Senate Week in Review: Session Wrap-Up

Springfield, Ill. - On May 31 lawmakers wrapped up the 2012 legislation session, claiming significant progress on one of the state’s most pressing issues: Medicaid reform. State Sen. Ron Sandack (R-Downers Grove) said that though legislators came together to pass a Medicaid reform package that could result in billions in long-term savings and set the program on the path to solvency, negotiations continue on much-needed pension reform.
 
On June 6, the four legislative leaders met with Gov. Pat Quinn to continue discussions on how to address the state’s overwhelming pension burden. Illinois has $83 billion in unfunded pension liabilities, and in recent years the state’s retirement system has consistently been ranked the most underfunded in the nation.
 
It’s not an exaggeration to say Illinois’ staggering pension obligations threaten the state’s financial solvency. More immediate concerns center on the probability that without serious structural reforms of the public retirement systems, Illinois could receive additional downgrades to the state’s already low credit ratings.
 
While a final outline is obviously still in the works, the framework of the bill is likely to provide “Tier One” employees and retirees with two options. The public employees would be given a choice between 1.) retaining their existing benefits but losing access to state-sponsored health insurance, or 2.) retaining access to the health insurance system but accepting more modest cost of living increases after retirement. Reform of the three major state pension systems is expected to save between $66 and $88 billion over 33 years and return the state retirement systems to solvency.
 
On the last day of session, Senate lawmakers passed a more limited pension reform measure that would only apply to state employees and members in the General Assembly Retirement system; teachers and judges were excluded from House Bill 1447. The bill was projected to save between $21 and $33 billion over the next 33 years. However, that measure stalled in the Illinois House, and Quinn has indicated that he is not behind a “partial” pension reform measure.
 
Discussions between the state’s top officials center on a proposal that would shift the responsibility of pension payouts for teachers and university employees from the state, to local school districts and universities. The shift is estimated to save Illinois at least $1 billion, though perhaps as much as $4 billion, in pension costs. However, critics point out that this would not be true "savings" but rather a shift for taxpayers from one pocket to another without any reduction in actual pension expenses.
 
Some legislators are interested in the proposal, noting that it seems fair for school districts to shoulder some of the pension burden since they ultimately negotiate the contracts that will determine educators and administrators’ retirement benefits. Opponents, however, raise valid concerns that shifting this responsibility will likely force school districts to increase property taxes.
 
State leaders plan to continue meetings to hammer out a possible pension reform solution, as officials gather financial data from Illinois school districts to help determine how a pension cost-shift would impact the districts.
 
Pension reform has dominated the headlines since lawmakers adjourned Thursday, May 31. Understandably the public and media attention often focuses on more prominent or notorious legislation. However, each year lawmakers pass hundreds of bills, many of which are relatively mundane—introduced to provide clarification of current laws, increase penalties for crimes, or in response to regulatory and licensure issues.
 
Below are some of the more notable bills that will be sent to Gov. Pat Quinn for consideration. The Governor has the option to sign these bills into law, amend the legislation, or veto the bill in its entirety. Measures that are amended or vetoed will be considered by lawmakers when they return for the fall “Veto Session” in November and December.
 
A full list of all bills passed by House and Senate lawmakers can be found at the Senate Republican Web site:
 
Adult Entertainment Tax (HB 1645):  Creates the Live Adult Entertainment Facility Tax and would require either a $3 entry into a club, or require club owners to pay an annual $5,000 - $25,000 surcharge.  Facilities could choose which tax they pay. The proceeds will largely go to the Sexual Assault Prevention Fund.

Caylee’s Law (SB 2537):  A response to the nationally covered case surrounding the death of 2 year old Caylee Anthony, whose mother, Casey, failed to report her daughter missing and then lied about circumstances surrounding the child’s disappearance and death. Increases penalties for failure to report the disappearance of a child 13 years or younger within 24 hours (1 hour if younger than 2). Increases penalties for failure to report within 12 hours the death of a child 17 years of age or younger. Expands the obstruction of justice definition to parents, guardians or caretakers of a child younger than 13 who provide false information to law enforcement or other authorities investigating the child’s disappearance or death.

Cook County Medicaid (HB 5007): Allows Cook County to apply for a Medicaid Waiver to receive additional federal Medicaid funds. Proponents claim the expansion plan would be self-funding, while opponents say it is wrong to add between 100,000 to 250,000 new Medicaid recipients at a time when the system is near collapse. 
 
Day Care Funding (SB 2450/PA 97-0684): Gives the Governor the ability to reallocate existing dollars in the Fiscal Year 2012 budget to cover a shortfall in child care assistance for the working poor. Does not increase overall state spending for the year.
 
Enterprise Zones (SB 3616):  Extends Illinois enterprise zones, which are valued economic development incentives for municipal and county governments. The bill allows the zones to apply for a 15 year extension or creation, and if they continue to meet certain criteria they can receive an additional 10 year extension. Establishes specified criteria for EZ applicants, and a point system that will be judged by DCEO. Creates an Enterprise Zone board that will review applications and either confirm or deny them. Creates a new sales tax exemption process for zones and high impact businesses. Establishes new accounting procedures to ensure compliance and to review effectiveness of zones. Folds the Rivers Edge program into the Enterprise Zone program when they begin expiring (resulting in 5 additional zones).
 
Financial Reporting (SB 3794):  Creates an independent body to assist the State in improving the timeliness, quality, and processing of financial reporting for the State. Audits of the State's financial statements have repeatedly concluded that Illinois doesn’t have adequate controls to ensure that information reported by agencies is fairly stated and compliant with generally accepted accounting principles (GAAP). The State's financial reporting system is comprised of over 250 disparate financial reporting systems that are antiquated, costly to operate, and, for over 80% of those systems, not compliant with GAAP.
 
"Free" Hospital Care (SB 3261): Requires hospitals to provide free care to low-income patients in order to qualify for property tax-exempt status as a not-for-profit institution.  Most hospitals would be required to provide the services to persons at 200% or less of the federal poverty level ($46,100 for a family of four). Rural hospitals and hospitals under 25 beds would be required to provide the free care to patients at 125% or less of the federal poverty level ($28,813 for a family of four). Opponents raised concerns that this new mandate directly contradicts the aims of Medicaid reform because it will encourage patients to utilize hospital emergency rooms instead of participating in a coordinated care system. Opponents also pointed out that the care is not "free," but rather the costs will be shifted to working class families who will end up paying more for insurance coverage.
 
GA Scholarship Elimination (HB 3810):  Eliminates the General Assembly Scholarship program; no scholarship may be awarded after Sept. 1, 2012. Creates a Tuition and Fee Waiver Task Force that will review tuition/fee waiver programs at the state’s public universities.
 
Gambling Expansion (SB 1849):  Advances a major gambling expansion measure that includes a 4,000 position Chicago Casino to be operated by a Chicago Casino Development Authority to be appointed by the Mayor. Casino revenues would go to Chicago. It also included four new riverboat licenses for Rockford, Park City (next to Waukegan), Danville and the South Suburbs of Cook County as well as gaming at the state's six horse racing tracks. COGFA estimates more than $1 billion in one-time revenues, but not for at least four years after new facilities are operational. Recurring revenue estimates are $334 million a year, most which will not be realized until FY 2016.
 
Infrastructure Investment (HB 4568): Authorizes $1.6 billion in bonds to finance state infrastructure repairs and improvements.  Half of the total would be used for state and local roads (transportation "D") and half would be used for rail and mass transit statewide. These bonds are part of the remaining bond authorization approved in the 2009 capital program, and is estimated to create 27,000 jobs.
 
Legislative Furloughs/COLAs (HB 3188):  Requires every legislator to forfeit 12 days of compensation during FY2013. Prohibits FY2013 Cost of Living Adjustments for GA members, state’s attorneys, and elected constitutional officers. Savings from furlough days amounts to savings of approximately $674,000. A .9 percent COLA would have amounted to about $285,000.
 
Leucadia (SB 3766):  Requires Nicor Gas and Ameren Illinois to pay 95 percent of the costs to build and operate a $3 billion coal-to-gas plant proposed by Leucadia National Corp. on the Southeast Side of Chicago. The plant is expected to bring 200 permanent jobs, and produce “clean coal” with fewer emissions, but also enforces a 30-year contract on Ameren and Nicor who believe they are being forced to pay more than their fair share for construction and operating costs.
 
Medicaid Reforms and Reductions (SB 2840):  Reduces Medicaid liabilities by more than $1.6 billion, and is a major component of the Medicaid reform package that is anticipated to reduce overall liabilities by $2.7 billion in FY13. Reflects numerous reforms that Senate GOP lawmakers have sought for many years, including many of the changes strongly advocated for in their 2011 Reality Check fiscal reform plan. Reforms target eligibility verification, utilization controls, optional services, and rate adjustments, among other changes.
 
Medicaid Reform – Section 25 (SB 3397): This reform will "cut up the Governor's Medicaid Credit Card" by changing the “Section 25” provision in state law that has allowed administrations to buy Medicaid services in one fiscal year, but not pay for those services until the next fiscal year. Beginning with the fiscal year that starts in July, the state cannot roll over more than $700 million in Medicaid bills. The following year and every year thereafter, the state's credit limit will be held to $100 million.
 
Presumptive Eligibility (SB 770/PA 97-0683): Targets the state’s use of “presumptive eligibility,” wherein applicants for aid in Illinois are automatically assumed to be eligible before the state has determined whether or not they are truly eligible. In response, Senate Bill 770 establishes that applicants cannot be reimbursed for the first 30 days of the Temporary Assistance for Needy Families (TANF) application process. The bill gives the state 45 days to process a TANF application.
 
Purchasing/Workers Compensation  (SB 2958): This is an omnibus Procurement Code reform designed to make it easier for companies to do business with the State.  Also draws clear lines of authority governing state procurement. In addition this legislation contains a provision that would outsource the State's Workers' Compensation Program to a third party vendor.  Requires the State (CMS) to relinquish responsibility to the third party on Jan. 1, 2013, and transfer all parts of the program to the vendor. State government has been hit hard not only by skyrocketing Workers’ Compensation costs, but also by scandals highlighting mismanagement of the program.
 
Racketeering (HB 1907): This is known as the "Mini" RICO (Racketeer Influenced and Corrupt Organizations) Act. It creates enhanced penalties for an extensive list of offenses when committed in furtherance of a criminal enterprise. It is an initiative of the Cook County State's Attorney and is intended to target street gangs who make huge profits as a result of engaging in drug trafficking and other criminal activity. The asset forfeiture provisions can go after gangs by taking away their wealth and other assets such as vehicles and real estate. While the federal RICO law was designed to go after organized crime, over the years it has been used against other groups, organizations and individuals. The broad application has drawn criticism from many quarters and has lead to several failed attempts in Illinois to enact a State RICO law.
 
Regional Superintendant Reduction (SB 2706):  Establishes that each educational service area must contain at least 61,000 (instead of 43,000) inhabitants.  The number of regions is reduced from 45 to 35 as well. This will reduce the number of regional superintendents.
 
Retiree Health Insurance (SB 1313): Repeals the state's health insurance subsidy of up to 100% (for retired employees with 20 years+ of service). Directs CMS to issue a retiree health insurance premium payment plan (annually) for annuitants of the five state pension systems. The premium plan is subject to approval by the legislature's Joint Committee on Administrative Rules.
 
Tobacco Tax Hike (SB 2194): Increases cigarette taxes by $1 per pack and doubles the tax on other tobacco products from 18% to 36%. Senate Republicans raised concerns that relying on a shrinking revenue source for growing Medicaid expenses was shortsighted. It was also noted that tobacco taxes are among the most regressive taxes in the state, with low-income taxpayers paying a disproportionate share of tobacco taxes. They also questioned how the relatively small revenues raised by the tax hike would solve the state's financial problems after a 67% tax hike last year failed to do so. The Funds would go toward Medicaid and would be matched by federal funds. The measure also spells out requirements that hospitals must meet in order to qualify for property tax exemptions as not-for-profits and imposes charity care requirements on for-profit hospitals.