from the Illinois House Republicans
Illinois Supreme Court strikes down pension reform law. On Friday, May 8, the Illinois Supreme Court unanimously reaffirmed a lower circuit court ruling on State pension system reforms contained in SB 1 (P.A. 98-599). In response to enactment of P.A. 98-599, five separate actions were filed in Cook County and Sangamon County courts to enjoin implementation of the pension reforms, claiming the reforms were unconstitutional due to a violation of the provision in the Illinois Constitution (Article XIII, Section 5) that asserts pensions are a contractual right and cannot be diminished or impaired. The five suits were subsequently consolidated into one action in Sangamon County Circuit Court.
On November 21, 2014, Sangamon County Circuit Court Judge Belz found for the plaintiffs, finding their claims that the pension reforms were unconstitutional had merit and the defense offered by the State, which was premised on police powers of the State allowed the reforms, was inapplicable. The Attorney General, on behalf of the State, sought an expedited appeal of the circuit court ruling, which was granted. Oral arguments before the Illinois Supreme Court were heard on March 11th. The State’s argument on appeal was premised on a belief that, notwithstanding a possible violation of the Constitution’s pension clause, the State’s reserved sovereign powers, namely the police power to ensure the health, safety and welfare of its citizens, permitted the pension benefit reforms to be made.
The Illinois Supreme Court ruling found P.A. 98-599 unconstitutional and permanently enjoined its enforcement. Regardless of the severability provision that linked only certain reforms, written to allow some reforms to fall and others to stand if so ruled by the Court, the opinion held that the pension annuity reduction provisions were so central to the Act that the entire Act must fall. The Court found that if all unconstitutional provisions were stricken, then the bill would no longer reflect the intent of the General Assembly and must be void in its entirety.
The In re Pension Reform Litigation v. Pat Quinn opinion explored the concept of diminishment, citing that the “…protections afforded to such benefits by Article XIII, Section 5 attach once an individual first embarks upon employment in a position covered by a public retirement system.” In reference to the State’s police powers defense, the Court referenced historical, cyclical examples of financial distress by governments, and citing case law precedent that “[N]o principle of law permits us to suspend constitutional requirements for economic reason…no matter how compelling those reasons may seem.”
House Republicans reject piecemeal budget components. An all-too-often told story played out again Wednesday in the Illinois House of Representatives: the story of a broken, backwards budgeting process intended to divide, not unite.
The process began with Governor Rauner’s introduced Fiscal Year 2016 budget which is meant to be a starting point for negotiations through which changes are made, with a final budget arriving back on the Governor’s desk for either approval or rejection. The budget process is designed to ensure all priorities are considered and more important that all decisions are made in an open and transparent manner.
Wednesday, in a divisive spirit, House Democrats short-circuited the budget process by bringing the Human Services budget directly to the House floor with little notice and no committee deliberations, then defeated the bill with unanimous Democrat opposition. This action was not genuine; it was intended to send a message. Recognizing that, the House Republicans voted “Present.”
Immediately thereafter, House Democrats filed 15 additional amendments, cherry-picking various programs vulnerable in the budget and began running them one at a time, again in the hopes of deliberately sabotaging the budget working groups that have been meeting for months, and continue to meet. Again, House Republicans voted “Present.”
House Republicans call for benefit certainty, process reform. A lengthy Committee of the Whole hearing on workers’ compensation issues was held before the full House on Tuesday, May 5. Injured workers, members of their families, and other stakeholders testified to lawmakers on the strengths and problems of Illinois’ current system of workers’ compensation.
Despite limited workers’ compensation reforms passed in 2011, Illinois still has the seventh highest workers’ compensation costs in the country. These high structural costs drive jobs to other states, including Indiana, where workers’ compensation costs are more than 50 percent less. For every $100 in payroll an Illinois employer pays another $2.35 in workers’ compensation premiums, whereas Indiana employers pay $1.06. For 2014, Illinois’ rates are 27 percent higher than the national median.
Governor Rauner speaks to Chicago City Council, warns no bailout. As the fiscal picture darkens for Illinois’ largest city, some advocates have held out hope that Illinois taxpayer could be persuaded to ride to the rescue with moves intended to bail out Chicago. However, in remarks delivered to the Chicago City Council on Wednesday, May 6, Governor Rauner told Chicago’s mayor and alderman their city has many strengths. The governor asserted that leveraging these strengths, combined with sacrifices by stakeholders, will lead to city-state cooperation that offers the best hope of achieving financial recovery.
“Compromise,” the governor urged. “Accept things we might normally oppose. That’s going to be required of all of us.” Chicago issues in which State actions are possible include pension reform, a possible Chicago-based casino, school reform, and changes to labor-management law. Bond rating agencies agree that the quality of Chicago’s debt is plunging towards junk-bond levels.
Governor Rauner releases key findings from Illinois-initiated study of ten foreign trading partners. The survey of key Illinois investors shows areas where Illinois can improve in its ability to become a focus for job creation and economic growth. Foreign companies considering investment in Illinois are asking the State and its lawmakers to focus on the State’s high tax rates, aging infrastructure, and lack of vocational training. The nations surveyed here have invested tens of billions of dollars in the United States, leading to the employment of hundreds of thousands of Illinois workers.
Governor names new executive inspector general. Maggie Hickey, a professional federal prosecutor, is finishing up a 10-year tour of duty in the Office of the Northern District of Illinois. She was named by Gov. Bruce Rauner on Tuesday, May 5 to the key post of executive inspector general.
Trick bag; no property tax relief in sight. Once again the Democrat-controlled House brought sham legislation to a vote for the sole purpose of putting Republican lawmakers in a trick bag and embarrassing the new Governor.
It is not without reason that House Republicans question the majority leadership’s commitment to property tax relief, when out of the clear blue sky they embrace so-called property tax freeze legislation that neither includes reforms nor guarantees that property taxes won’t increase (so no freeze). It’s not hard to draw the accurate conclusion that it is just political theatre.
After being sworn into office, Governor Rauner took action to address high property taxes. He assembled a bipartisan working group to look holistically at thoughtful reforms that would provide meaningful property tax relief without strangling schools and local governments. The group is considering unfunded mandates, pensions and other factors impacting costs that keep property taxes high. Once the working group completes its assessment, it will bring its work product to the proper standing committee for a full hearing – provided the Democrat leadership permits it to get that far.
After Republicans voted “Present” on an amendment to a bill going nowhere, State Rep. Ron Sandack called for HB 136, legislation he filed on the first day of the 2015 session, to be released from the House Rules Committee where the Democrats have kept it bottled up. House Bill 136, a carefully crafted, measured approach to property tax reform targeting homeowners who have lost value on their homes, was immediately dismissed through draconian House Rules that provide the majority party a defense again virtually any legislation they don’t like.
Illinois lawmakers face finish line in fight over massive deficit. Both the House and the Senate held repeated budget hearings this week to discuss estimated FY16 budget shortfalls of $6 billion to $8 billion, depending on how the red ink is counted.
Governor Rauner submitted a budget for FY16 to the General Assembly in February. Since that time, Democrats that opposes Rauner have repeatedly attacked budgetary adjustments made in this spending plan, but have neither generated a budget of their own nor issued a projection of State revenues from which a budget can be generated. The General Assembly is required to enact a budget for FY16, starting July 1, no later than May 31.
Moody’s reduces Chicago’s credit rating to junk bond status. The downgrade to what Moody’s calls “Ba1,” a junk-bond level, was announced on Tuesday, May 12, and affects $8.1 billion in city general-obligation debt. The moved marked semi-official acknowledgement, by a major player in global debt markets, that there is material risk that Chicago may on a future date fail to repay its bondholders in full and the city may default on its debts. The New York credit-rating agency attributed this move to the Friday, May 8 decision by the Illinois Supreme Court to discard recent moves toward pension reform. The decision (Illinois Supreme Court ruling) found SB 1, a December 2013 law that sharply reduced future pension liabilities to many classes of Illinois public-sector workers, to be unconstitutional.
As recently as March 2014, Moody’s rated Chicago debt at A3. With this May 2015 move, Chicago’s GO bonds will no longer be suitable for most purposes of fiduciary investment, including investments by pension funds, annuity funds, and funds operated by Wall Street that provide savings options to workers enrolled in 401(k) plans. Junk-bond debt often continues to trade back and forth between speculators and aggressive income-oriented investment funds.
New York’s largest credit-rating firm also reduced credit ratings on various Chicago-related and secured Chicago debts this week. Ratings for Chicago Public Schools were knocked down to Ba3 junk status on Wednesday, May 13, affecting $6.2 billion in school debt. Billions of dollars of additional Chicago bonded debts are backed by Chicago water and sewer services, motor fuel tax revenue streams, and sales tax streams. Bond watchers will be looking for ratings changes by several of Moody’s’ competitors in the credit-rating industry, especially Fitch Ratings and Standard & Poor’s.
House unanimously approves detailed performance audit of College of DuPage. In a unanimous show of support for the taxpayers who fund the College of DuPage (COD), the House of Representatives approved a resolution on Thursday that will launch a thorough performance audit of the college.
HR 55, sponsored by State Rep. Jeanne Ives, was filed in response to the decision by the COD board to provide outgoing College President Dr. Robert Breuder with a $763,000 severance package in exchange for his early departure as College President.
Through the language in HR55, the COD will assume the costs associated with a detailed audit the covers the following:
- The College of DuPage’s sources of revenues
- College expenditures, by category
- Whether the Board is carrying out its responsibilities required by Board policy
- Whether the Board is meeting its fiduciary responsibilities and ensuring compliance with the Public Community College Act and Board Policies
- Whether the compensation and severance packages provided to the COD president are comparable to compensation and severance packages provided to Presidents of other Illinois Community Colleges
- Whether changes to the College President’s compensation package were properly approved
- An amendment approved prior to the final vote expanded the scope of the audit to include the COD Foundation’s actions in the investigation.
“The majority of the trustees were making some very bad decisions at the expense of the taxpayers who support the College of DuPage,” said Ives. “With the recent election, we now have several concerned taxpayers serving as COD trustees, and they are committed to unearthing the extent of the malfeasance and taking steps to prevent these types of problems from occurring in the future. I expect they will cooperate fully with the investigation.”
For more on this audit resolution, please visit The Caucus Blog.
50-state survey shows recent Illinois job growth has underperformed neighboring states. The study, conducted by the nonpartisan Pew Charitable Trusts, counted the rates of new job creation in each of the 50 states between January 2008 (marking the start of the 2008-15 downturn) and March 2015. The study was released on Wednesday, May 13.
Most Senate bills had to be out of House committee by the end of last week to remain alive. As the General Assembly continues to move towards May 31 adjournment, members of the Illinois House and Senate scrambled to get committee approval for their bills this week. The coming week, May 18 through May 22, will see the deadline for Senate bills on the House floor.
By May 22, most Senate bills will either have been passed by the House and sent to the Governor for final signature, passed by the House as amended and sent back to the Senate for concurrence, or will have been sent to the House Rules Committee for failure to meet the deadline. Meanwhile, the Senate has a parallel deadline for House bills.
White House confirms future presidential library will be built on Chicago’s South Side. The widely leaked decision was officially disclosed on Tuesday, May 12.
The University of Chicago, in cooperation with Chicago’s City Hall, is recommending sites in Chicago’s Jackson Park or Washington Park. Both locations would be physically close to the Obamas’ longtime family home in Chicago’s Hyde Park/Kenwood neighborhood, as well as the University of Chicago Law School where Obama served as an instructor.
Investigative report finds generous Chicago police pensions. The revelations, uncovered by the Better Government Association in cooperation with CBS Chicago, found retired Chicago police officers working for at least six city agencies and the Chicago City Council and enjoying simultaneous pay and pensions. The practice is commonly called “double-dipping.” In some cases, the retired police officers were hired to their new civilian jobs less than 24 hours after completing their retirement. Pensions are blamed for this week’s significant decline in the credit ratings of the City of Chicago and government units affiliated with the city.
While House Republicans support keeping promises to our police officers and paying out pensions that have been earned, they are pushing back against aspects of double-dipping. Representative Grant Wehrli sponsored HB 1320 to strongly discourage retiring as a police officer in one jurisdiction and taking up service as a police officer or police chief in another jurisdiction. The bill was approved in April by the House by a vote of 88-20-2 and sent to the state Senate for further action.
House Republicans toughen push for tort reform. Trail-lawyer-friendly State laws and court procedures, which go far beyond the rights granted to trial lawyers in neighboring and comparable states, are blamed for a substantial share of the continued economic gap between Illinois and the rest of the U.S. House Republicans are working with civil justice reform groups to enact needed reforms to these laws.