The McDermed Dispatch for July 10th

Illinois Finally Has a Budget, But at High Cost

         After weeks of being in Springfield with little progress, everything came to a head last weekend. On the last day of the fiscal year, negotiators met late in to the evening and a bipartisan deal seemed within grasp. However on Saturday, the start the new fiscal year, Speaker Madigan announced that no votes would occur over the weekend. This was surprising and drew a vocal response on the House floor from legislators on both sides of the aisle who wanted to see a deal done and didn’t appreciate the break in urgency implied by the Speaker’s words. Shortly thereafter in a statement to the press, the Speaker pulled a 180 and announced a vote on a budget for the next day. Negotiations on other reforms to repair the state stalled. On Sunday we were asked to vote on hundreds of pages of legislation just hours after it was filed. With some Republican support, the General Assembly passed and then overrode the Governor’s veto on both a budget and a tax increase. Illinois now has a budget for the first time in over 2 years, but little else. You can read my op-ed on why I voted no, here
          When the temporary income tax ended in 2015 with no budget in place, spending continued at the FY15 level primarily due to court orders, consent decrees and continuing appropriations. As a result, our state has been overspending revenue for years at around $39 billion. This budget spends $36 billion, a $3 billion cut, but well above the $32 million the state has been taking in over past years. The budget relies on increasing income taxes to 4.95% for individuals and 7% for businesses as well as provisions for borrowing billions to pay down the historically high bill backlog.
           A primary reason for so many to sign a budget, any budget, was to prevent the state from being labeled as junk by investor services. Signs from Moody’s say that Illinois is still at risk for a downgrade because we did not do enough to address Illinois’ main credit problems; our astronomical pension obligations and substantial bill backlog. 
Special Session
           Two other significant pieces of legislation emerged from our time in Springfield; the EDGE program and a comprehensive telecommunications bill. The Economic Development for A Growing Economy Tax Credit(EDGE) encourages companies to locate or expand their operations in Illinois with incentives and tax credits. The EDGE program has come under fire in the past few years so HB162 was passed to extend it for 5 years while making improvements to the program.
            The House and Senate overrode the Governor’s veto of a large telecommunications bill that provides additional funding to 911 centers with an increase in cell phone fees. The Governor vetoed the bill, and I joined him by voting against it, over the size of the fee increase. Outside of Chicago will see a cell phone 911 surcharge of $1.50 (currently at $0.87) and Chicago will see their rates go up from $3.90 to $5. The increase will be used to upgrade equipment at call centers. Unfortunately because the bill was tied in with so many other elements, inaction on the over-ride would have ended funding to keep 911 centers operating.
             In addition to extending the statutes that regulate 911 centers, the bill extends various other telecommunications acts and grants AT&T relief as the ‘Carrier of Last Resort’. In Illinois AT&T would no longer have to provide traditional land line phone service pending approval from both the ICC and the FCC. The bill contains some protections for those with medical devices connected to AT&T landline services and requires continued service to public utilities and public safety facilities (911) for 4 years.
What’s Next?
           Next up is likely a debate on school funding reform. Over the past few years the General Assembly has debated and attempted to fix the K-12 school funding formula, seen by nearly everyone as inadequate and over-reliant on local property taxes. The Governor’s commission to study school funding reform last year concluded that using an evidence based model is the most effective way to allocate state resources to schools and ensure that students are given the best chance to succeed regardless of where they live. Through this model, two pieces of legislation were generated, Senate Bill 1 and House Bill 4069.
          The budget the General Assembly just passed contains a “booby trap”. The language in the bill essentially says that the state must allocate FY18 school funding with an evidence based model or schools don’t get funding at all. 
           The Illinois House and Senate Democrats passed SB1, which implements the evidence based school funding model, but is expected to be vetoed by the Governor because it unfairly allocates more money to Chicago at the expense of other school districts. Under the label of ‘pension equity’, 7 out of every 10 new state school funding dollars would go to CPS. House and Senate Republicans have filed our own school funding reform bill, HB4069, which is very similar to SB1, but does not include the additional $323 million to CPS. You can see below how the two different pieces of legislation would impact schools in the 37th district:
           There are 852 school districts in Illinois. Under HB4069, no school district would lose funding. School districts in every region of the state would be better off, instead of the proposal benefiting one district more than others. Senate Bill 1 has passed both legislative chambers, but has not been sent to the Governor. HB4069 remains stuck in the Rules Committee.