Illinois Supreme Court strikes down latest attempt to reduce Chicago’s unfunded pension obligations. The decision, announced on Thursday, March 24, struck down a pending Illinois law (P.A. 98-641) aimed at reducing the unfunded pension obligations of the Chicago Municipal and Chicago Laborers Funds, which are separate funds that provide retirement benefits for two classes of employees in Chicago. A recent actuarial analysis showed that the Chicago Municipal and Chicago Laborers’ Funds were projected to become insolvent by 2024 and 2028, respectively. The law, which will not be allowed to go into effect, had been pushed to passage in 2014 by embattled Chicago Mayor Rahm Emanuel to address the severe underfunding of these systems. The measure would have reduced the retirement benefits of current and future Tier I retirees, mostly through reducing the compounded 3% COLA, in addition to requiring current workers to pay more towards their retirement. The Supreme Court’s decision was aimed at the section of this law that reduced benefits, which the court treated as a breach of the constitutionally protected status that vested public-sector pensioners enjoy throughout Illinois. Affected by this decision were pension funds that cover Chicago workers classified as city workers and city laborers.
In other Chicago pension news, the city had to borrow $220 million this week. With police and firefighter pension funds running short again, money was required prior to April 1 to maintain the cash flow required to maintain their stability and prevent a worsening of their unfunded-liability balance sheet. The police and firefighter funds are $12.2 billion short of what is required to meet the actuarial requirements, making the maintenance of cash flows to the troubled systems a legal requirement. The news that the funds had been borrowed on the short-term money market was made public on Monday, March 21. SB 777 (Cullerton) is a pension funding reform bill for the Chicago Police and Fire Funds that has passed both Houses, and is currently being held by the Senate President on a Motion to Reconsider.
The police/fire pension fund deficits and cash flow needs are separate from the deficits and cash flow needs simultaneously being posted by Chicago’s pension funds for office workers, schoolteachers, and educators. These pension funds will also make demands on Chicago’s city government in the near future.
Economy – Home Prices
Illinois Association of Realtors reports rising valuations for Chicago-area real estate. The February 2016 year-over-year figure showed an increase of 7.1% in the 9-county Chicago area. The median price of a home or condominium increased from $175,000 in February 2015 to $187,500 in the most-recently-concluded month. Housing within city limits rose by a significant 12.3% in value, from $212,000 to $238,000, expanding a significant premium in value over suburban residential property.
Real estate professionals pointed to a shortage of new inventory coming onto the market. Building activity has significantly slowed since prior to the financial crisis of 2008. Housing shortages noted by Chicago-area realtors are concentrated in areas of significant and growing demand, including Chicago’s North Side and its north and west suburbs.
Education – Full Funding
Republicans call for full funding for elementary & secondary education foundation grants in 2016-17 school year. With budget conditions continuing to be unsettled, many Illinois teachers, educators, and parents are concerned that Illinois school funding may get caught in the crossfire. In addition, the State of Illinois has pro-rated its fulfillment of the “foundation grant” section of the existing school aid formula in each of the past seven years. The foundation grant covers much of the monies paid by the State to local school districts. The Rauner Administration and Republican legislators are calling for full school aid foundation grant funding and no pro-ration. The foundation grant level, which is determined by a formula set by statute, is currently $6,119 per student.
School districts that are relatively lacking in real property, and which cannot fully meet this foundation level through utilization of local resources such as property taxes, are paid a supplemental sum from the State of Illinois to enable them to meet this level. Foundation grants make up a large portion, although by no means all, of what we call “State school aid.” They are especially important in areas characterized by relatively low median household income, relatively low home values, and relatively low levels of ongoing commercial/industrial property investment.
Despite the failure of Illinois to enact an overall balanced budget to cover the 2015-16 fiscal year, the State did pass and enact an appropriation bill to partly cover Illinois school funding in FY16. The measure, which included a prorated foundation grant for Illinois elementary, secondary, and unit school districts, did not cover Illinois higher education. Although this FY16 appropriation bill was not fully funded, it did include money that Illinois school districts are using right now to meet their operational needs in this fiscal year.
Energy – Illinois Jobs
Report says Illinois leads Midwest in clean energy jobs. A new report indicates that more than 113,000 jobs have been created in Illinois to install and oversee so-called “clean energy” installations. Jobs defined as “clean energy” include work on energy efficiency, wind and solar power, and electric motor vehicles. This 113,000-job figure exceeds all other states in the Midwest. Job growth in this area is projected to strengthen and intensify in the future. The report from the Clean Energy Trust and Environmental Entrepreneurs was released on Tuesday, March 22.
The report indicates that the “clean energy” job field is significantly misunderstood. For example, only 4,300 of the Illinois positions counted by Clean Jobs Midwest were connected with the installation and maintenance of solar energy panels. The largest field of job creation counted in Illinois, “energy efficiency,” concentrates on the repair, refitting, and rebuilding of existing structures and real property to increase the productivity of energy already being used. To some extent new structures are being ‘built out’ more so as to increase energy efficiency from the start, as with high-end subdivisions where the new homes are routinely fitted with heat pumps.
Illinois State Fairgrounds Foundation
Fairgrounds Foundation Bill a Win for Taxpayers. Governor Bruce Rauner joined Acting Director of Agriculture Raymond Poe and other local elected officials to discuss his support for the Fairgrounds Foundation bill (HB 4990/SB 2903). The bill – that has bipartisan support – creates a foundation that allows private donors to support and maintain the fairgrounds in Springfield and DuQuoin.
“The Illinois and DuQuoin State Fairs are vitally important to our agriculture community and the local economies of both cities,” Governor Rauner said. “By creating a private foundation, companies and citizens will be able to donate directly to the fair to help maintain the grounds without any additional burden on the state.”
Nearly every neighboring state to Illinois has established foundations with the purpose of accepting private funds for their State Fairs or Fairgrounds. Similar measures have been introduced in the Illinois General Assembly for a number of years, but failed to advance.
“Fairground Foundations are not a new concept, and Illinois companies are donating money to those out-of-state foundations. We should be doing everything we can to keep that money in our state for our fairs,” said Raymond Poe, the Acting Director of the Department of Agriculture. “I sponsored legislation like this during my time in the House of Representatives, and I’m pleased to see my former colleagues continue to fight for it.”
Currently more than $180 million in deferred maintenance are needed at both the Springfield and DuQuoin fairgrounds. Many buildings are in need of significant repairs, including 20 roof replacements in Springfield, electrical upgrades and repairs to the Grandstand.
“The fact that I live just a few blocks from the State Fairgrounds, I know first-hand the positive impact the fairgrounds have on the city of Springfield,” State Representative Tim Butler (R-Springfield) said. “I fully support creating a foundation with the mission to raise private funds to improve the infrastructure as well as promote the use of the Fairgrounds. I anticipate the public-private partnership will help bring more activities and tourism to the region.”
“The State Fairgrounds do more than support the fair; they are used year round to host the number of events that come to Springfield and Sangamon County, which pay dividends into the local economy,” State Representative Sara Wojcicki Jimenez (R-Leland Grove) said. “This legislation will allow us to preserve the fairgrounds for the fair, as well as attract more events to the area that will positively benefit our community.”
The neighboring states of Iowa, Missouri, and Wisconsin have already created private-sector foundations to help raise money to continue to operate their state fairs, and the concept has worked successfully in these states. Governor Rauner described his support for HB 4990 in visits to the Illinois State Fairgrounds in Springfield on Tuesday, March 22, and in DuQuoin on Wednesday, March 23.
Law Enforcement – Summer Youth Police Camp
Annual American Legion Youth Police Camp accepting applications. Youth applications for the popular camp experience are due no later than May 28, 2016. The residency camp, which will run from June 26 through graduation on July 1, 2016, immerses young men and women (ages 14-16) in the possibilities of law enforcement service. The week-long experience is held at the Illinois State Police Academy in Springfield, Illinois. This will be the 44th year that the Youth Police Camp will be offered in Illinois.
The Police Camp is operated in close affiliation with the State Police as well as with the American Legion. Many active State police officers volunteer to staff the program, and retired police officers have been a mainstay of the experience for decades. Many Legionnaire and State Police volunteers are former graduates of the Youth Police Camp themselves. Applicants must be sponsored by a local post of the American Legion within Illinois.
Professional Regulation – Digital Licenses
State government productivity improvements include moving to digital platform for professional licenses. The move away from paper-based applications for licenses and certifications continues, with more than 1 million Illinois licensees now able to view and print out a license at their convenience. The license ‘papers’ can be accessed from mobile devices. The news that the Illinois Department of Financial and Professional Regulation (IDFPR) has moved to an all-electronic platform was announced in Government Technology magazine on Tuesday, March 22. The announcement was made by Hardik Bhatt, the appointed Chief Information Officer (CIO) of Illinois.
DFPR regulates more than 250 professions and crafts carried out by approximately 1.2 million residents of Illinois. Chief Information Officer Bhatt worked with IDFPR Secretary Bryan Schneider and his 450-person staff on the “going paperless” 2015-16 initiative. The move is expected to save IDFPR and Illinois taxpayers/licensees nearly $3 million in postage, paper and printing costs over the next five years.
State Government – Back Pay Case
In closely-watched case involving back pay, Illinois Supreme Court rules against AFSCME. The case actually began during the administration of Governor Pat Quinn, in which Quinn had refused (starting in July 2011) to pay a set of wage increases to AFSCME members. The increases had been included in collective bargaining agreements involving workers for five State departments, including the Department of Corrections (IDOC), but money to implement the increases was not appropriated in the Quinn budgets and the money was not paid. AFSCME sued to enforce the collective bargaining agreements, but the Supreme Court found that in cases like this one, the absence of appropriated funds legally trumps the standing of the relevant labor union to enjoy the terms of the wage-increase portion of the labor contract.
The case involves approximately 24,000 current and former State workers who are owed an average of $2,500 each. The Supreme Court decision strikes down a decision by a labor arbitrator to enforce the terms of the wage increase. The Supreme Court found that the powers enumerated within the state Constitution, and granted to the General Assembly, to appropriate funds within the context of a balanced budget, outweighed the status of the labor agreements discussed in this case. The decision was handed down on Thursday, March 24.
Spring in Illinois
Soil temperatures getting closer to readiness for spring planting. Farmers keep careful watch on soil temperatures to help determine when to plant expensive hybrid seeds in their fields. The Prairie Research Institute, an affiliated institution of the University of Illinois, monitors soil temperatures at a variety of locations throughout Illinois. The Institute reports warmer-than-usual soil this spring, a legacy of the mild winter of 2015-16. The Institute measures soil heat at a variety of depths, matching the soil surface depths where seeds are likely to be planted. At locations taken throughout Illinois at four inches under a bare soil surface, the Institute reported this week that Illinois soil temperatures averaged 56.7 degrees Fahrenheit on March 15. This number was about 11 degrees higher than 2015 and about 16 degrees higher than the average for this date and depth.
Week in Review
Get the Week in Review emailed directly to your inbox! Sign up today to get a first-hand look at the continuing legislative and fiscal challenges facing policymakers in Springfield.