By Bethany Jaeger
Political hopefuls and Statehouse insiders waited for the day when Illinois Attorney General Lisa Madigan would decide whether she would run for governor or for the state’s second U.S. Senate seat in 2010. Today she surprised most of them by saying, “Neither.”
Citing her family and her feeling that there is still “plenty to do” in her current position, she said she decided to seek a third term as attorney general, setting off a chain reaction of political decisions leading up to the election season.
“I know that for now, the best way for me to continue serving the people of Illinois is to continue doing the job that I love,” Madigan said in her announcement. She cited her work targeting predatory lending practices, lifetime supervision of sex offenders, utility rates, hospital bills for uninsured patients and public access to information.
Her decision to seek another term ripples throughout state and national politics, particularly because it comes shortly after a trip to Washington, D.C. She met with President Barack Obama and reportedly discussed a potential bid for his former U.S. Senate seat. Madigan was seen as a strong candidate to ensure that it remained in Democratic hands, given that U.S. Sen. Roland Burris’ abbreviated term has been clouded by his controversial appointment by embattled former Gov. Rod Blagojevich.
Attorney general
As an incumbent candidate for statewide office, Madigan faces a repeat opponent, DuPage County State’s Attorney Joe Birkett. He lost to Madigan in 2002. He ran for governor in 2006 but soon became Judy Baar Topinka’s running mate as lieutenant governor on the GOP ticket. They lost to Blagojevich and then-Lt. Gov. Pat Quinn. On his campaign Web site, Birkett said, “I want to remain a prosecutor.” He said he would bring to the forefront ideas to partner with state’s attorneys in every county, work with the General Assembly to reform laws, root out public corruption and protect communities against gang violence.
His fundraising, as reported to the Illinois State Board of Elections, however, has been outpaced by Madigan. She most recently reported having nearly $3.5 million available at the end of 2008, compared with Birkett’s $44,676 for the same period.
State Rep. Julie Hamos, an Evanston Democrat, was considering a bid for attorney general. Her campaign released a statement today saying she would revisit with community leaders and supporters. “I look forward to hearing their ideas and input as I discuss my next steps with my family."
U.S. Senate
Now that Madigan is out of the race for the Hill, chips are starting to fall for likely Democratic and Republican candidates to challenge Burris, if he indeed runs. Republican U.S. Rep. Mark Kirk has not officially announced but has reportedly reached out to supporters today. Statehouse insiders also have mentioned Kirk as a possible GOP candidate for governor.
On the Democratic side, state Treasurer Alexi Giannoulias of Chicago has formed an exploratory committee for the Senate. CORRECTION: Raja Krishnamoorthi, former deputy treasurer, is exploring a run for state comptroller, not treasurer. If Giannoulias vacates his position as treasurer, his chief of staff, Robin Kelly, wants it. Another Democrat exploring the U.S. Senate race is Chris Kennedy, who heads Chicago’s Merchandise Mart and is the son of the late Sen. Robert F. Kennedy. Democratic U.S. Rep. Jan Schakowsky decided June 8 against a Senate bid and instead will run for reelection in her House seat.
Governor
Madigan’s decision to seek reelection also causes a ripple effect at the state level. Not seeking the governor’s office avoids the politically awkward situation of serving while her father, House Speaker Michael Madigan, controlled one of the legislative chambers. It also avoids a primary run against sitting Democratic Gov. Pat Quinn.
Considering she was also widely seen as one of the strongest candidates for the chief executive’s job, several potential opponents waited for her decision. Comptroller Dan Hynes is considering; however, he has not officially announced which office he might seek. His campaign issued a statement that said he would discuss his options with his family and “make a decision within the next few weeks.” Krishnamoorthi is considering a bid for comptroller if Hynes decides to move on. My apologies for an error published in the original post.
The GOP primary race for governor, meanwhile, is increasingly crowded, particularly with suburban Chicagoans. State Sen. Kirk Dillard of Hinsdale, who served in the administrations of former Govs. Jim Edgar and Jim Thompson, officially announced his bid with a statewide tour today. “I’ve always said I didn’t care whether Lisa Madigan was my opponent. I intended to run otherwise. But, obviously, she and her father would have been very difficult opponents.”
He was quoted this morning as saying he looks forward to Lisa Madigan being attorney general when he’s governor. Dillard said this afternoon, however, that he was not endorsing her. “Joe Birkett and [GOP Rep.] Jim Durkin are close friends and would be great attorney generals. And it would be worth the price of admission to see a rematch between Joe Birkett and Ms. Madigan, especially since State’s Attorney Birkett came so close last time to beating her.”
In the race for governor, Dillard joins GOP candidates Sen. Bill Brady of Bloomington, a repeat gubernatorial hopeful; Sen. Matt Murphy of Palatine, who announced last month and has become his chamber’s budget point person; DuPage County Board Chairman Bob Schillerstrom; Dan Proft, political commentator for WLS-AM 890 Chicago radio, a political consultant and a writer for conservative publications; and Adam Andrzejewski, a self-made businessman and self-funded candidate based in the Chicago suburb of Oak Brook.
We’ll have more about the suburban Chicago hotspot for political aspirations in the future.
Wednesday, July 08, 2009
Tuesday, July 07, 2009
Layoff notices go out
By Bethany Jaeger
Gov. Pat Quinn said about 2,600 layoffs are needed to help reduce state spending by $1 billion. At the same time he outlined the cuts in Chicago Tuesday, Quinn also vetoed another portion of the state budget. He said the General Assembly sent him a spending plan that “just spends too much money.”
“I think the best way to operate with the budget that I was given by the General Assembly a week ago is to veto it in its entirety because it doesn't cut spending as it should,” he said in a Chicago news conference. He later added: “We're not playing tennis here. We're playing with people's lives.”
Quinn vetoed House Bill 2145, which authorized $3.8 billion in spending on state operations, because it didn't follow the principle of shared sacrifice, he said. “There were too many instances of entities getting the same budget they did the year before or a very modest reduction, where others are taking very painful cuts. I don't believe that that's fair, and I don't think the people, the taxpayers of Illinois think that's fair.”
Of his $1 billion in cuts, he proposed 12 furlough days, or unpaid days off, for all state employees, including unionized workers and those in the executive and legislative branches. The 2,600 layoffs would spread across all state agencies. He said the furlough days would save about $108 million. Without them, he would seek an additional 2,500 layoffs.
The list of cuts proposed by the governor also would include:
“We're all in this together,” Quinn said. “So whether you're the governor of Illinois or a member of the legislature or somewhere in the state bureaucracy, we have to cut costs, cut costs, cut costs.”
But a large chunk of the governor's cuts would require negotiations with public employee unions, which would mean reopening active labor contracts to implement furlough days and to reconsider pay raises scheduled for this year. Quinn said those raises account for about $125 million.
Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said yesterday, “We have a duty to listen to anything that the administration proposes, and we've indicated a willingness to do that.” However, he added, furloughs have the same effect of service cuts, and layoffs could result in more expensive overtime pay.
Furloughs are the “least painful way of going,” Quinn said. “We want to limit layoffs wherever possible. That's why the use of the furlough can help preserve jobs on the state.” Despite furloughs, he added the state would still have to lay off about 2,600 workers and that Illinois only has as many employees today as it did in 1973. The roughly 58,000 workers is one of the nation's lowest ratios of state employees per state resident. “But having said that," Quinn said, "we still have to do these very difficult cuts because we simply don't have the money.”
The dramatic cuts are nothing new to many legislators. The governor has been making similar warnings since the spring legislative session. However, some Republican lawmakers said they're still waiting for the governor to act on other types of reforms before they'll consider a tax increase, which Quinn maintains is the other major way to avoid such deep budget cuts.
For instance, Rep. Franco Coladipietro, a Blooomingdale Republican, said the governor and the General Assembly need to address initiatives that affect not just this year's budget, but budgets several years down the road. He cited job growth, as well as more significant ethics and public employee pension reforms. “Passing a tax increase right now with making no changes to the structural budget process in Illinois only puts us in a position where we'll be in the same exact position three years from now,” he said. “And it doesn't change anything.”
Coladipietro was one suburban Chicago legislator at a closed-door meeting with the governor yesterday. Quinn also previously met with female legislators. He said he plans to meet with downstate legislators in Springfield later this week, and he's scheduled to meet Monday with legislative leaders in the Executive Mansion.
Gov. Pat Quinn said about 2,600 layoffs are needed to help reduce state spending by $1 billion. At the same time he outlined the cuts in Chicago Tuesday, Quinn also vetoed another portion of the state budget. He said the General Assembly sent him a spending plan that “just spends too much money.”
“I think the best way to operate with the budget that I was given by the General Assembly a week ago is to veto it in its entirety because it doesn't cut spending as it should,” he said in a Chicago news conference. He later added: “We're not playing tennis here. We're playing with people's lives.”
Quinn vetoed House Bill 2145, which authorized $3.8 billion in spending on state operations, because it didn't follow the principle of shared sacrifice, he said. “There were too many instances of entities getting the same budget they did the year before or a very modest reduction, where others are taking very painful cuts. I don't believe that that's fair, and I don't think the people, the taxpayers of Illinois think that's fair.”
Of his $1 billion in cuts, he proposed 12 furlough days, or unpaid days off, for all state employees, including unionized workers and those in the executive and legislative branches. The 2,600 layoffs would spread across all state agencies. He said the furlough days would save about $108 million. Without them, he would seek an additional 2,500 layoffs.
The list of cuts proposed by the governor also would include:
- $150 million - Moving Medicaid patients to managed care health plans so they have medical "homes" and reducing IllinoisCares Rx, a prescription drug program started by former Gov. Rod Blagojevich.
- $250 million - Reducing grants to local agencies, local governments and programs by 10 percent across most state agencies, except the Department of Veterans' Affairs.
- $175 million - Maintaining last year's funding levels for education, while preserving the investment needed to secure all federal stimulus dollars.
- $125 million - Laying off about 1,000 Department of Corrections employees and possibly closing some prisons (he previously mentioned letting non-violent criminal offenders out of jail early).
- $100 million - Requiring all state agencies to reserve some spending for an even rainier day.
- $25 million - Reducing spending in other state offices and departments not under the governor's control.
“We're all in this together,” Quinn said. “So whether you're the governor of Illinois or a member of the legislature or somewhere in the state bureaucracy, we have to cut costs, cut costs, cut costs.”
But a large chunk of the governor's cuts would require negotiations with public employee unions, which would mean reopening active labor contracts to implement furlough days and to reconsider pay raises scheduled for this year. Quinn said those raises account for about $125 million.
Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said yesterday, “We have a duty to listen to anything that the administration proposes, and we've indicated a willingness to do that.” However, he added, furloughs have the same effect of service cuts, and layoffs could result in more expensive overtime pay.
Furloughs are the “least painful way of going,” Quinn said. “We want to limit layoffs wherever possible. That's why the use of the furlough can help preserve jobs on the state.” Despite furloughs, he added the state would still have to lay off about 2,600 workers and that Illinois only has as many employees today as it did in 1973. The roughly 58,000 workers is one of the nation's lowest ratios of state employees per state resident. “But having said that," Quinn said, "we still have to do these very difficult cuts because we simply don't have the money.”
The dramatic cuts are nothing new to many legislators. The governor has been making similar warnings since the spring legislative session. However, some Republican lawmakers said they're still waiting for the governor to act on other types of reforms before they'll consider a tax increase, which Quinn maintains is the other major way to avoid such deep budget cuts.
For instance, Rep. Franco Coladipietro, a Blooomingdale Republican, said the governor and the General Assembly need to address initiatives that affect not just this year's budget, but budgets several years down the road. He cited job growth, as well as more significant ethics and public employee pension reforms. “Passing a tax increase right now with making no changes to the structural budget process in Illinois only puts us in a position where we'll be in the same exact position three years from now,” he said. “And it doesn't change anything.”
Coladipietro was one suburban Chicago legislator at a closed-door meeting with the governor yesterday. Quinn also previously met with female legislators. He said he plans to meet with downstate legislators in Springfield later this week, and he's scheduled to meet Monday with legislative leaders in the Executive Mansion.
Monday, July 06, 2009
Gov. Quinn: Cuts are coming
By Bethany Jaeger
Gov. Pat Quinn is slated to announce layoffs and other government spending cuts in what he said is an effort to cut another $1 billion from the state’s operating budget. He’s scheduled to announce specific cuts in Chicago tomorrow afternoon, one week before the legislature is scheduled to return to Springfield to consider his recent veto of the part of the budget that would fund human services at reduced levels.
After meeting with suburban legislators today, Quinn said public employee unions would be notified this week of unpaid days off and layoffs. He did not specify where the layoffs would take place; however, Republican Rep. Jim Durkin of Western Springs attended the meeting and said the administration outlined 1,000 layoffs from the Illinois Department of Corrections and about 900 layoffs from the Department of Human Services, as well as cuts in grant programs.
One of the largest unions, the American Federation of State, County and Municipal Employees Council 31, had not received official notice, said Anders Lindall, union spokesman, adding that layoffs are expected without a new flow of revenue into state coffers. “As long as the budget is broken and legislators haven’t passed sufficient revenue, layoffs would be inevitable. Not just layoffs, but damaging cuts to essential human services and public safety.”
Lindall said furlough days or layoffs at state agencies would be tantamount to cutting services, wouldn’t save as much money as needed and could actually cost the state more money in added overtime pay. “Certainly, the thousands of layoffs he’s now talking about would have a profound harmful impact on basic services in DHS, safety in the prisons, DCFS functions and all of the basic services that Illinoisans [rely upon].”
According to Durkin, the governor indicated in the private meeting that he was willing to operate on a temporary state budget until a more permanent solution could be reached. That would counter Quinn’s previous statements that he would not accept a temporary budget.
The governor continues to frame a state income tax increase as the only solution to balancing the budget, which he estimates is $9.2 billion out of balance, but several legislators said they don’t expect a tax hike to win approval next week.
“I don’t think anybody’s mind was changed with today’s meeting,” Durkin said. “And I think that at this point in the year, I just don’t know how you get to 71.” He referred to the 71 votes needed in the House to approve any legislation now that the legislature has gone into overtime session. And cutting thousands of employees from prisons, for instance, won’t win political points with legislators, Durkin added. “I can see where a lot of these jobs are. These are in districts where you might have people who previously were supportive of an income tax increase. You lost ’em.”
Rep. Jack Franks, a Woodstock Democrat who attended today’s meeting, said the governor hasn’t proven to the public that a tax increase is a last resort. Instead of identifying specific spending cuts and negotiating with unions early in the spring, the governor has waited until the new fiscal year this summer to lay the groundwork for a tax hike. “This should have been the very last option on the table. And for him, it was the first and only,” he said.
Franks said his recommendations to the governor have been to cut member initiatives, otherwise known as pork projects, reduce or eliminate the pay of various board members and commissioners, close some state prisons and move to a two-year budget cycle.
Few legislators had high expectations for next week’s special session. “I think next will be a colossal waste of time,” said Rep. Dennis Reboletti, an Elmhurst Republican. “I don’t think any suburban legislators’ mind was changed by this meeting.”
In addition to considering the governor’s veto of the human services budget, the Senate also could reconsider a short-term borrowing scheme that the governor initially proposed but then lobbied against at the last minute — a bone of contention with many lawmakers.
Quinn, however, remains an eternal optimist. He has met with female and suburban legislators and said he plans to meet with groups of legislators from all regions of the state because he believes answering questions, offering suggestions and listening to criticisms has resulted in progress. “I would like to see all of this done by the 16th of this month,” he said.
Gov. Pat Quinn is slated to announce layoffs and other government spending cuts in what he said is an effort to cut another $1 billion from the state’s operating budget. He’s scheduled to announce specific cuts in Chicago tomorrow afternoon, one week before the legislature is scheduled to return to Springfield to consider his recent veto of the part of the budget that would fund human services at reduced levels.
After meeting with suburban legislators today, Quinn said public employee unions would be notified this week of unpaid days off and layoffs. He did not specify where the layoffs would take place; however, Republican Rep. Jim Durkin of Western Springs attended the meeting and said the administration outlined 1,000 layoffs from the Illinois Department of Corrections and about 900 layoffs from the Department of Human Services, as well as cuts in grant programs.
One of the largest unions, the American Federation of State, County and Municipal Employees Council 31, had not received official notice, said Anders Lindall, union spokesman, adding that layoffs are expected without a new flow of revenue into state coffers. “As long as the budget is broken and legislators haven’t passed sufficient revenue, layoffs would be inevitable. Not just layoffs, but damaging cuts to essential human services and public safety.”
Lindall said furlough days or layoffs at state agencies would be tantamount to cutting services, wouldn’t save as much money as needed and could actually cost the state more money in added overtime pay. “Certainly, the thousands of layoffs he’s now talking about would have a profound harmful impact on basic services in DHS, safety in the prisons, DCFS functions and all of the basic services that Illinoisans [rely upon].”
According to Durkin, the governor indicated in the private meeting that he was willing to operate on a temporary state budget until a more permanent solution could be reached. That would counter Quinn’s previous statements that he would not accept a temporary budget.
The governor continues to frame a state income tax increase as the only solution to balancing the budget, which he estimates is $9.2 billion out of balance, but several legislators said they don’t expect a tax hike to win approval next week.
“I don’t think anybody’s mind was changed with today’s meeting,” Durkin said. “And I think that at this point in the year, I just don’t know how you get to 71.” He referred to the 71 votes needed in the House to approve any legislation now that the legislature has gone into overtime session. And cutting thousands of employees from prisons, for instance, won’t win political points with legislators, Durkin added. “I can see where a lot of these jobs are. These are in districts where you might have people who previously were supportive of an income tax increase. You lost ’em.”
Rep. Jack Franks, a Woodstock Democrat who attended today’s meeting, said the governor hasn’t proven to the public that a tax increase is a last resort. Instead of identifying specific spending cuts and negotiating with unions early in the spring, the governor has waited until the new fiscal year this summer to lay the groundwork for a tax hike. “This should have been the very last option on the table. And for him, it was the first and only,” he said.
Franks said his recommendations to the governor have been to cut member initiatives, otherwise known as pork projects, reduce or eliminate the pay of various board members and commissioners, close some state prisons and move to a two-year budget cycle.
Few legislators had high expectations for next week’s special session. “I think next will be a colossal waste of time,” said Rep. Dennis Reboletti, an Elmhurst Republican. “I don’t think any suburban legislators’ mind was changed by this meeting.”
In addition to considering the governor’s veto of the human services budget, the Senate also could reconsider a short-term borrowing scheme that the governor initially proposed but then lobbied against at the last minute — a bone of contention with many lawmakers.
Quinn, however, remains an eternal optimist. He has met with female and suburban legislators and said he plans to meet with groups of legislators from all regions of the state because he believes answering questions, offering suggestions and listening to criticisms has resulted in progress. “I would like to see all of this done by the 16th of this month,” he said.
Sunday, July 05, 2009
People look for answers in funeral trust case
By Jamey Dunn
Millions of dollars entrusted by Illinois citizens to pay for their funerals is at stake in an investment scandal that has been marked by confusion and finger-pointing. A lawsuit now poses funeral directors against an association that was supposed to protect their interests.
A pre-need funeral trust fund allows people to make their final arrangements in advance for the cost at the time of purchase. The money is then invested into the trust, and the investment returns help cover inflation costs between the time customers buy their plans and the time they pass away.
Illinois’ pre-need fund, which held about $300 million at its highest point, began losing money in 2001 and is now mired in controversy, as the Illinois Funeral Directors Association faces investigations and a lawsuit filed by some of its members.
Funeral homes are still on the hook for guaranteed pre-need plans, regardless of whether the trust has enough money to foot the bill. Rep. Dan Brady, a Bloomington Republican and licensed funeral director, said that his fellow directors are “caught in the middle. They are left holding the bag … because of investment problems and questionable dealings.” Some directors say the association that is supposed to protect their interests has hung them out to dry by making bad investments and failing to give them accurate information about the pre-need trust.
The Illinois Funeral Directors Association began taking out life insurance policies on funeral directors as an investment, but the insurance policies did not pay out quickly enough to cover the funeral costs of the people with pre-need plans. When a funeral director dies, a portion of the insurance payout would go to his or her beneficiaries. But the majority of the money would go to the trust.
According to a complaint filed by the Illinois secretary of state’s office, the association sunk about $200 million from the trust into life insurance policies.
However, a statement on the Funeral Directors Association’s Web site pegs the economic downturn as the primary reason for the trust’s losses.
The association was licensed to control the trust in 1980 by then-Comptroller Roland Burris, now a U.S. senator. The license has come under scrutiny because Burris became a lobbyist for the association after he left office. Current Comptroller Dan Hynes has said the license shouldn’t have been issued in the first place. Burris has declined to comment about why he awarded the license, saying too much time has passed and he doesn’t remember.
Hynes’ office pulled the association’s license to manage the trust in September 2007 and ordered the organization to repay almost $10 million in fees it collected for managing the trust. Carol Knowles, spokeswoman for Hynes, said the comptroller’s office is prepared to take the association to court if the money is not returned.
Also as part of the fallout, a Merrill Lynch agent who sold the life insurance policies to the association has lost his investment adviser’s license from the secretary of state’s office and his insurance broker’s license from the Illinois Department of Insurance. The agent, Edward Schainker, is contesting both decisions.
Knowles said the comptroller’s first goal going forward is to protect individuals who purchased pre-paid funeral plans and then to help funeral directors who were unaware of their association’s investments. However, Knowles said she thinks some funeral directors knew what was going on. “They received personal insurance policies free of charge. Many of them sat on the [Illinois Funeral Directors] board at one time or another, and they participated in an investment that was, as they say, ‘too good to be true.’”
Many association members, in turn, claim that the comptroller’s office failed to protect them by waiting too long to alert them of the fund’s losses.
In an attempt to prevent the situation from repeating itself, Hynes backed state legislation aimed at protecting the money that is still in the fund and creating more transparency for investors. Senate Bill 1682, which passed both chambers of the General Assembly this spring, would require the fund to be administered by a third-party trustee that would be legally bound to make decisions that were in the best interest of investors. The bill also would require the trustee to send reports directly to individuals with money invested. The bill’s sponsor, Democratic Rep. Lisa Dugan of Bradley, said that measure is just a starting point for reform and would make changes that are urgently needed. “We can’t take $40 million that’s been mismanaged and not have something in place to make sure that — any money from here on out — the same thing doesn’t happen. … That part of the issue needed to be put under regulatory control now.”
However, it’s difficult to pinpoint the amount the fund has lost because the Funeral Directors Association gave its members inaccurate statements on the trust, according to Michael McRaith, director of the Insurance Department and acting secretary of the Department of Financial and Professional Regulation. He said it may not even be a matter of the fund loosing a lot of money; it may be that the association told members that the fund was doing better than it actually was. That difference now appears to be a large loss.
The Department of Financial and Professional Regulation worked out an $18 million settlement with Merrill Lynch, which sold the insurance policies to the association. McRaith said the figure was based on premiums that Merrill Lynch received for insurance policies and an additional amount that was tacked on to “bring the matter to closure.”
Funeral directors criticized the settlement by saying Merrill Lynch would be returning pennies on the dollar of the original investments into the trust. Some association members are, instead, opting to sue the Funeral Directors Association and Merrill Lynch. If individual members refused Merrill Lynch’s offer to settle, then their portion of the money would go to their customers who bought the pre-need funeral arrangements, instead.
Brady said the settlement is a well-intentioned effort to restore some faith in the trust, but, in the end, it has just created more “frustration and confusion” for funeral directors. He said the directors do not know if they should settle because they are unsure about how much money they actually lost. Brady said he thought $40 million was a conservative estimate but added, “I don’t think anybody truly knows.”
Confusion and frustration seem to be recurring themes surrounding the future of the pre-need funeral trust, and, so far, solutions are nowhere in sight. The Illinois House voted to create a task force that will look into the issue. The panel will consist of legislators and representatives from the comptroller’s office, the Department of Insurance and the Department of Financial and Professional Regulation. Both McRaith and Knowles said their offices wanted to wait for the task force’s recommendations before proposing any other changes to the way the trust is regulated.
Brady, who sponsored the resolution that created the task force, said that the group’s goals include holding accountable whoever is responsible for the problems with the trust and creating a comprehensive reform package that addresses problems in all areas of pre-need funeral sales. The task force must submit the report to the governor by the end of the year.
With all the negative attention on the trust, Brady said that he hopes reforms could help get it back on solid ground. “When you have a multifaceted problem like that, you have a consumer that is becoming very suspicious and skeptical when all they have been told over the last several years is that the whole idea is piece of mind.”
Knowles said that people should not be afraid to invest in the fund just because some individuals made irresponsible investments and took “advantage of the system.” She added, “People rob banks every day, but that doesn’t and shouldn’t stop people from putting their money in banks.”
See The State-Journal Register for a timeline of events associated with the pre-need funeral trust.
Millions of dollars entrusted by Illinois citizens to pay for their funerals is at stake in an investment scandal that has been marked by confusion and finger-pointing. A lawsuit now poses funeral directors against an association that was supposed to protect their interests.
A pre-need funeral trust fund allows people to make their final arrangements in advance for the cost at the time of purchase. The money is then invested into the trust, and the investment returns help cover inflation costs between the time customers buy their plans and the time they pass away.
Illinois’ pre-need fund, which held about $300 million at its highest point, began losing money in 2001 and is now mired in controversy, as the Illinois Funeral Directors Association faces investigations and a lawsuit filed by some of its members.
Funeral homes are still on the hook for guaranteed pre-need plans, regardless of whether the trust has enough money to foot the bill. Rep. Dan Brady, a Bloomington Republican and licensed funeral director, said that his fellow directors are “caught in the middle. They are left holding the bag … because of investment problems and questionable dealings.” Some directors say the association that is supposed to protect their interests has hung them out to dry by making bad investments and failing to give them accurate information about the pre-need trust.
The Illinois Funeral Directors Association began taking out life insurance policies on funeral directors as an investment, but the insurance policies did not pay out quickly enough to cover the funeral costs of the people with pre-need plans. When a funeral director dies, a portion of the insurance payout would go to his or her beneficiaries. But the majority of the money would go to the trust.
According to a complaint filed by the Illinois secretary of state’s office, the association sunk about $200 million from the trust into life insurance policies.
However, a statement on the Funeral Directors Association’s Web site pegs the economic downturn as the primary reason for the trust’s losses.
The association was licensed to control the trust in 1980 by then-Comptroller Roland Burris, now a U.S. senator. The license has come under scrutiny because Burris became a lobbyist for the association after he left office. Current Comptroller Dan Hynes has said the license shouldn’t have been issued in the first place. Burris has declined to comment about why he awarded the license, saying too much time has passed and he doesn’t remember.
Hynes’ office pulled the association’s license to manage the trust in September 2007 and ordered the organization to repay almost $10 million in fees it collected for managing the trust. Carol Knowles, spokeswoman for Hynes, said the comptroller’s office is prepared to take the association to court if the money is not returned.
Also as part of the fallout, a Merrill Lynch agent who sold the life insurance policies to the association has lost his investment adviser’s license from the secretary of state’s office and his insurance broker’s license from the Illinois Department of Insurance. The agent, Edward Schainker, is contesting both decisions.
Knowles said the comptroller’s first goal going forward is to protect individuals who purchased pre-paid funeral plans and then to help funeral directors who were unaware of their association’s investments. However, Knowles said she thinks some funeral directors knew what was going on. “They received personal insurance policies free of charge. Many of them sat on the [Illinois Funeral Directors] board at one time or another, and they participated in an investment that was, as they say, ‘too good to be true.’”
Many association members, in turn, claim that the comptroller’s office failed to protect them by waiting too long to alert them of the fund’s losses.
In an attempt to prevent the situation from repeating itself, Hynes backed state legislation aimed at protecting the money that is still in the fund and creating more transparency for investors. Senate Bill 1682, which passed both chambers of the General Assembly this spring, would require the fund to be administered by a third-party trustee that would be legally bound to make decisions that were in the best interest of investors. The bill also would require the trustee to send reports directly to individuals with money invested. The bill’s sponsor, Democratic Rep. Lisa Dugan of Bradley, said that measure is just a starting point for reform and would make changes that are urgently needed. “We can’t take $40 million that’s been mismanaged and not have something in place to make sure that — any money from here on out — the same thing doesn’t happen. … That part of the issue needed to be put under regulatory control now.”
However, it’s difficult to pinpoint the amount the fund has lost because the Funeral Directors Association gave its members inaccurate statements on the trust, according to Michael McRaith, director of the Insurance Department and acting secretary of the Department of Financial and Professional Regulation. He said it may not even be a matter of the fund loosing a lot of money; it may be that the association told members that the fund was doing better than it actually was. That difference now appears to be a large loss.
The Department of Financial and Professional Regulation worked out an $18 million settlement with Merrill Lynch, which sold the insurance policies to the association. McRaith said the figure was based on premiums that Merrill Lynch received for insurance policies and an additional amount that was tacked on to “bring the matter to closure.”
Funeral directors criticized the settlement by saying Merrill Lynch would be returning pennies on the dollar of the original investments into the trust. Some association members are, instead, opting to sue the Funeral Directors Association and Merrill Lynch. If individual members refused Merrill Lynch’s offer to settle, then their portion of the money would go to their customers who bought the pre-need funeral arrangements, instead.
Brady said the settlement is a well-intentioned effort to restore some faith in the trust, but, in the end, it has just created more “frustration and confusion” for funeral directors. He said the directors do not know if they should settle because they are unsure about how much money they actually lost. Brady said he thought $40 million was a conservative estimate but added, “I don’t think anybody truly knows.”
Confusion and frustration seem to be recurring themes surrounding the future of the pre-need funeral trust, and, so far, solutions are nowhere in sight. The Illinois House voted to create a task force that will look into the issue. The panel will consist of legislators and representatives from the comptroller’s office, the Department of Insurance and the Department of Financial and Professional Regulation. Both McRaith and Knowles said their offices wanted to wait for the task force’s recommendations before proposing any other changes to the way the trust is regulated.
Brady, who sponsored the resolution that created the task force, said that the group’s goals include holding accountable whoever is responsible for the problems with the trust and creating a comprehensive reform package that addresses problems in all areas of pre-need funeral sales. The task force must submit the report to the governor by the end of the year.
With all the negative attention on the trust, Brady said that he hopes reforms could help get it back on solid ground. “When you have a multifaceted problem like that, you have a consumer that is becoming very suspicious and skeptical when all they have been told over the last several years is that the whole idea is piece of mind.”
Knowles said that people should not be afraid to invest in the fund just because some individuals made irresponsible investments and took “advantage of the system.” She added, “People rob banks every day, but that doesn’t and shouldn’t stop people from putting their money in banks.”
See The State-Journal Register for a timeline of events associated with the pre-need funeral trust.
Wednesday, July 01, 2009
New fiscal year, same stalemate
By Bethany Jaeger
The first day of fiscal year 2010 is marked by Gov. Pat Quinn vetoing the portion of a state budget approved by the legislature, meaning the state doesn’t have a spending plan in place. And after yesterday’s strange string of events, lawmakers and state service providers wonder how the governor will proceed.House Speaker Michael Madigan had some advice for the governor: Stop doing 180s on his stances. “I plan to continue to work with the governor in full cooperation. I recognize the problems of state government, but it does not help in this very difficult situation to engage in all these flip flops.”
Most recently, Quinn sought the ability to float pension obligation notes as a short-term borrowing plan to free up about $2.2 billion, which legislative leaders of both political parties agreed would go to human services. The governor congratulated the House yesterday afternoon for approving the short-term borrowing plan in Senate Bill 415, but a few hours later, he called senators asking them not to vote for the plan because he said it would take pressure off of finding more significant revenue sources. Quinn said today outside of his Statehouse office that voting on the borrowing scheme was out of order.
“We didn’t know there was an order,” said Sara Wojcicki, spokeswoman for House Minority Leader Tom Cross. She added: “If there was anything that we were agreeing on in the leaders’ meeting [yesterday morning], it was that we were going to do that [short-term borrowing]. It seemed to be the program.” She also said it’s been hard for the caucuses to gather support or opposition to the governor’s proposals when he keeps changing his mind.
The legislature isn’t scheduled to return until July 14, about the same time the comptroller’s office is supposed to cut checks for the first wave of payroll of state employees. The timing, according to Madigan’s spokesman, reflects a survey of legislative members’ schedules. But Quinn said he hopes they all can find a solution well before then.
But the governor didn’t specify a plan for how that would happen. He just said the next few days are crucial and that he would work hard with legislators and others. “We will not relax in our battle to have a balanced budget in the Land of Lincoln. This is a fight worth fighting for.”
The bill he angrily vetoed, SB 1197, gave him authority to spend about 20 percent of the state budget that is distributed in grants. After funding federally required portions of education and Medicaid to acquire economic stimulus funds, the bill only gave the governor about $3.5 billion of the $10 billion he sought for grants of community-based human services, according to Madigan.
“We only appropriated for the amount of money that we thought would be available,” the speaker said, later adding, “There’s enough money to manage the government under the spending authority contained in the bills that we’ve sent to the governor.”
Madigan also said he would vote to override the governor’s veto, although he said he didn’t know whether his chamber would have enough votes to do so July 14.
Quinn has not addressed other portions of the budget, including various revenue sources. But, he said, “I’m philosophically opposed to trying to balance the budget on just one area of human services in Illinois.”
Even with his veto of the human services portion, however, some providers already have cut programs or laid off employees because the state Department of Human Services told them to prepare for cuts July 1 and more cuts later in the fall. The unpredictable nature of funding is enough to devastate social services that run on shoestring budgets. For instance, in the Southtown Star, columnist Phil Kadner describes the scene in the Chicago suburbs. The Herald & Review outlines cuts being made for Decatur-area services.
Comptroller Dan Hynes said the governor is sending the wrong message, which he said “bordered on irresponsible.” In a statement, Hynes wrote: “He needs to communicate to our social service providers that they need to continue providing services and they will be paid. Instead, he is adding to the hysteria by creating doubt and potentially causing disruption to these essential services.”
Quinn said human service providers should carry on. “I think it’s important that they do their jobs, and I’m hopeful, very hopeful, in a prompt manner, we will get this impasse resolved and get a balanced budget.”
Quinn’s office also issued a warning to state vendors that any bills incurred after today will have to wait for payment. “We have to hold that bill until we get a budget,” Quinn said.
July/August issue: The environment
Illinois Issues magazine's annual environment issue came out today.
In it, you'll find "Wind power," a story about Illinois being at a turning point in its energy-producing future. It's written by Michael Hawthorne, the Chicago Tribune reporter who broke the Crestwood water contamination story.
I picked up on the Crestwood case, which spawned multiple lawsuits, including one by Illinois Attorney General Lisa Madigan. I wrote about it in my July/August column, which explores current state law regarding how information about the public water supply trickles down — or not — to local residents.
Also check out a rather inspiring story about the "River man," a personal profile of Chad Pregracke, founder of Living Lands & Waters and dedicated leader of hundreds of volunteers who cruise the state's waterways and pick up unbelievable amounts of trash.
Energy policy gurus can catch up on the state's new process of procuring power on behalf of Illinois utilities by reading "Switched on." It discusses the Illinois Power Agency's role in an uncertain electricity market.
In addition to our regular columns, brief articles and legislative checklists, the print-only edition also includes a feature about the environmentally friendly but challenging technologies meant to fight pollution in urban areas. Our print readers also will learn more about Marc Miller, new Natural Resources director who is trying to revive that agency's morale while fighting an uncertain economic future.
Tuesday, June 30, 2009
The puzzle falls apart
By Bethany Jaeger, Jamey Dunn and Hilary Russell
Renewed hope and high spirits defined the transition from impeached Gov. Rod Blagojevich to Gov. Pat Quinn early this year, but frustration and gridlock have stained the end of the fiscal year.
Today marked the last day of fiscal year 2009. After a string of strange events, the legislature left town with no date certain to return. And Quinn would not specify how he would proceed, whether by calling special sessions or by holding more meetings with the top four legislative leaders behind closed doors. Nor would he address whether he would allow the state to shut down if a budget weren’t in place by the time the state ran out of money to pay its bills. According to the comptroller’s office, July 15 is a key date for the first wave of state payroll in the new fiscal year. But a spending plan would need to be in place by about July 9 or 10 to have enough time to process expenditures.
The legislature’s day started with a protest of sorts in an attempt to block House members from entering the chamber. Statehouse police removed eight individuals from the Service Employees International Union as they rallied outside the chamber and chanted, “Raise taxes now.”
Despite the governor’s wishes, the legislature didn’t even consider raising taxes today. Lawmakers, instead, sent him pieces of what Quinn dubs a “half-baked budget” that would mean drastic cuts to human services and, in some cases, has already resulted in layoffs and program cuts within community-based services. Quinn said he would veto the spending plan.
“We must not put off decisions for later in the summer or the fall or next winter," he said during a last-minute budget address before both chambers. "That’s not what adults do. They confront tough challenges. They meet those challenges with the best that they come up on behalf of the common good.”
And he gained one more reason to veto the so-called 50 percent budget late in the day. It would carry an even larger deficit than anticipated because the legislature failed to approve a short-term borrowing scheme to free up $2.2 billion. Senate Bill 415 actually failed twice tonight.
“Now you’re another $2.2 billion out of whack,” said Rep. Frank Mautino, assistant majority leader from Spring Valley. He added that the legislature has approved the governor’s authority to spend about $26 billion, but lawmakers didn’t approve enough revenue to pay for it. The result? In addition to giving Quinn more reason to use his veto pen, Mautino added that any momentum to override the governor’s veto deflated along with the Senate’s failure to approve the short-term borrowing (background here).
Sen. Jeff Schoenberg, sponsor of the borrowing plan, said not fully paying the state's $4 billion contribution into the public employee pension system will cost the state more than if the state borrowed money to make this year's payment.
And in a strange turn of events, Schoenberg confirmed that the governor’s office had called some senators to urge them not to vote for the bill, which the governor had proposed and supported earlier in the day. Schoenberg said members were told the borrowing plan would take pressure off of the legislature to act on more substantial revenue sources, such as an income tax increase.
Sen. Emil Jones III, son of the former Senate president of the same name, was one who changed his vote from a yes to a no. He said he ultimately voted against the borrowing plan to show support for a tax increase and to reject a piecemeal solution to the deficit.
Without the borrowing, Senate President John Cullerton said the spending plan sent to the governor’s desk would carry a $6.2 billion shortfall. Quinn maintains that the deficit is closer to $9.2 billion.
The disagreement is just one sign of the tension between the legislative and executive branches in the past month. They can’t even agree on the size of the deficit, let alone the methods to fill that gap.
House Speaker Michael Madigan said the governor and the legislature had “legitimate differences of opinion” but that they will continue to work through the differences. In the meantime, he said the governor has now received a package of bills that would allow him to spend the amount of money they expect to be available in fiscal year 2010. “The governor’s complaint is that he wants more money to spend,” Madigan said. “The legislature has said, ‘We’re not going to give you authority to spend money when we don’t think that money will be available.’”
Sounding similar to what he said last year when the General Assembly sent an unbalanced budget to then-Gov. Blagojevich, Madigan added, “As is contemplated by the Constitution, the governor has the ability to spend money at his total discretion.”
During his rare address to both chambers, Quinn said, “I’m prepared to stay here all summer to get the job done.” One person in the chamber clapped.
Quinn said the legislature’s spending plan is unbalanced and invites lawsuits. In fact, he cited a court order issued today. According to the Associated Press, U.S. District Judge John Grady’s order requires the Illinois Department of Children and Family Services to maintain support as promised for such services as psychiatric treatment, counseling and daycare.
The governor repeatedly said an income tax increase is the only way the state would be able to provide critical services to the most needy citizens. And even with a tax increase, he announced today he would need to scale back spending by another $1 billion, which would be in addition to the $1 billion in cuts he announced in March. Those cuts, he said, could come in the form of a dozen furlough days for state workers and 2,200 layoffs, as well as possible closure of state facilities. Closing prisons or other facilities, however, wouldn’t result in immediate savings because the process requires an intentionally long review by a legislative panel and the public.
Majority Leader Barbara Flynn Currie said she agrees with the governor, but his words could be falling on deaf ears. "He’s laying down the gauntlet, and he’s absolutely right," she said. "But I don’t think he changed a single mind or a single vote."
Some Republicans, including two gubernatorial candidates, Sens. Bill Brady of Bloomington and Matt Murphy of Palatine, said tax increases during an economic recession would cost more jobs and encourage more people to leave the state. Murphy suggested starting all over again. Senate Minority Leader Christine Radogno proposed a temporary budget that would fund services at the levels of two years ago, which she said was the “closest thing we’ve had to a balanced budget in recent years.”
Cullerton was in favor of buying some time, he said, to allow Republicans to come around to supporting an income tax increase and to continue to pursue long-term pension and Medicaid reforms. And the governor could sign the capital construction program for roads, bridges, schools and other infrastructure.
The construction program, however, is still in the lurch. Quinn said again this morning that he’s still tying the capital bill to an operating budget, meaning he’s unlikely to sign the bills into law without a balanced budget in place. The construction program was approved by the legislature last month, but it finally sent the bills to the governor's desk last night.
Renewed hope and high spirits defined the transition from impeached Gov. Rod Blagojevich to Gov. Pat Quinn early this year, but frustration and gridlock have stained the end of the fiscal year.
Today marked the last day of fiscal year 2009. After a string of strange events, the legislature left town with no date certain to return. And Quinn would not specify how he would proceed, whether by calling special sessions or by holding more meetings with the top four legislative leaders behind closed doors. Nor would he address whether he would allow the state to shut down if a budget weren’t in place by the time the state ran out of money to pay its bills. According to the comptroller’s office, July 15 is a key date for the first wave of state payroll in the new fiscal year. But a spending plan would need to be in place by about July 9 or 10 to have enough time to process expenditures.
The legislature’s day started with a protest of sorts in an attempt to block House members from entering the chamber. Statehouse police removed eight individuals from the Service Employees International Union as they rallied outside the chamber and chanted, “Raise taxes now.”
Despite the governor’s wishes, the legislature didn’t even consider raising taxes today. Lawmakers, instead, sent him pieces of what Quinn dubs a “half-baked budget” that would mean drastic cuts to human services and, in some cases, has already resulted in layoffs and program cuts within community-based services. Quinn said he would veto the spending plan.
“We must not put off decisions for later in the summer or the fall or next winter," he said during a last-minute budget address before both chambers. "That’s not what adults do. They confront tough challenges. They meet those challenges with the best that they come up on behalf of the common good.”
And he gained one more reason to veto the so-called 50 percent budget late in the day. It would carry an even larger deficit than anticipated because the legislature failed to approve a short-term borrowing scheme to free up $2.2 billion. Senate Bill 415 actually failed twice tonight.
“Now you’re another $2.2 billion out of whack,” said Rep. Frank Mautino, assistant majority leader from Spring Valley. He added that the legislature has approved the governor’s authority to spend about $26 billion, but lawmakers didn’t approve enough revenue to pay for it. The result? In addition to giving Quinn more reason to use his veto pen, Mautino added that any momentum to override the governor’s veto deflated along with the Senate’s failure to approve the short-term borrowing (background here).
Sen. Jeff Schoenberg, sponsor of the borrowing plan, said not fully paying the state's $4 billion contribution into the public employee pension system will cost the state more than if the state borrowed money to make this year's payment.
And in a strange turn of events, Schoenberg confirmed that the governor’s office had called some senators to urge them not to vote for the bill, which the governor had proposed and supported earlier in the day. Schoenberg said members were told the borrowing plan would take pressure off of the legislature to act on more substantial revenue sources, such as an income tax increase.
Sen. Emil Jones III, son of the former Senate president of the same name, was one who changed his vote from a yes to a no. He said he ultimately voted against the borrowing plan to show support for a tax increase and to reject a piecemeal solution to the deficit.
Without the borrowing, Senate President John Cullerton said the spending plan sent to the governor’s desk would carry a $6.2 billion shortfall. Quinn maintains that the deficit is closer to $9.2 billion.
The disagreement is just one sign of the tension between the legislative and executive branches in the past month. They can’t even agree on the size of the deficit, let alone the methods to fill that gap.
House Speaker Michael Madigan said the governor and the legislature had “legitimate differences of opinion” but that they will continue to work through the differences. In the meantime, he said the governor has now received a package of bills that would allow him to spend the amount of money they expect to be available in fiscal year 2010. “The governor’s complaint is that he wants more money to spend,” Madigan said. “The legislature has said, ‘We’re not going to give you authority to spend money when we don’t think that money will be available.’”
Sounding similar to what he said last year when the General Assembly sent an unbalanced budget to then-Gov. Blagojevich, Madigan added, “As is contemplated by the Constitution, the governor has the ability to spend money at his total discretion.”
During his rare address to both chambers, Quinn said, “I’m prepared to stay here all summer to get the job done.” One person in the chamber clapped.
Quinn said the legislature’s spending plan is unbalanced and invites lawsuits. In fact, he cited a court order issued today. According to the Associated Press, U.S. District Judge John Grady’s order requires the Illinois Department of Children and Family Services to maintain support as promised for such services as psychiatric treatment, counseling and daycare.
The governor repeatedly said an income tax increase is the only way the state would be able to provide critical services to the most needy citizens. And even with a tax increase, he announced today he would need to scale back spending by another $1 billion, which would be in addition to the $1 billion in cuts he announced in March. Those cuts, he said, could come in the form of a dozen furlough days for state workers and 2,200 layoffs, as well as possible closure of state facilities. Closing prisons or other facilities, however, wouldn’t result in immediate savings because the process requires an intentionally long review by a legislative panel and the public.
Majority Leader Barbara Flynn Currie said she agrees with the governor, but his words could be falling on deaf ears. "He’s laying down the gauntlet, and he’s absolutely right," she said. "But I don’t think he changed a single mind or a single vote."
Some Republicans, including two gubernatorial candidates, Sens. Bill Brady of Bloomington and Matt Murphy of Palatine, said tax increases during an economic recession would cost more jobs and encourage more people to leave the state. Murphy suggested starting all over again. Senate Minority Leader Christine Radogno proposed a temporary budget that would fund services at the levels of two years ago, which she said was the “closest thing we’ve had to a balanced budget in recent years.”
Cullerton was in favor of buying some time, he said, to allow Republicans to come around to supporting an income tax increase and to continue to pursue long-term pension and Medicaid reforms. And the governor could sign the capital construction program for roads, bridges, schools and other infrastructure.
The construction program, however, is still in the lurch. Quinn said again this morning that he’s still tying the capital bill to an operating budget, meaning he’s unlikely to sign the bills into law without a balanced budget in place. The construction program was approved by the legislature last month, but it finally sent the bills to the governor's desk last night.
Monday, June 29, 2009
Pieces to the puzzle
By Bethany Jaeger, with Hilary Russell and Jamey Dunn contributing
The House easily approved a short-term borrowing scheme to fully pay the state’s pension contribution and to prevent about $2 billion in cuts to human services, but not all services will be saved from significant funding cuts. The measure, SB 415, now heads to the Senate. The House also sent to the governor a $29 billion capital construction program that was approved in May but withheld because the governor said he wouldn’t sign the package until he received a balanced operating budget on his desk.
With less than 30 hours before a new fiscal year begins, Gov. Pat Quinn still doesn’t have a balanced operating budget on his desk. House Democrats could argue that the series of budget bills already approved by that chamber would be enough to fund about 93 percent of the governor’s proposed spending plan, “which, in this economy, is not too terrible,” said Rep. Lou Lang, an assistant majority leader from Skokie. But without enough votes to approve an income tax increase, as preferred by Quinn, the House appears poised to send to the governor four basic budget bills and wouldn’t come back to the Capitol until the money ran out.
Three existing basic budget bills include SB 1197, a lump sum spending plan; SB 1433, authority to sweep money from dedicated funds; SB 1609, ability to refinance state debt, which the governor already signed into law. The short-term borrowing plan, SB 415, would be the fourth bill in a bare bones spending plan.
“I think it reflects exactly the money that we have, and I think that’s a responsible thing to do,” said Rep. Frank Mautino, an assistant majority leader from Spring Valley. “If there’s more money [down the road], you can allocate more spending.”
The House tonight approved the borrowing plan and specified that the $2.2 billion freed up from the short-term borrowing would have to fund community-based human services (see Amendment 4).
“This is not the total package,” Rep. Kevin McCarthy, an Orland Park Democrat sponsoring the measure. “This is not going to eliminate all the pain out there, but it is a step forward.”
If approved by the Senate, the plan would allow community-based services to be funded at 70 percent of the level sought by the governor, according to House Democrats. Some legislators said that’s better than the 50 percent funding level projected without new revenues to pay for it.
“It's still 70 [percent] is better than 50 [percent] on across the board,” Mautino said.
But not all providers would reach the 70 percent funding level, according to Mautino. The 70 percent would be an average. And the governor would have significant latitude to spend the money within human services, potentially directing the money toward services that would recapture the largest amount of federal matching funds. The governor also would still have to cut at least $1 billion to get closer to a balanced budget that suffers from a deficit ranging from $7 billion to $9 billion, depending on whom you ask.
And some services, including financial aid for needy college students and funding for Amtrak rail services, still would see significantly reduced funding levels. The knock to transportation services also could jeopardize federal stimulus funds, said Rep. Elaine Nekritz, a Northbrook Democrat.
Yet, the bill passed with 101 voting in support and seven voting in opposition, but many said the borrowing plan is only a short-term fix that doesn’t address the need for long-term reforms of everything from tax policy to pension benefits.
“This is one of many puzzle pieces that we need to put together, but it’s not a long-range solution to a problem we’ve had in this state,” said Rep. Sara Feigenholtz, a Democratic leader on human services, adding that this year’s budget and economic downfalls are more complicated than in the past. “It is the 9-11 of state budgets. It’s a very fragile situation. It’s more responsible for us to fix how we spend, fix how we collect revenue.”
Rep. Dave Winters, a Shirland Republican who voted against the borrowing plan, said although the pension obligation bonds would allow the state to make its full $4 billion pension payment in the new fiscal year, the state would still have to find more than $4 billion for the next year’s payment, too. In addition, the state would have to start repaying $500 million for the bonds. So that would mean the General Assembly would have to find about a $4.7 billion in general funds to make next year’s contribution, according to Winters’ math. House Democrats said the borrowing plan would cost about $257.4 million in interest over five years.
“Borrowing is not the answer,” Winters said during floor debate. “It is simply digging a hole that we’re going to be stepping in next year.” And that hole will be bigger than the hole dug this year.
The GOP leader, however, said even if borrowing isn’t an ideal way to cope with the budget gap, Republicans at least want the revenue to specifically save providers of human services to the most vulnerable citizens. “We have a responsibility to work with [Democrats] and get this resolved and diminish or minimize the potential pain,” House Minority Leader Tom Cross said during floor debate.
Rep. Jim Durkin, an assistant minority leader from Western Springs, added before the vote that most Republicans thought it was the “fair” and “moral” thing to do to help prevent such drastic cuts to community-based service providers. “We’ve received some pretty tough letters from these providers over the past few weeks,” he said. “And I don’t appreciate the most vulnerable in our society being used as pawns — which they are being used as at the moment — in this budget process, but it’s reality.”
Capital bill sent to the governor
Rep. Lou Lang, a Skokie Democrat, said he released four pieces of the $29 billion construction program to fix the state’s infrastructure and to put people to work. The bipartisan plan was approved with the understanding that Gov. Pat Quinn would sign them into law, Lang said. But the governor changed his tune shortly after the vote. “The fact is that the governor gave us his word that he would sign those bills.” And when he did not sign those bills, Lang filed motions to reconsider. “We had just gone through six years of a governor who didn’t tell it to us the way it was,” Lang said, referring to former Gov. Rod Blagojevich. Lang added that he felt that if the bills were not going to be signed immediately, better to be in the control of the legislature than in the hands of someone who had said he would sign them but then reneged on his word.
“I don’t know what he’s going to do with those bills,” Lang said, “but we have thousands and thousands and thousands of Illinoisans out of work.”
Quinn’s office said the governor had wanted Lang to lift the holds on the construction bills so he could examine them when they landed on his desk.
The House easily approved a short-term borrowing scheme to fully pay the state’s pension contribution and to prevent about $2 billion in cuts to human services, but not all services will be saved from significant funding cuts. The measure, SB 415, now heads to the Senate. The House also sent to the governor a $29 billion capital construction program that was approved in May but withheld because the governor said he wouldn’t sign the package until he received a balanced operating budget on his desk.
With less than 30 hours before a new fiscal year begins, Gov. Pat Quinn still doesn’t have a balanced operating budget on his desk. House Democrats could argue that the series of budget bills already approved by that chamber would be enough to fund about 93 percent of the governor’s proposed spending plan, “which, in this economy, is not too terrible,” said Rep. Lou Lang, an assistant majority leader from Skokie. But without enough votes to approve an income tax increase, as preferred by Quinn, the House appears poised to send to the governor four basic budget bills and wouldn’t come back to the Capitol until the money ran out.
Three existing basic budget bills include SB 1197, a lump sum spending plan; SB 1433, authority to sweep money from dedicated funds; SB 1609, ability to refinance state debt, which the governor already signed into law. The short-term borrowing plan, SB 415, would be the fourth bill in a bare bones spending plan.
“I think it reflects exactly the money that we have, and I think that’s a responsible thing to do,” said Rep. Frank Mautino, an assistant majority leader from Spring Valley. “If there’s more money [down the road], you can allocate more spending.”
The House tonight approved the borrowing plan and specified that the $2.2 billion freed up from the short-term borrowing would have to fund community-based human services (see Amendment 4).
“This is not the total package,” Rep. Kevin McCarthy, an Orland Park Democrat sponsoring the measure. “This is not going to eliminate all the pain out there, but it is a step forward.”
If approved by the Senate, the plan would allow community-based services to be funded at 70 percent of the level sought by the governor, according to House Democrats. Some legislators said that’s better than the 50 percent funding level projected without new revenues to pay for it.
“It's still 70 [percent] is better than 50 [percent] on across the board,” Mautino said.
But not all providers would reach the 70 percent funding level, according to Mautino. The 70 percent would be an average. And the governor would have significant latitude to spend the money within human services, potentially directing the money toward services that would recapture the largest amount of federal matching funds. The governor also would still have to cut at least $1 billion to get closer to a balanced budget that suffers from a deficit ranging from $7 billion to $9 billion, depending on whom you ask.
And some services, including financial aid for needy college students and funding for Amtrak rail services, still would see significantly reduced funding levels. The knock to transportation services also could jeopardize federal stimulus funds, said Rep. Elaine Nekritz, a Northbrook Democrat.
Yet, the bill passed with 101 voting in support and seven voting in opposition, but many said the borrowing plan is only a short-term fix that doesn’t address the need for long-term reforms of everything from tax policy to pension benefits.
“This is one of many puzzle pieces that we need to put together, but it’s not a long-range solution to a problem we’ve had in this state,” said Rep. Sara Feigenholtz, a Democratic leader on human services, adding that this year’s budget and economic downfalls are more complicated than in the past. “It is the 9-11 of state budgets. It’s a very fragile situation. It’s more responsible for us to fix how we spend, fix how we collect revenue.”
Rep. Dave Winters, a Shirland Republican who voted against the borrowing plan, said although the pension obligation bonds would allow the state to make its full $4 billion pension payment in the new fiscal year, the state would still have to find more than $4 billion for the next year’s payment, too. In addition, the state would have to start repaying $500 million for the bonds. So that would mean the General Assembly would have to find about a $4.7 billion in general funds to make next year’s contribution, according to Winters’ math. House Democrats said the borrowing plan would cost about $257.4 million in interest over five years.
“Borrowing is not the answer,” Winters said during floor debate. “It is simply digging a hole that we’re going to be stepping in next year.” And that hole will be bigger than the hole dug this year.
The GOP leader, however, said even if borrowing isn’t an ideal way to cope with the budget gap, Republicans at least want the revenue to specifically save providers of human services to the most vulnerable citizens. “We have a responsibility to work with [Democrats] and get this resolved and diminish or minimize the potential pain,” House Minority Leader Tom Cross said during floor debate.
Rep. Jim Durkin, an assistant minority leader from Western Springs, added before the vote that most Republicans thought it was the “fair” and “moral” thing to do to help prevent such drastic cuts to community-based service providers. “We’ve received some pretty tough letters from these providers over the past few weeks,” he said. “And I don’t appreciate the most vulnerable in our society being used as pawns — which they are being used as at the moment — in this budget process, but it’s reality.”
Capital bill sent to the governor
Rep. Lou Lang, a Skokie Democrat, said he released four pieces of the $29 billion construction program to fix the state’s infrastructure and to put people to work. The bipartisan plan was approved with the understanding that Gov. Pat Quinn would sign them into law, Lang said. But the governor changed his tune shortly after the vote. “The fact is that the governor gave us his word that he would sign those bills.” And when he did not sign those bills, Lang filed motions to reconsider. “We had just gone through six years of a governor who didn’t tell it to us the way it was,” Lang said, referring to former Gov. Rod Blagojevich. Lang added that he felt that if the bills were not going to be signed immediately, better to be in the control of the legislature than in the hands of someone who had said he would sign them but then reneged on his word.
“I don’t know what he’s going to do with those bills,” Lang said, “but we have thousands and thousands and thousands of Illinoisans out of work.”
Quinn’s office said the governor had wanted Lang to lift the holds on the construction bills so he could examine them when they landed on his desk.
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