After five months and fifty scheduled days of legislative session, members of the General Assembly failed to fulfill their responsibility to pass a balanced budget before midnight on May 31 leading Governor Bruce Rauner to deem it a “stunning failure.” Illinois is now eleven months into the current fiscal year without a state budget and no immediate resolution to the ongoing budget impasse is in sight.
State debt is increasing by more than $33 million every single day and is expected to top $11 billion by the end of June according to Comptroller Leslie Munger. In the current fiscal year, state spending fueled by court orders, continuing appropriations, and nearly eighty consent decrees will approach $38 billion on revenue of only $32 billion. Another drop in the state’s credit rating is expected soon and the Governor’s budget director has noted that there will be “devastating consequences” if lawmakers don’t agree on a spending plan for the second year in a row.
On Wednesday, Democrats in the House of Representatives muscled through a $39 billion budget over strong opposition from the Governor and legislative Republicans. SB 2048 passed on a narrow vote of 60-53-1 and added $7.5 billion of additional debt because it failed to include any additional revenue or budget cuts. The budget appropriated nearly $14 billion while relying on the continuation of court orders and consent decrees to fund most of government. Higher education and some human service programs are not covered by these court orders and decrees. On the final night of session, the Senate rebuked the House budget by soundly defeating it on a vote of 17-31-0.
Prior to defeating the House budget, Democrat members of the Senate passed legislation (HB 2990) on a partisan vote (37-19-2) that funds only K-12 education. Totaling more than $10.2 billion, the budget increased education funding by $975 million including an additional $475 million for Chicago Public Schools. More than $4 billion was allocated to the Teachers’ Retirement System. The K-12 education funding is for both fiscal years (FY16 and FY17). Just before midnight on the final day, a bipartisan group of House lawmakers from the suburbs and downstate banded together to overwhelmingly defeat the Senate proposal on a vote of 24-92-0 because it was deemed a “Chicago bailout” that ignored needs in other parts of the state.
On the final day of session, Governor Rauner proposed a temporary stopgap budget with no economic development reforms during the leaders meeting that would provide additional money for the FY16 budget while paying for the first six months of the new FY17 budget with a goal of passing a final solution after the November election. The Governor’s temporary budget proposal was introduced by Republican Leaders Christine Radogno and Jim Durkin to (1) fund K-12 education and early childhood education; and (2) appropriate the remaining FY16 other state funds (OSF) and federal funds (FF), FY17 OSF and FF, and a limited FY17 general funds budget for short-term borrowing and limited payments for human services, prisons, and some general expenses. The proposal did not include the social service programs that were funded in SB 2038 that has passed both chambers and sits on the Governor’s desk.
It is possible that the budget working group could try and reach accommodation on a temporary, six-month budget to get past the November election but it’s extremely unlikely that any comprehensive budget will be passed in the near future. It now takes a supermajority to pass a stopgap budget and lawmakers have only four weeks remaining before the new fiscal year begins on July 1.
There are two possible pressure points that could compel legislative action in the coming months including the scheduled start of schools in August. The lack of a budget could lead many schools to delay the start of the school year leading to parental outrage. Secondly, a court ruling allowing state employees to be paid despite the lack of a state budget will soon expire. A recent Supreme Court ruling that found state employees could not receive back pay because of the lack of an appropriation could lead the Comptroller to stop paying state employees and create a crisis.
Continuous Legislative Session
House Speaker Michael J. Madigan and Senate President John Cullerton announced that the House of Representatives and Senate will be in “continuous session” over the summer with session every week. The House of Representatives released their calendar and plan to convene at noon every Wednesday in June.
Economic Development Working Groups
The Governor and legislative leaders have agreed to continue participating in the five working groups that include workers’ compensation, collective bargaining, pensions, government consolidation, and property tax relief. A comprehensive budget solution will likely include budget cuts, additional tax revenue and economic development reforms that are being negotiated in these groups.
The IMA spent countless hours in the Workers’ Compensation working group over the last week that included representatives from the Rauner Administration, all four legislative caucuses, and stakeholders including the business community, organized labor, insurance, and the medical community. It’s imperative that Illinois pass reforms that significantly reduce the cost of workers’ compensation for Illinois employers.
Employee Leave Mandates Pass General Assembly
While the IMA was successful in defeating nearly a dozen costly and cumbersome paid and unpaid leave mandates, three unpaid leave mandates ultimately passed the General Assembly and are headed to the Governor’s desk for action.
HB 4036 (Lilly/Hutchinson) amends the Victims’ Economic Security and Safety Act (VESSA) by requiring that small employers with 14 or fewer employees provide at least four weeks of unpaid leave in cases of domestic violence impacting the employee or a member of their household.
HB 6162 (Skoog/Collins) is an initiative of AARP that provides an employee may use personal sick leave benefits voluntarily provided by the employer to care for extended family members. This new state mandate creates a one-size-fits-all approach and does not allow employers the opportunity to craft policies that make sense for their individual businesses. The IMA and individual companies have noted that HB 6162 supersedes collective bargaining agreements and could violate the Illinois Constitution that prohibits any law impairing the obligations of private contracts.
SB 2613 (Bertino-Tarrant/Manley) creates the Child Bereavement Leave Act and mandates that employers must provide at least two weeks of unpaid leave to employees who have lost a child. In the unfortunate situation where an employee loses more than one child in a twelve-month period, an employer must provide six weeks of unpaid leave.
Energy Plan Stalls, Exelon Announces Closures
The General Assembly adjourned this week without considering the Next Generation Energy Plan (SB 1585) devised by Exelon and ComEd to boost distressed nuclear plants, construct micro-grids, utilize demand rates, and increase energy efficiency. Stakeholders including the IMA have engaged in talks for more than a year but could not reach consensus before the end of session on a critical topic for manufacturers.
Citing the lack of progress during the legislative session, Exelon announced the closure of two nuclear facilities. The Clinton plant is scheduled to shut down on June 1, 2017 followed by the closure of the Quad Cities facility a year later.
Illinois manufacturing companies need safe, reliable, and low-cost sources of energy using an “all of the above” approach that recognizes the importance of nuclear, coal, natural gas, and renewables. Employers have benefitted from a deregulated marketplace for two decades saving billions of dollars but the energy marketplace is constantly evolving due to a wide variety of causes like the use of hydraulic fracturing and new Clean Power Plant rules issued by the Obama Administration.
It is important that the Governor, lawmakers, and stakeholders engage in a serious policy debate about the future of Illinois’ energy marketplace.
Chicago Pension Relief
Lawmakers in the House of Representatives and Senate overrode the Governor’s veto of SB 777 (Cullerton/Currie) to give budget relief to Chicago Mayor Rahm Emanuel who is trying to fund police and fire pensions. Under current law, Chicago had until 2040 to boost the level of funding in these pension plans to 90 percent from their current levels that are less than 30 percent. This will cost Chicago taxpayers billions and billions of dollars that has already forced Mayor Emanuel to pass a $500 million property tax hike.
Earlier this spring, Democrats in the legislature passed a bill that extends the date (2040 to 2055) by which the pension plans must be funded at 90 percent. As a result, the City’s annual pension payment will drop by nearly $200 million this year alone. After passing the legislature, Governor Rauner vetoed the bill noting that it “kicks the can down the road” and will ultimately cost Chicagoans billions of dollars.
The Senate voted to override the Governor on a vote of 39-19-0. Three Republican lawmakers (Rep. David McSweeney, Rep. David Harris, and Rep. Mike McAuliffe) joined Democrats in the House in voting to override the veto.
IMA Bill Capping Right-of Way Fees Passes Legislature
Legislation capping fees that land management companies can charge for crossing a railroad right of way has been approved unanimously in the House and Senate. This IMA initiative is necessary because Illinois companies and projects are being held up by demands for fees in the tens to hundreds of thousands of dollars to build conveyers crossing small strips of land adjacent to railroad tracks. Multi-million dollar projects are being held hostage over a simple conveyance that may cover 20 to 40 feet on either side of railroad tracks. In response to similar abuses, Iowa enacted caps last year and lawmakers in Minnesota are moving forward on similar legislation.
SB 2241 imposes a $1,500 cap on fees that land management companies can charge for access for the conveyance of grain, aggregate, construction materials or other commodities across right-of-ways located in enterprise zones. This is identical to a legislative cap that utilities are charged for accessing these rights of way.
The IMA appreciates the leadership of Sen. Bill Haine (D-Alton), Rep. Jay Hoffman (D-Belleville) and Rep. Andy Skoog (D-Peru) for their leadership in sponsoring this legislation on behalf of manufacturers.