Government Strategy Associates

4023 Terramere Avenue

Arlington Heights, Illinois 60004

M E M O R A N D U M

To: Cathy Plouzek

Tami Ireland

Kay Tichneal

From: Terry Steczo

Maureen Mulhall

Re: Legislative Report

Date: February 28, 2013

Setting The Table

An old adage says, “The governor proposes, and the legislature disposes.” Last week Governor Quinn provided the General Assembly with a glimpse of his agenda for the coming session when he gave his “State of the State” address. Now, it’s up to the legislature in the next fifteen weeks to decide the ultimate fate of his proposals. Some will be embraced, some will be cast aside, and others will be the subject of some brutal, rigorous debate with a fate that’s far from certain.

Issues such as his proposal to create an advanced manufacturing hub in Chicago as a partnership between the University of Illinois and the National Center for Supercomputing Applications should be non-controversial. His proposal for an “open primary” (voters not having to declare their party affiliation), something he has proposed for decades, probably doesn’t stand a chance.

Then, there is pension reform and “public safety legislation” (aka gun control). No doubt about the fact that the fur will fly with these two issues. Courts have ruled that the 2nd Amendment is a fairly absolute right and have mandated the legislature to adopt a “conceal and carry” law by the end of May. Gun control proponents actually see this as an opportunity to negotiate some controls on some types of weapons like assault rifles. Both sides are extremely vocal and will no doubt raise the decibel level in the Capitol to ear-splitting levels. So far, the 2nd Amendment advocates have not been amenable to discussing compromise because they, ostensibly, have the courts on their side.

Pension reform will be the other roof-raiser issue. This is the legislature’s year to finally put the pedal to the metal and resolve the crisis. But, then again, that’s been said before. But how long can they go cutting the budget by a billion dollars per year to accommodate increased pension costs? Without some reform proposal that stems the tide there won’t be much of a budget left.

There are truly some philosophical differences between legislators on the best approach that can provide the most relief and also pass a constitutional test. But, after two years of false starts and false hopes this is the year that should result in some concrete action being taken. But before anything does happen there will be plenty of angst for legislators with demonstrations, threats of strikes, threatened suits by retirees and employees both, as well as other considerations that will have most legislators reaching for the Tylenol.

With the Governor’s budget address due next week, talk will no doubt turn to the state’s woeful cash flow and the possibility of issuing bonds to pay all or a portion of the $8 billion in back bills. So far, it’s been all talk and no action on the issue with many legislators uncertain about possible repercussions. If the issue does arise during the remaining weeks of the session it will be a battle between forces to look at additional bonding as increased debt versus those who consider it more of a “refinancing” plan.

Governor’s Budget Message on Tap

Every legislative session establishes a rhythm. This past week marked the first that the House and Senate have been in session together since the first full week in February and there’s no doubt that the session is not close to hearing a rhythm let alone finding it. But, with the scheduled budget address by the Governor next Wednesday things should begin to hum procedurally. Each session begins as a blank slate. That slate is filled in as bills get filed and as discussion begins on new or carry-over issues. And, as much as citizens and observers want to process to go from 0-100 as fast as a rocket, but government works very slowly, and the legislative process even slower.

Part of the delay in addressing important substantive issues is simply the process of drafting and introduction. It takes time to draft the over 5,800 combined House and Senate Bills that members have submitted for consideration this session. Add to that the legislative rules that, for the most part, are intended to allow the public notice in order to participate and you can see the reasons why the start of sessions moves at tortoise speed. Every so often the General Assembly moves it into high gear for emergencies but not often. Most issues must go through the often laborious process that may end with final passage sometime toward the end of May.

Each General Assembly session’s first and foremost priority is to enact a budget for the state of Illinois. The process starts with the Governor providing his budget plan. In recent years, with state finances a shambles, the General Assembly has adopted revenue and spending caps to keep spending in check while attempting to take into consideration ever increasing pension and other debt obligations. It is expected that the same process will be followed this year.

In this week leading up to the Governor’s budget message there has been good news and not so good news from two different sources. Here’s the good news. The Commission on Government and Fiscal Accountability (COGFA) issued a recent fiscal report indicating that through January FY2013 revenues have increased a smidgeon over $1.2 billion. However, some of these revenues are one time only increases that can’t be counted on next year, making the general, “reusable” increase level somewhere in the neighborhood of $750 million. For FY2014, GOGFA estimates additional revenues in the neighborhood of $665 million; not fabulous but still a sign that the state economy seems to be improving.

The bad news is that the report by the non-partisan Civic Federation this week indicated that unless pension reform and a plan to account for increases in the state Medicaid program are adopted to free up state cash flow. According to their study, unless substantial action is taken pension costs alone will consume over one-third of the state budget by FY2018. The report also calculates that the unresolved pension issues plus the revenue loss caused by the temporary income tax sunset in 2015 could balloon the state’s unpaid bills from the current $8 billion to $22 billion by that same FY2018 time frame.

Back To The Future

Regardless of what was said earlier about each legislative session finding a rhythm, sometimes the leadership tries to insert a pacemaker to help establish it. That was the case this week with gun and pension legislation. While these issues will not receive any final considerations until nearer the close of the session, the House Democratic leadership has decided that it needs to get members thinking about the depth and breadth of issues that are looming. Tuesday was “conceal and carry day” where the day was devoted to considering amendments to addressing conceal and carry issues. Today, Thursday, is “pension day” where the chamber will consider a number of amendments addressing various elements of pension reform.

Current general House practice calls for amendments to bills to be referred to committees for consideration. The practice of sending amendments directly to the floor, as in the case with each of these issues, is done mostly at the end of sessions and for technical or housekeeping matters. However, that hasn’t always been the case. The rules the House labors under today came into existence in 1995. Prior to that the common procedure was to file amendments to bills, have them distributed on the House floor, and consider them immediately. Not only was there no committee hearings, but there generally was very little notice either. But, only a handful of House members were serving back then so to everyone else who only knows the newer rules it’s a big deal. It’s not, especially since there is not final action involved. It will also let all of the newer members have an opportunity to start mulling over what any final pension reform package needs to look like at the time of the May 31 adjournment.

Representatives Elaine Nekritz and Tom Cross introduced a plan yesterday that will be the basis of today’s pension reform plan considerations. Their bill creates Tier 3 defined benefit/defined contribution plan for SURS and TRS members who start work after January 1, 2014, and modifies pension plans for employees hired both before and after 2011. Some of the amendments offered to the plan may include provisions to eliminate all future cost-of-living adjustments, halt the COLAs until the pension plans reach an 80 percent funding level, raise the retirement age for full benefits to 67, and require employees to chip in another 5 percent of their paychecks toward retirement. If adopted, none of these will represent the final word, either in the House nor the Senate, where they have adopted a clearly different philosophy on what might or might not satisfy constitutional hurdles and restrictions.

Medicaid Expansion Legislation Begins To Move

One large part of the upcoming Affordable Care Act (ACA) implementation is the extension of Medicaid to individuals earning less than 133% of the Federal Poverty Level (FPL). Originally a mandate under the ACA, the U.S. Supreme Court ruling last year made this portion voluntary among the states. As part of their bargain the federal government has agreed to pick up 100% of the cost for the first three years and 90% thereafter. The Governor signaled long ago that Illinois was going to become part of the program and has asked the legislature to approve. It looked like this issue would be addressed either in the fall veto session or January lame duck session but it didn’t happen. Now, the time has apparently come with the Senate Executive Committee having recently approved the plan, sending Senate Bill 26 to the floor for further consideration. The legislation also extends the hospital assessment program for 21 days providing a cash infusion for both the state ($3 million) and hospitals ($10 million). Medicaid expansion will assist approximately 342,000 people, by HFS estimates.

HFS Director Julie Hamos testified that hospitals, clinics, local governments, homeless shelters and jails be the largest beneficiaries from the ACA implementation because it will supplant reliance on charity care and emergency room usage for non-emergency medical care. She also indicated that benefit eligibility will be verified annually.

Illinois also has received word that the federal government approved the state-federal partnership application relating to the Health Care Benefits Marketplace (formerly Exchange). Under such plans, the feds provide the structure and the state runs the Exchange/Marketplace. But the state, via the legislature, can’t agree on what kind of marketplace it wants or how the marketplace board should be structured. The result of a stalemate will be a federally run marketplace for Illinois. A federally run marketplace would allow fewer options and less flexibility that if the state were to be in charge. The General Assembly has until the May adjournment to resolve the apparently unsolvable issues. The ACA affords states the opportunity to take over and run its marketplace at any time, and many in Illinois are hoping for sooner.

FOIA In Our Future?

One of the most ominous pieces of legislation for local government associations that has been introduced in this session is House Bill 943, legislation that would amend the Freedom of Information Act to specify that the term "public body" includes any association of units of local government or any not-for-profit corporation with membership consisting of units of local government. It means that the Illinois Council of SHRM could conceivably be brought under the umbrella of FOIA and be required to comply with freedom of information requests, spending the staff time to comply and possibly legal expenses when requests are denied.

In a conversation with the sponsor, Rep. Sam Yingling (D-Hainesville), he indicated that the legislation is undergoing major revision and is not intended to place any burden on smaller associations. His goal, he said, is to amend the bill to exempt associations with just a few employees and also associations that are comprised of a mixture of public and private members. However, even if an accommodation for smaller associations is made today, there is always the likelihood that such an exemption could be repealed in the future.

Session Schedule/Deadline Dates

Here are some relevant dates for the legislative session.

·  March 6 – Governor’s Budget Address

·  March 22 – House/Senate Committee Deadlines

·  March 25-April 7 – Spring Recess

·  April 19 – House 3rd Reading Deadline (House Bills)

·  April 25 – Senate 3rd Reading Deadline (Senate Bills)