales tax: 32nd
Unemployment insurance tax: 42
And property tax: 40

The report says Illinois, along with Pennsylvania, Indiana, Michigan and Colorado, are in the top 12 for the individual property tax because each state uses a single, low rate. Watch for my November column about Chicago's property tax system.

Illinois placed 27th overall last year and 29th in 2006. That’s down from placing 19th in 2003, the first year the group published the report.

“Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same,” the federation says. “Variation in the tax treatment of different industries favors on economic activity or decision over another. The more riddled a tax system is with these politically motivated preferences the less likely it is that business decisions will be made in response to market forces.”

Here’s the executive summary of the background paper, and here’s the full background paper. You can access the full report here.

By the way, this is the same group that said Gov. Rod Blagojevich’s failed gross receipts tax idea was the “largest single-year state tax increase this decade.” I mention that in my May feature about the state’s business climate. Watch for more analysis by Charlie Wheeler, director of the Public Affairs Reporting master’s program at the University of Illinois at Springfield, next month.

Something fun
You may be interested to see which presidential candidates align with your views. WQAD News Channel 8 linked to this 11-question survey, which is not scientific, developed by Minnesota Public Radio. It’s here. It's quick and easy, but the site says it's not meant to pick your candidate for you. It's designed to inform the public about the candidates' stances on a variety of issues.

"There's always next year"

The state is starting to look a lot like the Chicago Cubs in dropping the ball and saying it’ll get the job done next year. The Illinois General Assembly finished its annual fall session Friday without addressing two of the big-ticket items that have divided the legislative leaders and the governor all session: capital construction projects and mass transit subsidies. House Speaker Michael Madigan said he’d give his members seven days’ notice before calling them back to Springfield to act on some leftover business from the regular spring session, which, by the way, still hasn’t ended. It was supposed to end in May. Here’s what they did do during the six days of so-called veto session:

Budget overrides The Senate restored $7.9 million of the $470 million cut out of the state budget by Gov. Rod Blagojevich in August. Senate President Emil Jones Jr. said Thursday that the move was to restore dollars that were “inadvertently cut out of the budget.” The move restored the original funding levels for the offices of the attorney general, the auditor general and such other legislative bodies as the Commission on Government Forecasting and Accountability, the Joint Committee on Administrative Rules and the legislative research and information bureaus, as well as the Illinois courts. Budget negotiator and Chicago Democratic Sen. Donne Trotter said the Senate can come back and approve more overrides or a supplemental budget bill when the state’s revenue forecasts improve. (See the Commission on Government Forecasting and Accountability’s monthly report that says sales tax revenue has declined and the latest comparative study that says Illinois has lagged behind most other states in economic growth.)

Property taxes The Senate president was the lone “no” vote when the his chamber overwhelmingly agreed with the House to override the governor’s changes to the so-called 7 percent solution. The program, which started in 2004, caps the taxable amount of residential properties’ assessed values, which started skyrocketing in 2000. As approved by both chambers, this session’s legislation extended the assessment caps another three years and raised the homeowner's exemption, on a sliding scale, to as much as $33,000 from an earlier high of $20,000. The governor used an amendatory veto to change the legislation by extending the homeowners’ exemption limit up to $40,000 and by making the 7 percent rule permanent. Because both chambers overrode the governor’s action, the original legislation immediately became law. Taxpayers can expect to receive their tax bills by November 1. The county can expect to receive payments by December 1. However, such lawmakers as Sen. Terry Link, the Waukegan Democrat who sponsored the legislation, favor making the program permanent. But he and others agreed to override the governor’s changes because a) if they didn’t agree with the House, then the measure would have died, and b) some questioned the constitutionality of the governor’s use of an amendatory veto to make such sweeping changes. Link says he’ll pursue legislation that would make the 7 percent solution permanent.

Moment of silence Rep. Bill Black, a Danville Republican, passionately spoke against the House and Senate approving a mandatory moment of silence to start each school day. “At least in that moment of silence, they can pray that the General Assembly finally sends them the money that they need,” Black said, referring to schools waiting for their belated state aid payments caught up in a political battle between Madigan and Jones, who is aligned with the governor. The moment of silence may be required, but there aren't any penalties for disobeying the rule. It’s immediately effective.

What’s next? There is no schedule for lawmakers to come back to the Capitol, but the House does have a public hearing scheduled for October 17 in Chicago to discuss the gaming-for-capital bill approved by the Senate. It would create three new casinos to pay for road and school construction projects and some mass transit subsidies, but it has been labeled as too aggressive by some House Republicans and by the speaker. It may well be next year before the legislative leaders set aside their differences and agree on capital and mass transit plans.

Relationships 101

Rep. Tom Cross, the Republican leader in his chamber, had the quote of the day from the House floor before lawmakers finished their first week of the annual fall session.

“Perhaps, at least at the higher level, we’ve had an inability to communicate to get the budget done, to take care of capital, to take care of RTA, to take care of gaming. And I have a suggestion,” he said.

He cited psychologist and author Kate Wachs, who’s been interviewed by such media entities as the Chicago Tribune and Oprah Winfrey.

“She’s a nationally acclaimed relationship expert, and she’s written a book, Relationships for Dummies,” Cross said. “And she has a very good chapter on good communication, the bolts. One of the things she talks about is finding compromises that work for you and your partners. And I thought maybe she could come to a leaders’ meeting.”

Lawmakers return to the Capitol Wednesday, October 10 for three more scheduled days of the fall session. What do we have to look forward to? Lots or little, depending on whether the legislative leaders decide to hold off on major actions until the House holds committees on gaming and mass transit later in October. Until then, we wonder:
- Will Senate President Emil Jones decide to do the same as the House and let his members vote to override some of Gov. Rod Blagojevich’s $460 million in budget cuts?
- Will Jones decide to act on the House version of a property tax assessment cap that phases out in three years or continue to side with the governor and advance language to make the cap permanent?
- Will House Speaker Michael Madigan allow budget implementation bills to be processed so schools can get their delayed state aid payments by November?
- And will the governor make a public appearance in the Capitol before the scheduled last day of the fall session, October 12?

A few surprises

The first day of the Illinois General Assembly’s annual fall session played out as expected Tuesday. The only surprise came with the news that Senate Majority Leader Debbie Halvorson, a Crete Democrat, announced she’s running for Congress to replace Rep. Jerry Weller, a Morris Republican. He announced his retirement in September shortly after the Chicago Tribune and other news reports said he failed to fully disclose land holdings in Nicaragua, potentially violating federal ethics rules. Weller said that didn’t play into his decision. It was simply to spend more time with his family.

Halvorson’s announcement is key because she was previously mentioned as a potential contender for the Senate president’s position whenever the current president, Emil Jones Jr., retires. Jones seems to be supportive of Halvorson’s Congressional bid. “It’d be a tremendous loss, but she’d be a great congresswoman,” he said Tuesday.

During a break from the veto session, Halvorson said she opted not to pursue the Senate leadership position because, “It’s not about me. And it’s not about titles. And I found over the weekend it’s about people and about where you can make the biggest impact. And that’s why I’ve chosen to move on to where I believe the issues are much bigger and my help is needed.”

She attended a women’s leadership conference in Washington D.C. over the weekend and said that helped her realize that she could make the biggest difference in such issues as health care and troop levels in Iraq. While in D.C., she also met with current speaker of the U.S. House, Nancy Pelosi, and members of the Democratic Congressional Campaign Committee. Halvorson said the committee assured her that the 11th District race was an important one and that they would be working with her to snag the seat from Republicans. The district covers 11 counties of the southern suburbs of Chicago and parts of north central Illinois and has leaned Republican, but it could be vulnerable to political change as the demographics shift.

“It’s a very large district, but anybody who knows me knows what a fighter I am and what a campaigner,” Halvorson said. “I love a good fight, a good challenge, and I can’t wait to get out there.”

(Former intern Deanese Williams-Harris featured Halvorson in a March article about the senator’s push for young women to receive a vaccine for HPV, a common sexually transmitted disease that can lead to ovarian cancer.)

One potential contender for Weller’s seat mentioned was state Sen. Christine Radogno, a GOP budget negotiator who failed to win the state treasurer’s race last year. But the Lemont Republican said Tuesday that she decided not to run. “One, I like what I’m doing here. Two, I don’t live in that district, and while that’s not a legal requirement, I think that voters deserve to be represented by someone who does live in the district. It’s a different type of district than I have right now. It’s a rural district, 11 counties, as opposed to a more suburban district than I have right now.”

Here’s the not-so-surprising news:
• An overwhelming majority of House members voted to override most of the governor’s budget cuts. But the overrides are unlikely to have a favorable future in the Senate.
• Latino legislators representing the southwest side of Chicago still want the Senate to override the budget cuts, too, to help relieve severely overcrowded schools. Sen. Martin Sandoval, a Chicago Democrat and Latino Caucus member, says there would be enough votes in his chamber if the Senate president would allow a vote to override the governor’s budget cuts.
• However, Jones said this afternoon his stance has not changed and that he does not intend to call the overrides for a vote in his chamber.
• Mass transit advocates still want a long-term funding source to aid the Chicago area’s public transportation systems, but that’s still intertwined in the ongoing debate about whether to add new casinos. A House Gaming Committee hearing isn't scheduled until October 17 in Chicago.
• And the Senate advanced another version of a measure to limit increases to Cook County property tax assessments to 7 percent, the so-called 7 percent rule. This one is supposed to be identical to the governor’s announcement that he wanted to increase the homestead exemption from $20,000 to $40,000 and make the so-called 7 percent rule permanent. That version is unlikely to win over House Speaker Michael Madigan, who has supported phasing out the 7 percent cap over three years.
• Also, the Senate voted to override a governor’s veto and support the original measure that would establish a uniform speed limit of 65 miles per hour for all vehicles traveling on four-lane highways separated by a median. Essentially, it would allow trucks to drive the same speed as cars. The House would also have to override the veto in order for the uniform speed limit to become law.

More maneuvering means more fireworks

The governor sidestepped the legislative process again. He announced Thursday that he changed legislation dealing with high property taxes in Cook County, a controversial measure that took a lot of time and a lot of negotiating between legislative chambers. It’s now beholden to the ongoing power struggle between Gov. Rod Blagojevich and House Speaker Michael Madigan.

The property tax relief bill approved by both chambers in August would have extended the so-called 7 percent solution, which caps the amount assessments can increase, for another three years (it started in 2004). It also increased the homeowners’ exemption to $33,000 and phased it out over the three years. The governor’s amendatory veto expanded the homeowners’ exemption even more — up to $40,000 — and made it permanent.

Because the governor used an amendatory veto to make the changes, both chambers have three options: agree with the changes, override the changes or let the bill die. If one chamber overrides it but the other doesn’t, the bill dies. Lawmakers would have to run another bill through the legislative process to extend the program that expires this year.

David Eldridge, legislative director for the Taxpayers’ Federation of Illinois, said that was the intent of the original law: to phase out the 7 percent cap and replace it with a long-term homeowners exemption. “The intention there was to go at the targeted areas in Cook County that really need it rather than do a broad brush and capture areas that didn’t need the 7 percent [cap],” he said.

Now he said there’s worry of a slippery slope. The governor said his maneuver would cover at least 76 percent of Cook County residents, but the Taxpayers’ Federation has feared all along that the tax break would eventually apply to all of Cook County. “The fundamental question is, is it a good idea for 76 percent of Cook County to get this greater relief than the rest of the state gets, when there are other parts of state that are paying higher taxes than Cook County is,” Eldridge said.

That’s because when more people are getting bigger exemptions than they had before, someone else has to pick up the tab. Businesses argue they’re the ones paying a bigger portion of the tax burden.

Rep. Lou Lang, a Skokie Democrat and original sponsor of the 2004 legislation, said he actually would have supported the governor’s idea if it had gone through the legislative process. But it didn’t, and it led lawmakers to question the move’s constitutionality. “I’m unsure as to whether I can support an action that may have questionable motives and questionable underpinnings under the law,” Lang said.