Below is the government affairs update from Roberta Parks, President of the Peoria Area Chamber of Commerce, dated 6/21/12.

No More Free Health Insurance

Today, Governor Quinn signed a bill that will end free health care for retired state employees. Starting July 1st, all retired legislators, judges, state employees, and university employees will have to contribute to the cost of their health care, based on their ability to pay. One important note, this law does NOT apply to teachers. The State Journal Register has more.

New Pew Center on the States Report

A recent report released by the Pew Center on the States ranks all of the states pension systems. Not surprisingly, Illinois is ranked the absolute lowest. According to the report, Illinois only has 45% of its total pension liability funded. This report is based on FY2010 numbers, but I doubt that more current numbers would be any more favorable for our state. This report only reinforces the fact that the state needs to make reforms to the pension system and it needs to happen now. To read the full report, click here.

Win for Business

In a recent ruling from the Supreme Court, the Court decided in favor of the respondent, GlaxoSmithKline, ruling that the Secretary of Labor does not have the authority to bypass established rule making procedures to reinterpret hour and wage regulations. This protects businesses from arbitrary rule changes, providing a consistent regulatory climate. For more information, read this article.

Cost Shifts and District 150

A couple of days ago, the governor’s office released a report on the financial reserves of all the school districts in the state at the end of FY2011. The report showed that, with the exception of only a handful of districts, schools districts are sitting on what one might think are pretty substantial reserves. For District 150, the report said that the district was sitting on a reserve of something along the lines $48 million. The reason the governor’s office released these figures is to bolster his position that shifting the costs of pensions from the state to the local school districts would not cause a significant financial burden to the districts.
However, what we heard from David Kinney, the interim comptroller at District 150, was not supportive of that view. Through an email correspondence, he broke down what makes up that cash reserve. Here it is…

“Our fund balances here in Peoria District 150 were just under $44 million at the end of the year (by our audit). But a few things are very important to understand:

1) $2.8 million of that happened to be in the Debt Service Fund. What that really means is that money was just sitting there waiting to be used for a bond payment. Because of our various payments for bonds and lease payments to the Public Building Commission happen at a variety of times, it was all a matter of timing. It just so happens those funds are here June 30 waiting for a payment when the books close. Those were not excess funds and could not be spent elsewhere.

2) This is the REALLY important. Two years ago the Board had to borrow - by virtue of selling working cash fund bonds - $38 million. Prior to that the Board had to many times sell Tax Anticipation Warrants just to make payroll. What the State needs to understand is that means that our reserve is a BORROWED reserve. Take away that and the debt service balance and we started the year with about $3.2 million. I think that calculates to about 4 and a half days.

3) This is also important to understand. District 150 operates on a modified accrual form of bookkeeping and auditing. We accrue all mandated state categorical grant funding as IF the State had made all its payments before June 30. However, we KNOW that is not the case. As of June 30, we were owed $7.1 million. We received that amount throughout the fall. (The previous year we didn't receive final payments until December - and guess what - half the categorical payments won't be here by June 30 this year either). So whatever fund balance is reported, obviously the State was holding a significant portion of that.

4) When one looks at audit data like the Governor's staff is doing, they are looking at data created by an audit generated June 30th. That happens to be the very HIGH point of our fund reserves because it includes the receipt of about half our property tax revenues for the year. We have much more in reserves at that point in time and because we don't spend as much over the summer, we actually have a little cash flow for awhile. However, as the year goes on, our reserves go down SIGNIFICANTLY. By early June, we are watching that cash flow very carefully on a daily basis, and literally sweating until the property taxes start rolling in again in mid-June for the next year. Of course this is compounded because of the late State payments.

Again, while I understand the issues, the State is already significantly reducing revenues coming to us. When we figure General State Aid at 89%, we will lose an additional $5 million. Add that to declining property values and we are in for a troubling FY13. It is important to put all of this in the same information bank so our taxpayers really understand fully what is happening.”

The Chamber believes that this “cram-down” method is not the way to resolve the pension issues and believes that forcing the districts to pay for the backlog of bills is especially onerous.

Jobs Tax Credit

The state announced today a new tax credit for small businesses. This is a $2500 tax credit for small businesses that, as of July 1st, 2012 you employed 50 or fewer full time employees (counting all locations). Not-for-Profit or Professional Employer Organizations are also eligible to receive the credit. For full program details, visit this website.

If you would like to receive these updates by email, please email Roberta at rparks@chamber.h-p.org and tell her that you would like to be placed on the government affairs email list. For past government affairs updates, click here.