Governor Rauner Orders Lawmakers Back to the Capitol
With only two weeks remaining before the start of the new fiscal year, Governor Bruce Rauner invoked a rarely-used constitutional power to call a special session of the General Assembly beginning on Wednesday, June 21 for the sole purpose of considering legislation “which addresses a balanced budget and structural reforms including but not limited to property tax relief, job creation, workers’ compensation reform, government consolidation, education, term limits, pension reform, and spending limitations.”
In an accompanied press release, the Governor noted that the General Assembly has ignored calls to return to the Capitol in the two weeks following their adjournment on May 31.
The Illinois Constitution (Article IV, Section 5) allows either the Governor or presiding officers of the General Assembly to call a special session by proclamation. While lawmakers are not paid a per diem or travel costs during a regular overtime session, they are entitled to receive these benefits during a special session.
Both the House of Representatives and Senate are currently in a continuous session meaning that they can convene at the call of the chair. While the Governor has issued a special session to address specific issues, the House or Senate could also gavel in a regular session and act on any legislation unrelated to the special session topics.
As the IMA has reported previously, the Senate Democrats previously passed a $37.3 billion tax and spend package predicated on $5.4 billion in new tax revenue with no significant economic development reforms. House Democrats chose to simply adjourn in May without voting on any budget plan despite the fact that Illinois has not had a state budget for nearly two years resulting in a massive debt approaching $15 billion.
The IMA continues to engage daily with the Governor’s Office and lawmakers and will provide updates as necessary.
Republicans Offer “Capitol Compromise” Budget, Reform Plan
House and Senate Republicans held a press conference this week to offer their “Capitol Compromise” budget and reform package designed to end the nearly two-year budget impasse. Illinois’ backlog of bills now exceeds $15 billion and the state is one notch above junk bond status. Both Moody’s and S & P have issued dire warnings that junk status is fast approaching without action by the Governor and General Assembly.
On the day after the Republican press conference that outlined the compromise plan, Governor Bruce Rauner issued his stamp of approval noting that it is a “compromise plan that I can sign.”
The Republican plan closely mirrors an earlier “grand bargain” negotiation that occurred for many months in the Senate before talks finally broke down in the last 10 days of the spring legislative session. It includes the following components:
- Four-year hard spending cap of $36 billion (SB 2214) that includes across-the-board reductions to most state agencies and all branches of government. It reduces the backlog of bills by more than four billion dollars while adding $250 million in new K-12 education funding. This Republican budget plan cuts an additional $1.3 billion in spending from the plan approved by Senate Democrats for total spending cuts of nearly $4 billion
- Pension reform (HB 4064, HB 4065) includes a consideration model under which government employees can matriculate to a cheaper system in exchange for future pensionable wage increases. It also creates a new hybrid pension system that includes a 401-k style system for the first time in Illinois history while also capping pensionable salary, smoothing, and buying out former employees who are vested in the system. Illinois would pay for the Chicago Public School pension cost for two years. It is estimated to save $1.25 billion annually but would be challenged in court.
- Four-year property tax freeze with an exemption for debt service (HB 4066). Voters would be allowed to lower levies, raise levies, or renew the freeze every four years through referenda.
- Government consolidation (HB 4067) allows voters to dissolve local units of government through a Citizen’s Empowerment Act. Illinois has more units of local government than every state in the nation.
- Workers’ Compensation reform (HB 4068) includes significant reductions in the medical fee schedule, increased TTD waiting periods, a four-year wage freeze on PPD benefits, changes use of AMA guidelines, rectifies the Will County Forest Preserve case, creates credits for previous spinal injuries, and establishes a new drug formulary. It is estimated that this reform could save employers between $125 and $150 million annually.
- K-12 Education Funding reform (HB 4069) creates a new funding formula and individualized adequacy targets for every school district based on issues like poverty. All school districts will be “held harmless” for three years and receive no less money. $250 million in new money will support K-12 education.
- Term Limits on Leaders and Constitutional Officers. Creates term limits of 10 years on legislative leaders and eight years (two terms) for Constitutional Officers.
With regard to tax revenue to help address the budget gap, Republicans noted that they are amenable to the Senate Democrat tax plan (SB 9) with two major changes. The income tax increase would take effect on July 1 (not retroactive to January 1) and it would be a four-year, temporary income tax increase tied to the property tax relief. The plan passed by the Senate Democrats contained a permanent increase in the income tax to 4.95 on individuals (now 3.75 percent) and 7.0 percent on corporations (now 5.25 percent).
Speaker Madigan issued a statement noting that they are prepared to work with the Governor and Republicans on a plan but noted that they had previously passed many of these items. However, the bills passed by House Democrats, particularly workers’ compensation reform, are not real and meaningful changes that would reduce costs for employers. Additionally, the House Democrat revenue plan completely ignored the manufacturing sector by not addressing critical issues like the R & D credit, Manufacturers Purchase Credit, or Graphic Arts exemption. All of these were included in the Senate plan.
It’s critical that Illinois pass a balanced budget with fiscal reform, address the massive pension debt, and enact meaningful economic development reforms.