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State Senator Daniel Biss is sponsoring a panel titled, “Illinois on the Brink: A Discussion of the State’s Budget Impasse and Its Consequences,” at 7 p.m. on April 26 at the Morton Civic Center. Therese McGuire, a professor of strategy at the Kellogg School of Management, Northwestern University; Bill Stafford, a member of the Board of Trustees of Oakton Community College; and Mark Weiner, president and CEO of CJE SeniorLife, are the speakers.

“I worry that what’s going on right now is deeply destructive in a way that a lot of people only see a slice of it, and I worry that there’s not a level of communication from us in Springfield that’s adequate for the public to really understand what’s happening,” Sen. Biss said.

“I thought I’d put together this panel where we had experts not only from the areas being affected, but also Therese McGuire from Northwestern, who can really talk broadly about, as an economist, what are the long-term costs to our economy of putting us through something that is as destabilizing and destructive as this …. I hope it will spur the level of, frankly, outrage that might be necessary to finally bring this to an end.”

In a lengthy interview, Sen. Biss told the RoundTable his views on the budget impasse and its impact, on a proposed increase in income taxes, and on legislation the might impact the financial position of School Districts 65 and 202.

Some Consequences of the Budget Impasse

Historically, State universities and community colleges have received direct funding from the State. Additionally the State has provided $400 million in MAP grants, which are grants toward students’ tuition. The grants enable many students to go to college and also provide indirect funding to colleges. Sen. Biss told the RoundTable, “None of that is being spent at all right now.”

He said that the University of Illinois at Urbana-Champaign and Southern Illinois University have basically made it through this year “without any visible consequences yet,” but he questioned how long that would go on. He added that less well-funded universities “are facing really immediate and devastating consequences. Chicago State is likely to have to make some kind of truly dramatic announcement, possibly as early as the end of the month. Northeastern is really not in a much better situation.”

 “We’re pretty close to a point of real structural change to our higher education system,” said Sen. Biss. “There’s no question that the students who get affected first are the students who are most in need.”

Community colleges are “a little insulated” because they raise part of their revenues through property taxes, but they too have not been receiving State funds.

At the human service level, Sen. Biss said “Lutheran Social Services, one of the most significant providers in the State, just laid off 750 people, 43% of their staff.” Closer to home, he said, Connections for the Homeless had to cut or suspend some services when the State did not provide funding.

The State has many hundreds of non-profits, some large, but most small, which provide social services that the State has a direct or indirect responsibility to provide, said Sen. Biss.  “You see providers struggling; you see some providers closing. … Because of the patchwork of non-profit providers, there’s no one breaking point, there’s not going to be a moment when human services will be shut down. There’s just a long, long decline that we are well into and that has already had deep consequences for the worst-off Illinois residents.

“If we resolved a lot of problems tomorrow, it would not be undone.”

He explained that when a non-profit lays off social workers, counselors, or psychologists, they need to find another job. “You’re eroding the State’s long-term capacity to provide these services.”

He added, “I think there is a long-term economic consequence when a State becomes less attractive to young people who are going to college and who are in college, when a state lays off people who are providing a core set of services, and when a state makes its universities less desirable as an employer to faculty. That starts to affect macro-drivers of the State, and the long-term consequences of that are great.”

In an attempt to address these problems, the legislature passed SB 2046 last week and sent the bill to Governor Bruce Rauner for his signature. The bill provides $3.9 billion to restore MAP grants, funding for colleges and universities, and a wide variety of human services.

When the bill was passed, Sen. Biss said, “Illinois desperately needs a sustainable State budget solution that is balanced and fair. Clearly, the Legislature and Gov. Rauner are not in agreement yet on what that means.

“Until we’re able to find common ground, we shouldn’t stand by and watch the slow, painful destruction of many of the things that make us a proud and compassionate State – namely, our network of human service providers and our enviable public universities and community colleges.

“We must do what we can today to save these institutions as we work together on longer-term reforms to stabilize Illinois’ future.”

Gov. Rauner has said he will veto the bill.

What About K-12 School Funding?

The RoundTable asked Sen. Biss if the budget impasse would be expanded to include State funding for K-12 schools for this coming school year.

Sen. Biss said, “I don’t know. I just don’t know.

“There are some people who say if we allow the schools to be part of the impasse, then that will finally force us to all be grown-ups again. I understand the reasoning, but there’s always something you’ve got to be very careful about, because so far the impasse has gone way longer and has been more persistent than most people predicted. You never want to blindly just assume that a particular impulse will necessarily end it.”

He added that Senate President John Cullerton is strongly committed to changing the formula used to allocate State funds to schools. Sen. Cullerton said recently in a speech at the City Club that the Governor was conditioning his approval of a budget on the Democrats’ acceptance of his “Turnaround” agenda. Sen. Cullerton  added that the Democrats should condition approving a school budget on the Governor’s agreement to reform the school aid formula.

“Cullerton was referring to an explicit threat not to fund any K-12 school until school funding reform was addressed,” said Sen. Biss.

Can the Impasse Be Resolved?

Gov. Rauner has conditioned his approval of a budget on the Democrats agreeing to various provisions that would restrict unions’ bargaining power.

In a guest essay in February, Sen. Biss said the underlying dispute leading to the budget impasse “is about economic philosophy and values between a Republican governor and a Democratic-controlled Legislature. Rauner and his supporters believe in a theory of economic growth that focuses on competitiveness, which to them means decreasing costs for businesses and decreasing wages and benefits for workers. Democrats believe in a theory of economic growth that invests in people and infrastructure while relying on rising wages to build a thriving middle class that then drives further consumption and growth.”    

When asked if this philosophical impasse could be resolved without one side caving in, Sen. Biss said, “One goal is to get through without doing more damage, sort of a stop-gap measure, which is not the best outcome, but is a lot better than nothing. There’s nothing wrong with, until we’re able to get a long-term solution, coming together and enacting whatever stop-gaps are necessary to keep these institutions going.

“Eventually, how do you get out of this?” He said one option is one side could cave,  and another is that the parties could look at the things  on the table and produce a compromise.

Sen. Biss added that he thought the Democrats have not been as vocal on what they want, and instead have focused on what they do not like about Gov. Rauner’s Turnaround agenda.

“We need to have a better story about what the solutions are. I don’t think the Democrats have spent as much time as we could laying that out. … I’m spending a lot of time trying to think about what ought to be the progressive vision to solve all our State’s problems, and I think if the Democrats can lay out a bold progressive vision that’s really attractive to us, then we will have the tools in place that may allow us to negotiate the best outcomes.”

Is a Tax Increase Necessary?

The State’s expenses this year – counting what is approved and what is court- ordered – exceeds its revenues by several billion dollars. If the Governor signs SB 2046, then the expenses over revenues may be in the range of $5-6 billion.

When asked if a tax increase was necessary to balance the budget, Sen. Biss said he thinks the Democrats and Gov. Rauner both think “part of the solution to the budget problem is more revenues coming in,” but there is some posturing.  He said people are “basically saying we need additional revenues, but let’s work out what it is rather than have politically charged negotiations about what it is.”

He added that last week State Representative Lou Lang (D-Skokie), introduced a bill that would provide graduated income tax rates in the event the Constitution is amended by voters in a referendum to allow a graduated income tax (rather than a single rate for all income levels).  The bill goes in tandem with a resolution in the House to amend the Constitution. 

“I think that’s really a good step forward,” said Sen. Biss. “It’s really healthy to lay out our specific revenue solution as opposed to saying there should be more.”

Legislation Impacting Schools

Senate Bill 231 was amended last week to change the formula used to allocate State funding for education. The bill, if passed, would essentially shift State funding from school districts that have higher equalized assessed property values  to other districts. It is patterned after SB 1, which was introduced last year. The Senate Executive Committee quickly approved SB 231.

ISBE has not yet calculated the impact that SB 231 would have on individual school districts. But it calculated that under SB 1, School District 65 would lose $6.6 million and District 202 would lose $2.2 million a year in State funding, after the phase-in period.

SB 231 does not appear to contain any provision that would change that result.

When asked about the chance of SB 231 passing through the legislature, Sen. Biss prefaced his remarks saying, “I’m not sure at all. I’m not confident in my prediction…

“So let’s be frank. It’s a really, really, really dicey thing to do. It will be hard to do. It’s not impossible. … It’s not there yet. I think there’s a lot of people who don’t have the level of comfort that they’ll need to have to move forward.”

SB 231 does not appropriate more money for education. Sen. Biss said if the bill was done in conjunction with a revenue bill or a broader budget solution, it would give more clarity on whether it is possible to include a provision in the bill that “truly holds schools harmless or less harmed” from losses of State funding.

“I don’t think this bill is going to pass by itself in a vacuum. … If you change the formula without having clarity about your long-term budget solutions, then it’s very hard to even understand what the consequences are for individual schools.”

Sen. Biss said at this point he has no position on SB 231.

Property Tax Freezes: A number of bills were introduced last session to freeze property taxes for two years (or longer). Property taxes are the main source of revenue for School Districts 65 and 202, and they have each estimated that they would lose about $3.5 million in the second year of a property tax freeze. Because of the way property tax caps operate, Districts 65 and 202 would also lose about $3.5 million in potential revenue each succeeding year.

When asked about the chances of a property tax freeze being enacted, Sen. Biss said, “I don’t think it’s impossible. Historically, it’s an item the Governor wants and the Democrats have found less unpalatable. So there’s some thought they’re likely to happen.”

He added, “I don’t think anyone thinks you should just freeze property taxes and not give the governments some tool to cope with the hit.” The question is what the tools would be, he said.

“This kind of thing you could see in the context of a broader agreement. I don’t think it would just happen on its own.”

Pension Cost Shifts: A year ago there was a lot of discussion about shifting the cost to fund teacher pensions from the State to local school districts. When asked about the possibility of shifting pension costs, Sen. Biss said, “I don’t think it’s good because it’s such a tricky, controversial, difficult thing to do. Much like a property tax freeze, it make sense if you’re able to do it in a way that gives the school districts a way to deal with it.

“I have not heard much in that direction for well over a year now,” said Sen. Biss. He said the Governor has some “modest proposals” to shift the pension cost on the amount of salaries over $180,000. “I can imagine something like that.”

For more on the State budget impasse and its consequences, attend the forum on April 26.