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State Senator Daniel Biss held his audience at the Levy Center rapt for about an hour and a half on Dec. 3 as he offered his view not just of the politics in Springfield but also of the philosophies behind the two main figures in the stalemate that has kept the State without a budget for months.

“It’s December, and the State’s fiscal year began July 1,” said Sen. Biss. “We’re now entering the sixth month of the fiscal year with no budget. The legislative session ended May 31. At no point in this process has there been anything even approximating a budget.

“It’s extraordinary what’s being done to the State of Illinois, not only to our most vulnerable citizens but to the workers… a truly extraordinary and awful, awful thing that’s being done,” Sen. Biss said, referring to the non-payment of funds for a large number of human services programs – for domestic violence, mental health and immigrant services, as examples. Nor is higher education being funded, he said, and many public colleges and universities are not being reimbursed for  expenditures or tuition reductions they made or absorbed on behalf of students with a promise the money could be recouped from the State. 

Payments Without a Budget

Even so, some State payments are being made – because of court orders, consent decrees, Constitutional mandates, and, in a few cases, votes by the General Assembly. The Governor signed the K-12 education budget, so school districts are receiving General State Aid payments. Other authorized expenditures include the payroll for State employees, many Medicaid payments and payments of federal grants that pass through the State.

Pension payments have been made, and funds are being remitted to local governments, Sen. Biss said. The City of Evanston, like other municipalities, has been receiving those funds.

Martin Lyons, assistant City Manager and chief financial officer for the City of Evanston, told the RoundTable the City “has continued to receive payments from the Local Government Distributive Fund category of revenues from the State (income tax, personnel property replacement tax, etc.). We ceased receiving Motor Fuel Tax Funds as of July of this year and that revenue loss for half a year would vary depending on actual taxes but could be around $900,000. The State agreed to release these funds on Dec. 8.”

The funds to which Mr. Lyons referred are contained in Senate Bill 2039, which the Senate approved and Governor Bruce Rauner signed on Dec. 7. The $3.1 billion bill included funding for winter road maintenance, domestic violence shelter programs and local shares of video gaming and motor fuel tax revenue.  The bill also contains funding for the Lottery, the Community College Board, the Illinois Department of Transportation, the Illinois Math and Science Academy, breast cancer services and research, nursing home licensing and inspections, heating bill assistance, 911-related costs and the Illinois Department of Public Health for the Tobacco Quitline, according to information from Sen. Biss’s office.

In a statement about his vote for the bill, Sen. Biss said, “Public universities and community colleges are struggling because they have not received state funding. Likewise, vital services are on hold for rape victims, the homeless, autistic children, at-risk youth, the poor and people in need of health care because of the impasse.”

‘How We Got to This Point’

Sen. Biss traced the stalemate in Springfield immediately to a lack of revenue because of the rollback of the State income tax, but ultimately to a “clash of world-views” that he said offer two very different perspectives on the State’s long-term economy.

A short look back finds Governor Bruce Rauner taking office “at the moment the hole was blown in our State revenue,” Sen. Biss said. That was when the State income tax rate dropped from 5% to 3.75%, as was planned in the initial increase.

The obvious options for the General Assembly, Sen. Biss said, were either to raise revenues to meet expenses or to cut expenditures to match revenues. “The Governor said he would cut, but he seems to be incapable of balancing the budget without [an additional] $3 billion,” Sen. Biss said, referring to a budget prepared several months ago by Gov. Rauner that it had a $3 billion shortfall.

Gov. Rauner came to Springfield with an anti-union agenda, which he formalized into what he called the Turnaround Agenda. “The Governor is really attached to these ideas and sees these ideas as leverage,” Sen. Biss said. “He is saying he will compromise ‘if you agree to my agenda,’ and the Democrats disagree – both with that approach and with the anti-union agenda.”

Divergent World Views

The clash between Republican Gov. Bruce Rauner and Democrat House Speaker Michael Madigan, said Sen. Biss, is a battle over the future of the State’s economy. Gov. Rauner “sincerely believes” that his anti-union agenda, which is designed to force lower wages, will benefit the state ultimately by attracting more businesses.  Sen. Biss called this a “race to the bottom.”

The other side, Sen. Biss said, is pro-middle-class. “We are now a couple of generations into inequality,” he said. Since the 1980s the median wage [adjusted for inflation] has been dropping. The share of the total economy eaten by corporate profits is increasing, and the power of unions is in decline. The share of the economy in the financial sector is going up and up, and labor markets are more and more global. “The ultimate result is it’s harder and harder to be a middle-class worker,” he said.

There are two ways to respond to that situation, the Senator said, loosely classified as the “Texas” approach and the “Minnesota” approach. Texas “dropped wages and attracted capital, created jobs … but it is a hard place to be poor,” he said.

Examples of the flip side are Minnesota and Massachusetts, states that invested in conditions for fast-rising wages such as education funding and preserving unions.

“These are very different philosophies to talk about what kind of economy you’re going to have. The Governor believes Minnesota is doomed, that eventually capital will leave. I don’t think that’s true.

“I think it’s worth investing in wages and education. Capitulation is capitulation. I hate what is being done to our State – but to capitulate on what kind of economy we’re going to have … seems like a bridge too far,” Sen. Biss said.

Fiscal 2016 Budget in Calendar 2016

Despite payments’ being made grudgingly in some cases, and in dribs and drabs, Sen. Biss said he is “reasonably optimistic that over time there will be more places of agreement. I think there’s an understanding that we can’t go on like this. There will be similar, other agreements and eventually that will lead to discussion.” However, he said he does not believe that will happen in 2015.

Senate President John Cullerton, who is “very much a deal-maker, may be the one to say, ‘We can’t live like this. We have to find a way,’” Sen. Biss said.  “Eventually people will have to get over themselves. … But not until the clash of values is over will they go on.”

Legislation pending in Springfield, if passed into law, would have a devastating impact on District 65’s and District 202’s financial operations. Last year the Illinois Senate passed Senate Bill 16, which proposed to revamp the way in which the State allocates funding for education. The House, however, did not vote on SB16, and it became void at the end of the session.

This year Senate Bill 1, which is patterned after SB 16, was introduced, but it has not been voted on in the Senate. Under SB 1, District 65 would lose approximately $6.5 million on an annual basis, and District 202 would lose $2.2 million. The full loss would be phased in over three years. It appears unlikely that SB 1 will be acted on this year.

On Aug. 5, the Senate passed Senate Bill 318. That bill, if enacted, would freeze property taxes for tax levy years 2017 and 2018; it would repeal in two years the current method used by the State to allocate funding for education; and it would establish a bi-partisan commission to recommend a new method to fund education in the State. The bill also provides a payment to the Chicago teachers pension fund in the amount of $197 million.

It appears that the thinking behind SB 318 is to reduce reliance on property taxes to fund education in Illinois and to shift to a new method that may rely more on State income taxes, and perhaps be patterned after SB 1. If freezing property taxes is coupled with a revamp of the way the State funds education as is contemplated in SB 318, the impact on Districts 65 and 202 would be huge.

State Senator Daniel Biss voted for SB 318, in what he said was a party-line vote. While the bill is still pending in the House and its final action date has been extended to Jan. 29, 2016, Sen. Biss said the bill “is pretty much dead.” He added, though, “in this climate, anything could happen.”

In addition, the State is considering shifting the cost of funding teacher pensions from the State to local school districts. Districts 65 and 202 assume in their financial projections that the Districts will ultimately be required to pay on an annual basis an amount equal to about 2% of teacher salaries, phased in over four years. This amount could be higher in light of the Illinois Supreme Court’s May 8 decision holding the pension reform law unconstitutional.

The table below reflects District 65’s and District 202’s estimates of the impact of potential State legislation – all of which represent added costs shifted to Districts 65 or 202 or lost revenues.

Legislation in Springfield may also cut the City’s revenues. Among other things, the Governor proposed a 50% decrease in the Local Government Distributive Fund. If passed, it would reduce the City’s funding by $3.75 million each year. The State has also discussed a property tax freeze and other cuts in municipal funding.