Missed opportunity

The Illinois comptroller’s office says the state missed the boat in early April to do three things at once: 1) reduce its backlogged Medicaid bills by half, 2) activate the second half of a program that distributes federal dollars to hospitals that care for Medicaid patients, and 3) repay a $900 million loan that kick-started that program. Statehouse reporter Doug Finke wrote about it in Wednesdays’ State Journal-Register. I talked to Carol Knowles, spokeswoman for Comptroller Dan Hynes, Wednesday morning.

About $747 million in federal Medicaid funds are sitting unused until the Department of Healthcare and Family Services gets legislative approval to spend that money, according to Keith Taylor, Hynes’ chief of staff. He said in an April 4 letter to the department director Barry Maram that the federal money could be tapped to pay $650 million of the state’s backlogged Medicaid bills due to health care providers. But the comptroller can’t pay those Medicaid bills without the department submitting the invoices to Hynes’ office. Taylor’s letter said the department was holding more than $1 billion in Medicaid obligations.

“We can’t pay bills that they haven’t sent to us,” Knowles said. “It’s difficult when you’re sitting on more than $1 billion worth of bills everyday and you can’t bring that down. And that, in the end, winds up costing the state more money in interest. Why would they want to do that?”

Department spokeswoman Amy Rosenband wasn’t able to call me back before this post and before I head off to committee meetings, so I’ll add her response once I get it.

In a follow-up letter April 24, Taylor said the comptroller’s office was “extremely disappointed” that the department didn’t respond to the request. The timing was sensitive given the June 7 deadline for the state to repay its $900 million loan. The General Assembly also still has time to approve the spending authority needed to start the second year of the hospital assessment program. In fact, I’ll be in a House committee this afternoon that is expected to discuss a supplemental budget, which would give the spending authority needed for the program.

The Golden Rule exemption

Deanese Williams-Harris offered the following observation:
On stage, Gov. Rod Blagojevich repeatedly campaigns for his health care initiatives as following the Biblical Golden Rule: Do unto others as you would have them do unto you. Behind the stage, however, the governor uses a different approach, particularly when in Springfield.

He took the stage at Springfield’s Prairie Capital Convention Center Tuesday afternoon, speaking to a crowd of Illinois’ nurses to promote his Illinois Covered health insurance plan for all adults. He said “powerful forces” attack the way he plans to fund the program and accused the opposition of “having friends in high places” and “wanting to keep the system as it is.”

Once off stage, the governor briefly stopped to take pictures with some supporters. But a scene erupted when reporters approached the governor to ask questions, and things escalated when two of the governor’s security detail grabbed a newspaper reporter by both of his arms. The reporter called out, “Governor, do you see what your goons are doing to me?” and demanded the guards take their arms off of him.

Blagojevich, who clearly had no intentions of addressing the media after the event, flashed a deer-in-the-headlights look as other reporters started shouting out questions. He was in such a hurry to get into his black SUV that he closed the car door in Sen. Carol Ronen’s face before the Chicago Democrat could hop in. She started knocking on the window. The governor’s entourage finally let her in before driving off, but not before another reporter prompted the governor to at least put on his seatbelt.

Chicago PEOPLE in the news
Ron Huberman is the new board president of the Chicago Transit Authority, as recommended by Chicago Mayor Richard Daley. Huberman replaces Frank Kruesi, who resigned after more than nine years as the agency’s chief executive officer and shortly after the agency asked the General Assembly for billions of dollars.

In a March report, Auditor General William Holland’s office said the Chicago Transit Authority joins the Regional Transportation Authority, Metra and Pace in “facing a serious financial shortfall,” and it doesn’t bring in enough revenue to cover current operations and replacement of aging buses and rail cars. The report also said the CTA’s retirement plan is “severely underfunded and its condition is worsening” and that the whole mass transit system needs an overhaul.

The Chicago Transit Authority wholeheartedly agreed and backed a campaign for the state legislature to help pay for a five-year plan needing $10 billion in new capital funding and $400 million more a year for operating costs.

Huberman served the past two years as Daley’s chief of staff, and he previously served as executive director of the city’s Office of Emergency Management and Communications. The mayor’s new chief of staff is Lori Healey, the city’s former planning and development coordinator. She previously chaired the Chicago Housing Authority and became the first deputy commissioner of the city’s tax increment financing program (see our Q&A with her in Illinois Issues, October 2006, p. 40).

This week at the state Capitol

This week’s events provided little evidence of how things will play out before the state legislature reaches its constitutional deadline of May 31, but some Statehouse scenes throughout the week could hint at the status of the governor’s policy proposals (education, health care and a tax overhaul) and high electricity rates.

Education committee: well organized
There was an obvious elephant in the room when a Senate committee held a hearing about the governor’s education plan. The Senate Democrats gave a nice advanced notice about the hearing with a printed list of witnesses to testify, printed testimonies available to the press and everything. All testified in support of the educational policy side, but the committee chair intended to keep discussions from bleeding into the more controversial funding source, the gross receipts tax. Meanwhile, most of the room was packed with people who opposed the new business tax, and they got rowdy when Senate President Emil Jones Jr. tried to say the gross receipts tax was the most fair way of actively doing something about education reform. However, as hard as the administration tries to portray a positive message about the tax and education plan, the fear of the unknown in the GRT really does create skeptics among legislative members of both parties.

Health care committee: We want details
Deanese Williams-Harris contributed this portion
Senators want to see the rules to the governor’s new subsidized insurance plan in writing.

“You’re asking us to raise $2.1 billion in taxes for a plan we can’t identify,” said Sen. Mike Jacobs, a Democrat from East Moline. “If I don't know the rules, I can’t vote for it.”

Larry Barry, president of the Illinois Life Insurance Council, agreed, calling the initiative generic in nature. “Put in the bill what you want done. That’s all I’m asking,” he said. He also voiced concern that insurance companies would have to wait for the state to reimburse them for insuring people who were subsidized by the state, but the legislators would have to approve money in the next state budget for those reimbursements to be possible.

The gross receipts tax also would be the main funding source for Illinois Covered. “What happens if [GRT] fails?” said Sen. Dale Righter, a Mattoon Republican.

“GRT is a comprehensive package,” responded Anne Marie Murphy, Medicaid director and the governor’s health care policy advisor. “We have to see all of these [proposals] as a package.” She also said the rules would be put in writing before the measure is called for a vote.

Tax overhaul: Jones vs. Meeks
President Emil Jones and Sen. James Meeks didn’t exactly whisper when they were going back and forth about the gross receipts tax as a Senate committee heard testimony. At one point, Jones leaned back in his chair towards Meeks, who was sitting behind him, and said, “We are for the gross receipts tax, not taxing individuals.” Meeks is sponsoring alternative tax reform that would raise income and sales taxes and is designed to relieve property taxes. The measure, House Bill and Senate Bill 750, has potential to take some Democratic and Republican votes away from the governor’s gross receipts tax supported by the Senate president. Considering Meeks played chicken with the governor this summer by threatening a gubernatorial run if Blagojevich didn’t promise significantly more money for education, it’s safe to say Meeks has used his political leverage before.

Electricity rates: Procedural maneuvering
The full Senate approved a one-year rate freeze for downstate Ameren Illinois electricity customers, but they excluded Commonwealth Edison that serves northern Illinois. Procedural maneuvering allowed Senate members to cast a vote to include ComEd knowing full well it wouldn’t make it into the final legislation. Sponsor Sen. Gary Forby got a political slap in the face. The Benton Democrat has gotten a lot of angry phone calls from his southern Illinois constituents who really can’t afford their electricity bills, but he worked hard to get ComEd’s northern Illinois customers in the freeze, too. After ComEd was stripped from the legislation, Forby said he was completely surprised and disappointed. In fact, as many angered Democrats and Republicans pointed out during floor debate, the bill is expected to go to the House, where Speaker Michael Madigan is likely to favor a freeze that includes ComEd. Adding an amendment to include ComEd also would give House members a chance to go on the record as supporting a comprehensive freeze. The amended measure would then be sent back to the Senate (because both chambers have to approve the exact same wording before it’s sent to the governor), but the Emil Jones is unlikely to allow a freeze to impact ComEd, a large supporter of the Senate president. Sen. Chris Lauzen, an Aurora Republican, called it a “premeditated, parliamentary scheme.” Sen. Dale Risinger of Peoria told the chamber he wanted to go home and shower.

GRT or nothing?

If Gov. Rod Blagojevich’s revenue idea to create a gross receipts tax fails to get legislative approval this spring (or summer), the governor is willing to consider other revenue sources, according to John Filan, Blagojevich’s former budget director and current chief operating officer.

“He won’t support an income and sales tax increase, but there are other aspects of the budget, other revenues he’d take a look at,” Filan said Monday after a budget-related conference in Springfield. But the administration is determined to keep the gross receipts tax as its primary revenue source, with some flexibility in tweaking it. “We think the gross receipts tax is the kind of tax that can generate that kind of money without disrupting large parts of the economy with smaller tax bases like an income tax or, especially, a sales tax does.”

He and budget director Ginger Ostro joined a panel of policy experts on taxes, education funding and business at “A Budget on the Brink” conference at the Springfield Hilton Monday. (Find more information about “A Budget on the Brink” here.) There was a lot of back-and-forth and repeated allegations of people citing facts based on assumptions rather than on transparent numbers. But the panels also posed a few good questions: 1) Does the state truly need more money to spend? If so, then how can the state fairly restructure its tax code? And 2) If the state needs to control spending as business groups advise, then what can the state and state agencies cut out?

Blagojevich’s $10 billion investment in education over four years wouldn’t fly without a revenue source as big as the $7 billion expected from GRT. Because the governor already ruled out increases in income or sales taxes proposed in HB 750 (see our March 20 blog), what else is on the table that would generate as much revenue as the GRT?

• Leasing the Illinois Lottery: at least $10 billion, but the governor already earmarked that for pension funding
• Leasing the Illinois Tollway: anywhere from $1 billion to more than $20 billion, but that hasn’t gone anywhere this session
• Selling a larger chunk of the state’s student loan portfolio: a $4 billion asset, but legislators urge that money only be used for higher education
• Opening four new Chicago-area casinos with expanded gaming statewide: between $2 billion and $3.5 billion a year. HB 480, proposed by Rep. Lou Lang of Skokie, wasn’t mentioned by the governor and is stalled in negotiations
• A combination of all of the above

And what about the near-universal health care plan that would cost about $2.1 billion annually by the time it’s fully implementation in 2010? The governor could still secure the $1.1 billion generated by a payroll tax on businesses that don’t offer comprehensive health benefits. But he’d also need some other form of revenue or federal funds.

Ethical dilemmas

Deanese Williams-Harris wrote the following post.

The results of a recent state employee ethics survey paint a gloomy picture of the environment in state offices. The survey, conducted by the Illinois Executive Ethics Commission, surveyed 402 random employees.

Employees reported ethical concerns with leadership roles and with how ethics investigations are carried out. As it stands, investigator general reports are not made public.

"Because the Ethics Act requires complete secrecy about investigation into wrongdoing, employees are not convinced that wrongdoers face any consequences," says Chad Fornoff, executive director of the commission.

Furthermore, an overwhelming majority report ethic rules weren't being fairly enforced, and many say they're uneasy about reporting unethical behavior. "The bad news is many employees believe agency ethics programs are ineffectual and fear retaliation if they report unethical activity," he says.

Eighty-seven percent of those surveyed identified one or more elements in the workplace that lend themselves to an unhealthy climate. More than 45 percent of employees say senior officials in their departments are less likely to be disciplined for wrongdoing than other employees.

Fornoff says the lack of trust reported by employees shows the need for transparency in the investigation and disciplinary process. "We believe that a pending bill that we have been supporting, SB157, will alleviate this problem." If approved, the measure would make public all alleged violations, the history of those violations and recommended disciplinary action against the state employees.

Natural Selection
A report released by the Illinois auditor general says the state Department of Natural Resources showed favoritism to certain hunters in issuing administratively approved hunting permits. The department also exceeded hunting quotas stipulated by Illinois law.

More than 1,200 permits were given out by administrative approval. The special permits benefited Illinois Conservation Foundation donors, professional athletes, judges, politicians and five representatives of an ammunition company.

The process allows hunters to bypass the hunting permit lottery system. However, the process wasn't open to the public. According to the report, fewer permits were available to Illinois hunters because of the number of special permits issued before and after the lottery process.

More than 90 percent of the applications for the special permits were incomplete, and fees weren't paid for more than 20 percent of the permits.

As a result, the department was asked to establish policies and procedures for issuing administratively approved permits. The department agreed to the recommendations.

For a quick synopsis of the violations, log on to the auditor general's findings.

Corruption, power and money

Corruption
I'm actually talking about my computer's hard drive, which has "major corruption." While my laptop is in the shop, I apologize if my blogging is rather light this week. I'm still crawling at a snail's pace, but enough sob stories. On to some news:

Power
The newest twist to the already dynamic electricity rate debate: House Speaker Michael Madigan's brand new proposal to create the Illinois Power Authority, which would create a five-member state board to control power procurement, generation and distribution, as well as the creation of new power plants. More details and reaction later (I hope soon).

Money
Deanese Williams-Harris contributed this observation of a committee hearing this morning
Several House committee members repeated a new slogan — GRT is DOA — coined by Rep. Roger Eddy, a Hutsonville Republican. GRT is the governor’s proposed gross receipts tax, which Gov. Rod Blagojevich says would generate a net $6.3 billion a year but hasn’t gained popularity just yet. Committee members asked the governor’s budget director, Ginger Ostro, if the administration had Plan B to fund education or other initiatives if the GRT fails.

Rep. Will Davis, vice-chair of the committee, asked if property tax relief was included in the governor's proposal. Ostro said no. Davis said he felt concerned and that something needed to be done about the “racist system” of relying on property taxes to fund education.

Rep. Jerry Mitchell, a Sterling Republican, wanted to hear the Plan B for leasing the state lottery and funding the state’s pension deficit. He said the governor’s unwillingness to consider other funding proposals is a disaster waiting to happen. He asked Ostro whether the governor would consider expanding gambling as a funding source for education, pension deficit and backlogged Medicaid bills. Ostro said the governor is willing to consider other proposals, but he definitely opposes hikes in income and sales taxes (i.e. HB/SB 750 to reform the way the state pays for education). Ostro said, “We think GRT is a viable way to fund education and provide tax fairness throughout the state.”

Sen. President Emil Jones Jr. has said he wouldn’t call the HB/SB 750 (called the tax swap proposal) and that he supports the governor’s GRT plan.

Busy day

Maneuvering inside the Statehouse was interesting today. About 1,000 people stood shoulder to shoulder on the three tiers of the Capitol rotunda and waved American flags. They were showing support measures that would grant drivers’ certificates to immigrants and earmark $25 million for expanded English classes. Roughly seven more busloads of people wearing green, pro-business T-shirts spread throughout the Capitol to show opposition for a statewide smoking ban. Meanwhile, lawmakers sat inside committee rooms and in their chambers to debate policy dealing with AT&T, electric utility bills and college loans, among many others. But the following measures could keep unfolding in the next couple of weeks:

Immigrant drivers’ certificates — Two measures, one in the House and one in the Senate, are being revised and are expected to come up soon.

Statewide smoking ban — One of the smoking ban measures is in its passage stage in the Senate.

AT&T — the telecommunications measure would allow companies to enter the video market through a statewide video franchise rather than through individual municipalities. Hours of testimony have been heard for three weeks, but no amendments have been filed, yet. It might take more time to get out of the House committee.

Electric utility bills — A Senate committee approved 11 to 1 a measure that was revised to freeze electricity rates for one year for Ameren Illinois and Commonwealth Edison customers. Watch for it on the Senate floor in the next couple of weeks.

College loans — The Illinois Student Assistance Commission is looking to sell up to 80 percent of its student loan portfolio, in line with one of Gov. Rod Blagojevich’s revenue ideas last year. Here’s legislation that would expand the existing grant program for college students from low-income families.

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.”

Price fixing?

The mess over electricity rates just got messier. Illinois Attorney General Lisa Madigan filed a complaint with the Federal Energy Regulatory Commission to allege that 15 power companies manipulated a power auction last September. The auction set electricity prices for Ameren Illinois and Commonwealth Edison, which buy power and distribute it to homes and businesses. Madigan’s office says the auction set unfair prices that cost Illinois consumers an extra $4.3 billion.

The complaint cites evidence, some of which is blacked out for the public. For instance, it says ComEd’s parent company, Exelon Generation, won 97 percent of the 41-month ComEd contracts.

Madigan, along with Lt. Gov. Pat Quinn, has opposed the so-called reverse power auction from the beginning, saying it violates the intent of the 1997 state law that set the stage for today’s “deregulation” process.

Today also marks the day that Ameren Illinois has to answer the first batch of questions from the Illinois Commerce Commission, but spokeswoman Beth Bosch says the commission will have to review the answers before deciding whether they’ll be public. She adds that the commission is scheduled to meet at 1:30 p.m. Tuesday and 10:30 a.m. Wednesday in Springfield. Ameren’s invited to the Tuesday meeting. We’ll see if we can hear some of those answers.

ICC calls Ameren to account

This just in: The Illinois Commerce Commission asked Ameren in a letter to explain all the threats they’re making about how a negative credit rating (see the March 13 blog below) would lead to drastic measures and hurt customer service. Specifically, the commission demands explanation of why the company would resort to laying off between 700 and 800 workers and delaying projects and connections when the higher 2007 rates should cover those costs (the commission allowed the downstate utility to collect $96.7 million from customers to cover operating costs and to get a fair return on investments). And the commission points out that the Ameren Illinois utilities paid millions that padded the pockets of shareholders of the parent company, Ameren Corp.

The commission set deadlines for Ameren to answer some questions by March 16 and the rest by March 28.

Hell freezing over in the Senate?
The Senate previously rejected the idea to freeze electricity rates again. Committee action today could potentially shift the winds, but the coast still isn’t clear.

Seven Senate Democrats approved legislation that led Moody’s Investors Service to give a negative outlook for Ameren Illinois’ credit rating (see the March 13 blog below for the story).

After starting an hour late, the Senate Environment and Energy Committee took a break to gather enough votes to approve Sen. Gary Forby’s legislation (see amendment 2). It would roll back Ameren's electricity rates to the December 2006 level and freeze them for a year, which Froby said would buy time so lawmakers could figure out a more permanent solution to skyrocketing electric bills in downstate Illinois. The four Republicans present voted no.

Forby, a Benton Democrat, said his legislation focuses on Ameren customers and that lawmakers who want to address Commonwealth Edison customers in northern Illinois should introduce a separate measure. He added that he’s got a feeling Senate President Emil Jones Jr., who opposes a rate freeze, would call his bill for Senate floor debate. “I’m pretty convinced, not 100 percent convinced, but I’m pretty convinced that he’s going to let my bill run,” Forby said.

Jones’ spokeswoman, Cindy Davidsmeyer, said, “[Jones’] personal position on a freeze has not changed, but he certainly realizes that the situation with Ameren is very serious.”

As with every other rate freeze proposal, Ameren opposes the measure and threatens financial hardship. But one shoe has already dropped. Ameren spokesman Leigh Morris sent this e-mail Tuesday night in response to the Moody’s credit rating announcement:

“The Ameren Illinois utilities are continuing to evaluate the impact of yesterday’s decision by Moody’s Investors Services to downgrade the issuer credits of the three Ameren Illinois utilities (AmerenCILCO, AmerenCIPS and AmerenIP) to non-investment grade (junk) status. The utilities are carefully evaluating our next steps. It must be noted this credit rating action already has triggered cash collateral demands from several of our natural gas suppliers including banks with which we have financial hedging positions. In addition, the Ameren Illinois utilities believe our ability to acquire long term gas supply will be effected very shortly, which could ultimately drive up costs to our customers and potentially impact system reliability.”

Downstairs in a House committee, Rep. Bill Black moved a bill that would freeze electricity rates just for Ameren’s all-electric customers, who were particularly shocked by higher bills after their discount ended along with the state’s 10-year rate freeze. Black, a Danville Republican, says the year would give the homeowners and businesses time to find an alternative power source or to rewire their homes so they wouldn’t be all-electric anymore.

Black promised the committee that he would amend the bill to remove ComEd from the legislation, although some Chicago lawmakers wanted their all-electric customers to be included in the one-year freeze.

Reconsidering rebate

Shortly after the Illinois Commerce Commission approved a plan Monday to reimburse some Ameren Illinois customers for high electricity bills, the utility began reconsidering that proposal because Moody’s Investor Service downgraded the utility’s credit rating to junk status. That makes it more expensive for Ameren to borrow money, says spokesman Leigh Morris. “But it creates tremendous problems for the company and it puts at risk all of the programs we have in play.”

Currently at risk is Ameren’s latest plan to spend $20 million (using $10 million of its own money and borrowing the other $10 million) to reimburse customers who use a lot of electricity, mainly residents who use only electricity to heat their homes. The plan also would stop charging interest on the customers who have chosen to phase in their rate increases over three years. As of Tuesday morning, Morris says Ameren still hasn’t declared whether it would take the plan off the table.

But in its March 7 filing with the Illinois Commerce Commission, Ameren warns the $20 million plan would end if its credit rating status were downgraded to junk.

The utility, which serves 1.2 million electric customers downstate, and the Illinois Commerce Commission have been under scrutiny for increases in electricity rates since a 10-year rate freeze expired in January. Ameren’s all-electric customers have gotten bills that have increased an average of 90 percent to 150 percent over last year’s rates. Lawmakers are still trying to move legislation to return all electricity rates to their 2006 level, when rates were frozen. The pending legislation was a factor in Moody’s decision to downgrade the utility’s credit rating.

Budget reaction

Gov. Rod Blagojevich’s budget proposal for the next fiscal year now goes to the General Assembly. Many Democratic and some Republican lawmakers applauded parts of his plan, but there’s a lot of negotiating to be done before the spring session’s constitutional deadline of May 31. (I’m not holding my breath that they’ll adjourn by then.) Deanese Williams-Harris and I gathered some reaction from lawmakers on Budget Day:
See highlights of the governor’s budget proposal in the “governor’s moral imperative” blog entry below.

Senate President Emil Jones Jr.
He says he supports the governor’s entire plan and doesn’t have anything he wants to change right now. While he supports the tax on business’ gross receipts (because it would be fairer than the current tax on corporate income), he leaves the door open to other revenue ideas.

Specifically — and significantly — Jones says four new casinos in the Chicago area are still on the table. And that could possibly be linked to a capital plan for school and road construction. He also says senators are talking with utilities and that a tax on power generators is something to consider for easing electricity rates, although he’s not revealing his stance on the subject, yet. He flat out opposes another regulatory freeze on electricity rates because he says it would “only delay the inevitable.”

Rep. Lou Lang, a Skokie Democrat
He introduced gaming legislation to create four new casinos in the Chicago area, which he expects could generate $2.3 billion to $3.5 billion this year. The governor didn’t mention gaming in his budget address.

“I think that to ignore the obvious economic development and revenue that we could get by making some changes in gaming laws is short-sighted. I did notice that while he didn’t mention it, his budget plan includes new taxes on casinos. And so it’s a tremendous source of revenue for our state, and to make it more difficult for them to do their work, to make it more difficult for them to create jobs or build things all over the state of Illinois, I think he’s putting a road block in front of a business that simply wants to invest in Illinois. I think we need to do more in that area.”

“I think my plan regarding gaming and his plan might find a way to mesh. And we need to sit down and talk about balance. I’ve got a bill that would generate $2 or $3 billion. I don’t think we should ignore that. And I’d do it without a tax increase. The governor’s proposal today will raise several billion dollars, but it’s taxes. No matter what he calls it, it’s taxes.”

House Minority Leader Tom Cross of Oswego
About the gross receipts tax: “Call this what you want. It’s a tax on consumers. What’s interesting about today and the speech is that everything is connected. The concern you would have about lottery is that you’re giving up $620 million in annual revenue. And the governor would say, I suppose, that if you do GRT it wouldn’t matter.”

“I’m not embracing [the idea to lease the lottery], but I’m not outright dismissing it. The thing about the lottery is, ‘What would be the conditions of the lease? What would the company that comes in and gives us money demand?’ Might be some good, might be some bad.”

About education: “No one is talking today about how to ensure a quality education. I don’t know if everybody accepts the premise that if you throw $1.5 billion into schools, then all of a sudden you’re going to end up with a perfect product. We need to focus our attention on how we can end up with a quality education and a quality product at the end of the day and not just have a discussion about money.”

Sen. Minority Leader Watson of Greenville
About the governor’s spending plans: “This is the largest spending increase in the history of the state, the largest tax increase in the history of the state,” he says. “Another $16 billion in borrowing, and what troubles me greatly is to see the debt being piled upon debt.”

About universal health care: “Fifteen percent of people in Illinois do not have health care insurance, and I feel bad for them. But is it the government’s responsibility to take care of them from birth to the grave?”

About electricity rates: “The issue of the day is what’s happening with people getting their power? To not even spend four sentences on the power rate issue and then have the audacity to say I’ll sign whatever bill you agree to, that’s not leadership.”

About the gross receipts tax: “The consumer is who pays taxes in Illinois, and for him to stand there and say that this isn’t going to be an increase on taxes to the consumer is totally misleading to the public. There’s a certain amount of class warfare that’s being developed by these kinds of policies. It’s a hidden tax and those are the worse kind.”

Sen. James Meeks, a Chicago Democrat
He’s sponsoring the education reform proposal in Senate Bill 750, which we explain in our “Moneymakers” blog entry February 9, 2007.
“Generating new dollars for education is great, but true education reform is going to have to deal with property tax relief.” Under the governor's plan, Meeks says, “Those who are paying property taxes that are too high now, there is no room for relief for them.”

Sen. Christine Radogno, a Lemont Republican
She’s the Senate GOP budget negotiator and last year’s Republican candidate for treasurer.
About the gross receipts tax: “The consumers will be paying that. The assertion that he made in the speech over and over again — it’s corporate, not people — is just baloney. Corporations don’t have bank accounts and checkbooks the way a family does. There’s really no such entity. It’s a legal entity. There’s no question a $6 billion tax increase is going to be paid by people. If it was not going to be paid by people, why would he exempt food and drugs? Because he knows it’s going to apply to people. It is a sales tax that is embedded throughout the system, and people will pay it. They won’t be able to see it, but they will pay it, there’s no question.”

About pension bonding: “There are ways to do it that could be positive. The question is what are the details of his plan, and that’s oftentimes the problem with this administration: We don’t see the details. We’ll have to see how the bonds are structured, whether he’s going to take some of that bond money out to use as cash for budget relief today instead of putting it all in [pensions]. I would take a look at that, for sure.”

The governor's "moral imperative"

Gov. Rod Blagojevich proposed levying new taxes and floating bonds pay for his spending plans, particularly “universal health care,” education and pension obligations. Here’s the breakdown. Reaction from legislators and groups from around the state will come in the next blog.

Taxes
Governor: “This will ease the burden on the middle class and force big corporations to start paying their fair share.”

Businesses aren’t so excited about the new taxes, one of which — the gross receipts tax — would tax every Illinois-based business input as it goes through the distribution chain. Think of it in terms of two key factors — how many steps are in the supply chain and how many of those steps happen in Illinois — says Tom Johnson, president of the Taxpayers’ Federation of Illinois. (See his highlights of the budget here.) While the governor says five other states tax business’ gross receipts, Johnson says the governor’s plan as it would be applied could make Illinois unique and, therefore, at risk of losing a competitive edge.

The governor’s tax idea, expected to net of $6 billion a year, would eliminate the corporate income tax and phase in a tax on business’ gross receipts. That’s an alternative to expanding the state sales tax to such services as haircuts and car repairs. Some lawmakers and education groups prefer the sales tax expansion as a way to reform education funding and to relieve the burden on property taxpayers.

John Filan, the former budget director and current chief executive officer for the state, said Tuesday night that a gross receipts tax would be “less onerous” than an expanded sales tax because it’s broad-based and low-rate. However, Johnson says the gross receipts tax is not as low-rate as it seems on the surface, and there’s a risk that businesses would move part of their supply chains out of state to avoid the tax. “Companies that don’t make a profit would have a liability they didn’t have before,” he said last week at a Statehouse press briefing.

The other tax that’s likely to raise opposition, particularly among small businesses, is a 3 percent tax if employers don’t offer comprehensive health benefits to employees. The so-called payroll tax is expected to generate $1 billion a year, which the governor would use to help fund his new $2.1 billion health care program.

Health care
Governor: “First, we will cover the 1.4 million uninsured adults in Illinois. Second, we will help provide assistance to middle-class families so they can get, keep and afford the health care they need. Third, we will help small businesses pay for health insurance for their workers.”

Illinois Covered offers three types of plans. One gives state subsidies to help people pay for their private insurance plans if they don’t get medical benefits through their employers. Another offers rebates to help individuals or families pay their monthly insurance premiums if they have employer-based plans. And a third expands the public aid program FamilyCare for single adults who have children or for families with incomes at 400 percent of the federal poverty level ($80,000 a year for a family of four).

And businesses that have more than 10 employees and that don’t pay for at least 70 percent of employees’ health benefits will be assessed a 3 percent tax on their total payroll.

Education
Governor: “Ten billion new dollars [over four years] will help relieve the pressure on local property taxes and finally bring an end to the savage inequality in how we fund our schools.”

For fiscal year 2008 that starts July 1, he proposes spending $1.5 billion on education. Some of that money would increase the state minimum spent per student by $686, bringing the minimum to $6,020. Students would have more options for after-school tutoring, and the school year and school day would be extended.

He also would increase the reimbursement rate for special education teachers for the first time in 20 years.

Early childhood education would get $70 million to expand state-sponsored preschool for children of low- and middle-income families and $10 million for all-day kindergarten.

Teachers would have access to statewide mentoring programs and have incentives to work in schools with limited resources and poor test scores. The governor proposes working with teachers’ unions to develop “merit-based pay,” which would reward teachers whose students meet federal testing standards.

But perhaps most important to hundreds of districts that have been on a waiting for state capital funds to build new schools or do maintenance projects, the governor proposes $1.5 billion over three years for school construction.

Pensions
Governor: “Our plan will free up an asset like the [Illinois] Lottery, lease it, generate $10 to $12 billion and put that toward our pension obligation. That, along with another pension bond refinancing, will put an infusion of $26 billion into the system and bring down our liability from $41 billion to $15 billion.”

He wants to float $16 billion in pension obligation bonds and rely on $10 billion from leasing the Illinois Lottery. Filan says paying down the pension debt from $41 billion to $15 billion would require less drastic increases in the state’s annual pension contributions. He says increased investment returns would help pay off the debt.

Ginger Ostro, the governor’s budget director, adds private operators could run the lottery more efficiently because they’re more nimble and can respond better to the market.

Watch list
What wasn’t on the governor’s list of revenue ideas was an expansion of gaming. Instead, his administration is proposing a new renewal fee on gaming licenses. Meanwhile, state Rep. Lou Lang, a Skokie Democrat, has sponsored legislation to create four new casinos in the Chicago area. See more reaction in the next blog.

Watch for legislation that would consolidate some of the state’s 621 special funds dedicated for such services as youth alcoholism and substance abuse and veterans’ rehabilitation. As with other governors, Blagojevich has swept some surpluses of the funds to pad the state’s main checkbook called the general revenue fund. Some of those funds could be merged into the general revenue fund to shore up the state’s “rainy day” fund.

Budget highlights

Tom Johnson, tax expert and president of the Taxpayers' Federation of Illinois, breaks down Gov. Rod Blagojevich's budget proposal for the next fiscal year with these highlights. The governor will give his annual budget address and combined State of the State to the General Assembly at noon today. We'll provide updates and reaction as much as we can throughout the day. And, as always, see Illinois Issues magazine for more in-depth coverage in the issue that publishes April 1.

Utility campaign contributions

The House conducted a rare Committee of the Whole Tuesday that included hours of testimony about Illinois’ electricity rates. Commonwealth Edison and Ameren Illinois customers have experienced increases ranging from 24 percent to as high as 300 percent (anecdotally) since a decade-long freeze was lifted on electric rates in January. A lot of downstate legislators have gotten earfuls from constituents, particularly those who use only electrical power. The electric-only customers of Ameren Illinois have been hit the hardest, leading Democrats and Republicans to raise a storm of opposition to the current rate-setting process.

Those lawmakers want immediate action, but the committee didn’t take a vote on any proposed solutions (the most recent being Rep. George Scully’s House Bill 1750 that would reinstate the rate freeze and refund customers with interest). The governor wasn’t present, and the Senate wasn’t involved. There’s no telling how long a compromise to relieve electricity rates could take, if it could happen at all this session. Senate President Emil Jones Jr. has said he opposes reinstating a rate freeze.

The debate has become particularly political because the major utilities have a huge stake in the outcome, and they’ve been putting their money where their mouth is by donating to political campaigns in recent elections.

The Campaign for Political Reform says Commonwealth Edison is a “career patron” of Senate President Emil Jones, Senate Republican Leader Frank Watson and House Republican Leader Tom Cross. Records from the group’s Sunshine Database show ComEd gave $2,429,000 from January 1, 1993, through June 30, 2006, to candidates for Illinois statewide candidates and legislative candidates. Of that, 53 percent was contributed to Republicans.

Cross also received $22,000 from Ameren Illinois’ political action committee in 2005 and 2006. House Speaker Michael Madigan received $50,000 total from Ameren Illinois between 2003 and 2006. He also received $15,000 from the interest group for Dynegy, the utility that purchased Illinois Power before it merged with Ameren Illinois the election cycle before that.

You can find more campaign donations at the Campaign for Political Reform’s Sunshine Database.

For more context on the electricity challenge faced by state officials, see our December blogs and our feature about the Illinois Commerce Commission.

TGIF

Nothing has gone as planned this week, so here are some links that could be useful throughout the spring session. They provide thinking points about 1) the Illinois GOP, 2) Illinois poverty and 3) Illinois' financial health (and other major policy issues).

1) The House Republican’s new brainstorming Web site

2) The Illinois Poverty Summit’s 2007 report (More information here)

3) The Institute of Government and Public Affairs’ 2007 report (IGPA is a public policy research unit comprised of researchers at the University of Illinois' three campuses.)

Obama for president

Thousands of people — kids in snow pants, adults in long johns — saw U.S. Sen. Barack Obama’s breath as he said the highly anticipated words, "Today, I announce my candidacy for the president of the United States," on the backdrop of the Old State Capitol in Springfield Saturday morning.

They heard him propose a form of universal health care by the end of the next president’s term and promise a plan to bring U.S. troops home from Iraq by March 2008. But they didn't hear any details of the plans. You can listen here.

He entered the stage with his wife, Michelle, and their two daughters. One of the first thing he said: “We all made this journey for a reason. It’s humbling to see a crowd like this, but in my heart I know you didn’t just come here for me (some people yelled, ‘Yes we did’). No. You came here because you believe in what this country can be. In the face of war, you believe there can be peace. In the face of despair, you believe there can be hope. In the face of a politic that’s shut you out, that’s told you to settle, that’s divided us for too long, you believe that we can be one people, reaching out for one possible, building that more perfect union. That’s the journey we're on today.”

He smiled and laughed throughout the rest of his speech, but when he spoke of Iraq, his voice was low, deliberate and calm. When he spoke of health care and ethics in government, he raised his voice and his volume to rekindle the crowd. By far, the most energetic responses were to his comments about establishing universal health care and removing troops from a civil war in Iraq.

The scene fit the image of a presidential campaign: a huge American flag hung the Pease’s Fine Candies building with others between the pillars of a bank. Supporters waved blue Obama signs. Guards with bulletproof vests and binoculars surveyed the crowd from the top of three buildings.

The public gathered a couple of hours before gates opened 9 a.m. State, federal and local officials filled the gates first. Some people came to see “history in the making,” a common phrase this morning. Others were skeptics who wanted to see what was the big deal about Obama. One anti-abortion group held graphic signs and chanted against Obama’s belief that a woman has the right to choose to have an abortion.

The number of media was amazing. Some crews waited in line as early as 3:30 a.m. to secure a good spot when the media gates opened at 5 a.m. Local and international reporters from as far as Japan stood on three, multi-level stages lining the grounds. A British reporter told me that he would expect this size of a gathering in the final stretch of a presidential run, but not the first. Canadian reporter Beth Gorham, Washington correspondent for the Canadian Press, said people in her country feel curious about the potential of the first black or first woman president of the United States. She said people also were simply interested in knowing more about the man behind the buzz.

U.S. Sen. Dick Durbin of Springfield, stepped onto the stage first and introduced Obama. Without saying Obama was the next Abraham Lincoln, Durbin did say Lincoln’s journey included skeptics who wondered whether he could meet the challenges of his time. Earlier, Durbin said Obama’s life experiences would inspire people to support him. “To rise to the position of being the editor of the Harvard Law Review, that says a lot. And then to make the decision not to cash in and make a lot of money as a lawyer, but rather become a civil rights lawyer working for poor people in the city of Chicago, community organizer, all these things tell me where his values are.”

After the event, Gov. Rod Blagojevich told one group of reporters after another: “The whole thing was great, especially his focus on health care for everybody. That’s a tremendous objective. Our objective is to get it done here in Illinois. So when Sen. Obama becomes president, all he has to do it get it done in 49 states instead of 50.”

State Sen. James Meeks, a Chicago Democrat, said he thinks Obama has a “great chance” to appeal to the masses because he's "uniter, not a divider." He added that he thinks Obama is not a political insider tainted by lobbying dollars.

Bethany’s perspective
I’ve never been so thankful for hand warmers and soccer socks. It was so cold that ink froze in my pens (good thing I had a few pencils), battery juice froze in my camera, and my digital recorder was stuck in the “on” position. I was lucky enough to score a good spot by one of the media stages. I knew what to expect with the size of the crowd, but it started to hit me just how big this day was when I felt the entire audience take a deep breath and stand on its toes when Durbin welcomed Obama to the stage, the music picked up and he came closer into view.

It was pretty neat standing among so many people from so many countries listening to an Illinois senator announce a presidential bid. Yet, many people don't know that much about Obama or his political stances, allowing them to assign any ideal identity to the candidate. We'll have to see how he rides the wave.

Deanese’s perspective
Seven out of eight people I spoke with had the facts wrong about today’s events. The majority believed that Obama was making history by being the first African American to announce a presidential run. Not to shame any of his supporters, but it’s not true. The Rev. Jesse Jackson, Al Sharpton, Carol Mosley Braun and Shirley Chisholm have all made steps towards the White House in earlier races. Chisholm was actually the first African American to announce her bid for the presidency on Jan. 23, 1972.

Moneymakers

Pressure is mounting for Illinois to milk the cow this year. Lawmakers need a long-term plan to pay for education, transportation, health care and public employee pensions, but there’s disagreement about which cash cow to milk.

HB/SB 750 tax reform
Sen. James Meeks reintroduced a so-called tax swap plan to raise income taxes, lower property taxes and expand the sales tax as a way to fairly fund education and significantly pay down the state’s pension obligations.

Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, says the bottom 60 percent of income earners would not pay more in income taxes than they are now. And the money they saved in property taxes would be intended to offset the cost of sales taxes on consumer services, such as auto repair labor and haircuts.

Martire adds that the property tax relief would total $2.7 billion statewide. “No school district loses a penny,” he says.

He says the drafters of the legislation tried to “depoliticize” the distribution of the money. Of the state’s $5 billion net revenue, $720 million would go to downstate schools, $420 million to Chicago schools, $400 million to suburban Chicago schools, and $300 million for higher education.

Depoliticize is a bold word, considering this year's budget debate is expected to be a doozy. Gov. Rod Blagojevich has repeatedly said he would veto an increase in state taxes. Senate President Emil Jones Jr. also said on Inauguration Day that he definitely opposes expansion of the sales tax to consumer services. But he did leave the door open to other revenue ideas. “We do not have a spending problem. We have a revenue problem,” Jones said.

Good or bad, he'll have plenty of “creative” revenue ideas to consider.

Privatizing the lottery and the tollway
The governor is still considering selling the Illinois Lottery to fund a $6 billion plan to pump more money into education, school buildings, teacher quality and books. But the plan doesn't address pensions.

Sen. Jeff Schoenberg, an Evanston Democrat, is still considering privatizing the Illinois Tollway (scroll down to the August 29, 2006, blog) as a way to raise lots of money to pay the state’s unfunded pension liabilities and transportation costs. However, he said on Inauguration Day that he is convinced the state should not sell the tollway, but maintain majority ownership. He said the next step is to work with the Illinois attorney general’s office to get insight on the legal dimensions of such a lease.

Sen. Bill Brady’s solution to the pension liability problem is giving current state employees an option to participate in a self-managing plan (like a 401-k) that mirrors the private sector retirement options. New state employees would have to participate in the self-managed plan. The board of trustees of each of the five retirement systems would select up to seven companies where state employees could choose to invest their money as they wished. Brady, a Bloomington Republican, says it would save taxpayer money, reduce political influence on state investment decisions and prevent the state from raiding the five pension systems to pay for general state costs.

More to come
There’s also more creative — read politically risky — revenue ideas to come, potentially targeting businesses as one way to pay for the governor’s promised plan of universal health care. He gives his combined State of the State address and his budget address March 7.

Deanese Williams-Harris contributed to this post.

Budget buzz

Budget will be No. 1
Anything the Illinois General Assembly wants to accomplish this session will revolve around the state budget. Gov. Rod Blagojevich will propose the budget for fiscal year 2008 on March 7 (in combination with his State of the State address). Three challenges — taxes, pensions and Medicaid bills — could trump the buzz about some of his new proposals for social programs.

We already know gaming and privatization are options for new state revenue. Raising taxes is not, according to the governor.

House Speaker Michael Madigan and Senate President Emil Jones Jr., on the other hand, have each mentioned the possibility of tax reform. One panel of budget analysts considered some possibilities Tuesday. (The panel was part of a series of luncheons sponsored by the Institute of Government and Public Affairs and the University of Illinois at Springfield’s Center for State Policy and Leadership.)

While the panel members’ comments echoed reports by the Commercial Club of Chicago and the Center for Tax and Budget Accountability, the panel also highlighted some ideas for tax reform.

Economics Professor Patricia Byrnes at the University of Illinois at Springfield says the state is missing the boat in taxing Internet sales. In 2008, she says Illinois can expect to miss out on $622 million to $900 million in collections from Internet sales. That’s about 2.8 percent to 4.4 percent of sales tax collections.

That combines with the state’s sales tax being too narrow. She says Illinois currently taxes only 17 of 164 services. And unlike the governor’s budget office, Byrnes says she wouldn’t focus on corporate taxes. Instead, she would focus on the state income tax, which she called the least progressive because it’s a flat rate for all incomes. She recommends increasing the tax rate up to 5 percent and increasing the reasons for personal exemptions.

According to economics Professor J. Fred Giertz of the University of Illinois at Urbana-Champaign, the political question this session is whether lawmakers would override a governor’s veto and raise taxes without his support, particularly when a tax increase simply would generate more money for the governor to spend on his programs. Giertz says that’s “unlikely.”

State Sen. Christine Radogno, the Senate Republican’s rising budget expert (and unsuccessful candidate for state treasurer last year), says another big question this session is whether lawmakers would have the political will to implement changes that would have delayed gratification.

She adds the public has no confidence in state government to spend money responsibly if Illinois general taxes were to increase.

The next portion was written by Deanese Williams-Harris, the Public Affairs Reporting intern working in the Statehouse with Bethany Carson. The Chicago native joins us from Southern Illinois University Carbondale, where she was a McNair Scholar.

Education will be No. 2
The legislature’s new Education Caucus met Monday afternoon and debated whether the group’s reform efforts should focus on elementary education, higher education or both.

Rep. Dave Winters, a Shirland Republican, opened the debate to whether the caucus should focus on K-12 to avoid being distracted by higher education.

Rep. Robert Pritchard, a Sycamore Republican overseeing the meeting, quickly rebutted, saying, “Illinois has always had a disconnect between pre-school, K-12 and higher education. We need to make those connections now.”

He recalled a recent visit to one of the state’s juvenile detention centers and said it was heartbreaking to see kids getting less than two hours of education or skill development.

“We need to develop a system that does it right the first time so that kids don’t get discouraged and drop out and don’t turn to a life of crime,” he said.

Blagoterminator

Yes, it’s easy to get sidetracked by the name game of Team Blagojevich-Schwarzenegger that met in California yesterday. But they made environmental announcements that show promise, according to the Environment Illinois advocacy group.

Rebecca Stanfield, Environment Illinois state director, says it’s significant that Illinois partnered with the “Golden State” because California has already enacted some of the policies recommended in the Illinois group’s report to reduce global warming emissions.

For instance, she says California was the first state to set carbon dioxide emission standards for cars made in 2009 and beyond. That law was approved in 2002 under the former governor. Last summer, California Gov. Arnold Schwarzenegger also approved a cap on greenhouse gas emissions (coupled with reporting requirements) so statewide levels would return to 1990 levels by 2020.

Stanfield says there’s no doubt the auto industry would fight tooth an nail against a CO2 standard for cars (they’ve already taken their case to Supreme Court), but she hopes that consumer demand for clean cars could heighten the chances that CO2 standards could be adopted in Illinois.

Gov. Rod Blagojevich released another statement today touting his anti-pollution programs, including the creation of the Illinois Climate Change Advisory Group that has to make recommendations to the governor by July 30 this year. Last summer, Blagojevich also unveiled an energy plan to invest in renewable fuels (corn and soybeans) and wind power. And he caps his accomplishments with this week’s announcement of BP PLC funding of the Energy Biosciences Institute that promises up to $100 million for the University of Illinois at Urbana-Champaign’s research on converting plants to fuel.

This all comes on the heels of an international panel’s declaration that human behavior, particularly burning of fossil fuels, “very likely” causes global warming. Fossil fuels emit CO2, the most important greenhouse gas, according to the Intergovernmental Panel on Climate Change created by the United Nations.

BP invests in UI, biofuel development - News