Week in Review for week ending 5/11/19

TAXES

Durkin: “We have the money to balance the budget without new taxes.”  On Wednesday, House Republican Leader Jim Durkin, along with Deputy Leaders Dan Brady and Tom Demmer, held a press conference to reiterate the need for bipartisan negotiations to pass a balanced Fiscal Year 2020 budget.

In light of this week’s announcement that April revenues were up by $1.5 billion and that FY20 estimated revenues were revised upwards by $800 million, Leader Durkin announced that we have the money to balance the FY20 budget without new taxes. Durkin’s full remarks follow:

For the first time in years, we are here to report great news for Illinois taxpayers. 

Some of you might recall, though it seems Speaker Madigan has already forgotten, that last year after bipartisan negotiation between Republican and Democrat members in the House and Senate, we were able to enact an FY19 budget that was not only balanced but will likely be running a surplus by the end of the year. 

Furthermore, projections are showing that this year’s tax receipts will be the HIGHEST they have ever been in our state’s 200-year history.

All of this is clear evidence of what I have always preached: when Democrats invite Republicans to the table and respect our priorities, we will work together in good faith and come to agreements that help move our state forward. 

And because of our bipartisan work last year, Governor Pritzker was able to move off his misguided and short-sighted approach to balancing the FY20 budget by artificially lowering our obligations to the state’s pension systems.

What’s even better is that taxpayers can now be reassured that Governor Pritzker and his Democrats repeated call for more and more of their hard-earned money to balance the budget is unnecessary. 

Work with the Republican caucus and we will help you balance the FY20 budget too, all without raising taxes. 

The numbers are clear – WE HAVE THE MONEY TO BALANCE THE BUDGET WITH NO NEW TAXES AND NO TAX INCREASES.

There is no more need to talk about raising taxes on bags or cigarettes or businesses or the middle class.

There is certainly no reason to even be considering a graduated tax now. 

The desperate pleas for more taxes have rung hollow in Illinois for years, and now taxpayers know the truth. 

We have the money to balance the budget without new taxes.

With only 18 days left of session, we must start working NOW to craft another truly balanced budget, with no new taxes or increases, that will continue projecting our state towards fiscal stability.

Morrison Files Amendment to Protect Taxpayers From Future Tax Increases.  State Representative Tom Morrison filed a new constitutional amendment this week requiring a supermajority vote in the House on any future income tax increase proposals. HJRCA 34 will require two-thirds approval from lawmakers in order to move forward. 

“I filed this amendment to do right by Illinois taxpayers,” said Rep. Morrison.  “This legislation is a necessary safeguard to ensure that it will be harder to raise additional taxes or increase the existing ones. We cannot continue allowing unchecked tax increases to pass through the General Assembly, and this step will provide the protections our taxpayers deserve.”

Rep. Morrison has been a staunch opponent of Governor J.B. Pritzker’s push for a graduated income tax and seeks to protect Illinois businesses and the middle class. While a supermajority vote is needed to actually change the Illinois Constitution for a graduated tax structure, only a simple majority is currently required to once again increase taxes on Illinois families and businesses.

The Democrats have already changed their rates since their initial proposal, and Rep. Morrison believes that they will continue to raise taxes to feed their agendas of increased spending.

Rep. Morrison’s amendment was filed Tuesday and already has 30 co-sponsors in the House.

House Democrats advance $2.4 billion in tax and fee increases to fund transportation infrastructure.  On Thursday, Democratic members of the House Revenue & Finance Committee advanced an amendment (on a partisan roll call) to the full House that would raise the gas tax and related fees by $2.4 billion to fund transportation infrastructure needs.

House Amendment #1 to HB 391 contains language proposed by Local 150 to provide funding for “horizontal” capital, i.e. roads and bridges. This legislation is identical to HB 3233, Senate Amendment #1, which is Local 150 language. It is important to note that these bills have not been negotiated or agreed to by all parties involved and do not represent a finalized capital infrastructure funding plan.

The major revenue components contained within HB 391 include increasing the motor fuel tax by 25 cents (a 132% increase) and increasing vehicle registration fees by $50 (a 51% increase). Together with the other tax and fee increases outlined below, HB 391 would bring in approximately $2.4 billion in annual funding for transportation infrastructure.

BUDGET

COGFA reports $1.5 billion increase in April revenues.  The Commission on Government Forecasting and Accountability (COGFA), the General Assembly’s nonpartisan revenue-monitoring arm, works with the Illinois Comptroller, the Illinois Department of Revenue, the Illinois State Lottery, and other State agencies to check on money coming in and report to budget lawmakers on whether it is keeping up with projections.  Numbers for April 2019 were published on Friday, May 3.

The April revenue numbers showed good State cash flows in the areas of individual income taxes, corporate income taxes, and State sales taxes.  Total general funds revenues came in at almost $6.8 billion in April, an increase of almost $1.7 billion (a $1.502 net increase) from the $5.1 billion paid into State general-funds coffers one year earlier in April 2018.  More than half of this overall year-over-year increase, $1,068 million, consisted in increased payroll withholdings, electronic payments, and checks paid by Illinois individual income taxpayers.  COGFA staff believes this increase is likely a one-month-only phenomenon attributed to changes in federal tax law: these changes affected April 15 reconciliation-deadline payments made as part of tax year 2018 filings.   

However, in a letter to lawmakers dated May 7, 2019, the Directors of the Department of Revenue (IDOR) and the Governor’s Office of Management and Budget (GOMB) indicated that net tax receipts are indeed up by $1.5 billion dollars in the comparative months of April and that this caused them to revise their FY20 revenue estimates upwards by $800 million. The Directors recommended that these additional revenues be dedicated to the State’s statutory FY20 pension payment, as opposed to the $865 million pension underfunding that was part of the Governor’s proposed FY20 budget.

CHILDREN

Harsh criticism of DCFS after death of 5-year-old A.J. Freund.   Calls for reform of the troubled Department of Children and Family Services (DCFS) deepened this week after the agency released new case records.  The Freund case, which was an active case file during the child’s final months, show that A.J. had previously gone to an Illinois emergency room.  In December 2018, the boy told an emergency room (ER) physician that “maybe” he was being beaten by his parents.  Under Illinois law, ER caregivers are mandated reporters of child abuse to DCFS, and this caregiver followed the law and reported the probable abuse.  Even after this report was made, DCFS allowed A.J. to remain with his family.

When allegations are made against the parents or guardians of a possibly abused child, DCFS faces a serious dilemma.  It is an ugly act to intervene in the life of a family and take steps to separate parents from their children.  In the words of page 3 of DCFS’s Mandated Reporter Manual, “the investigation of abuse or neglect is necessarily very intrusive into family life.  The state must exercise its authority cautiously and appropriately in order to respect the rights of parents.”  In this case, aware of the dilemma, key DCFS personnel kept an open case file and waited for more evidence to turn up.  In April 2019, the body of young A.J. Freund was located in a shallow grave.

FLOODING

Serious high water levels affect many sections of Downstate Illinois.  Rainwater runoff into the Illinois, Mississippi, and Missouri Rivers is straining many river levees and causing damage to riverfront properties.  In Peoria, the Illinois River crested nearly 10 feet above flood stage, threatening the city’s historic central-city park and riverfront.  The Illinois River was closed to all shipping and boating this week by the U.S. Coast Guard, the federal agency with life-safety responsibility over all navigable waterways.  Falling water will allow the River to reopen.

In the Metro-East area adjacent to St. Louis, where the Missouri and Mississippi Rivers come together, high water is threatening the region’s water-intake facilities.  Mandatory water conservation measures have been issued for customers of Illinois American Water in Belleville, East St. Louis, Granite City, and other Metro-East communities.  

GAMBLING

Sports betting push.  Illinoisans could soon get the chance to place bets on sporting events, including sporting events that are being played at the time the bet is made, under legislation presented to the Illinois House on Wednesday, May 8.  The proposed Sports Wagering Act would give a variety of private businesses with expertise in taking bets the opportunity to seek licenses and to team up with online identity-managers to open sports betting books.  The new industry, and its customers, would pay taxes on its betting activity to Illinois.

Various entities told the Illinois House this week that they could help implement a new sports betting law.  Representatives of teams in three of America’s major sports leagues told an Illinois House committee this week that they could provide near-instantaneous, accurate online data to sports bookmakers; in return, they want the Illinois industry to pay them a mandatory royalty fee.  Online identity-managers would like to help existing participants in the gaming industry, including racetracks, riverboat casinos, and video gaming terminal operators, to set up online identities and start taking sports bets.  Sports betting has become a subject of intense discussion during the final weeks of the 2019 General Assembly spring session.

HOLOCAUST

House Republicans join observers at annual Springfield remembrance service.  The annual event pays tribute to the victims of the Holocaust.  Called Yom HaShoah, the springtime day of observance includes a remembrance service held in many locations throughout the world.  For the Illinois General Assembly, the Yom HaShoah observance is held, by tradition, at the Old State Capitol in Springfield.  Mourners gathered there on Thursday, May 2 for the ceremony.  

Yom HaShoah includes not only the continued memorial awareness of the Holocaust, but also the lighting of candles as a celebration of life.  The Old State Capitol ceremony conformed to the observance’s requirements.  One traditional element of Yom HaShoah is the speaking of testimony by one or more Holocaust survivors.  As the world moves toward the 2020s, the children and grandchildren of survivors are being asked to speak out.           

LAW ENFORCEMENT

New tactic to enforce construction work zone law.  Illinois law imposes enhanced fines and penalties upon speed-limit violations and other acts of unsafe driving within construction work zones.  Despite this law, violations continue.  State Police troopers this week announced a plan, “Operation Hard Hat,” to operate vehicles disguised as construction-crew equipment.  The “construction workers,” who may be dressed in plain clothes, will be able to witness and stop unsafe drivers.  The increasing percentage of police vehicles that are light trucks makes this tactic possible. 

Under current state law, a first-offense speeding ticket in a construction zone will draw a $375 fine.  A second offense can bring a 90-day suspension of the guilty driver’s license, plus a fine of up to $1,000.  The Illinois Department of Transportation (IDOT) has posted an informational sheet for drivers to consult for reminders on safe driving in and around work zones.

PENSIONS

Annual report on State-managed pensions estimates unfunded liabilities of almost $137 billion.  As part of its responsibilities, the General Assembly’s COGFA arm conducts an annual review of the financial condition of the five State of Illinois-managed pension systems, including the systems that underwrite the pensions paid to Illinois public school teachers, state government workers, and Illinois public university professors and personnel.  COGFA’s most recent report audits the financial condition of these state retirement systems as of June 30, 2018.

Illinois’ public-sector pension systems continue to be characterized by a state of serious unfunded liability.  With global prudent-investment interest rates continuing to be very low, the pension systems cannot use their existing assets to grow their money into funds sufficient to make the legally required payouts to vested employees.  Unfortunately, as of June 30, 2018 after application of prudent actuarial projections regarding future interest rates, these existing assets could only cover 40.2% of these future liabilities.  COGFA estimates that the five pensions systems will, collectively, be $136.8 billion in the red at the close of business of FY19 on June 30, 2019.  Based on future interest rates, this unfunded-liability situation could be even larger than the amount estimated.