I would like to take moment to update you on the process of the Legislative Audit Commission’s (LAC) review of the Auditor General’s audit of Governor Pat Quinn’s failed Neighborhood Recovery Initiative (NRI).
As a quick refresher on NRI, the Illinois Auditor General performed an audit on the early stages program. His office found that the NRI was "hastily implemented" by Quinn’s office just before the election in 2010. The NRI was supposed to combat an epidemic of violence in Chicago, but the audit found the program failed to target the most violent neighborhoods, and aldermen were able to influence where the grant money went.
Earlier this year, the LAC subpoenaed emails and other related documents from members of Governor Pat Quinn’s staff. One former staffer, along with Governor’s office, has failed to submit all requested documents. They have also claimed that some communications are exempt from the subpoenas because of attorney-client privilege.
This week I sent a letter to Illinois Attorney General asking her to intervene on our behalf and enforce the subpoenas, as well as investigate whether the claims of attorney-client privilege are valid.
It is important that we receive documents so we can truly understand what went wrong with NRI, and how to avoid similar disasters in the future. We have our next hearing scheduled for October, and we will need time to look through the immense amount of subpoenaed information.
I will update you on our progress as soon as we have news.
Senate Week in Review
Illinois has received some encouraging economic news lately, with recent drops in the state’s historically high unemployment rate and other signs that an improving national economy may finally be boosting the state’s outlook.
But, two new reports serve as reminders of how far the state still must go to get its financial house in order. A report from the legislature’s bi-partisan financial forecasting agency shows a drop in state tax revenues during the first two months of the new fiscal year and a report from Moody’s Investor Services highlights just how deeply in debt state and local pension systems are in Illinois, when compared to other states.
Also during the week, the nation’s largest organization of small businesses announced that all Republican members of the Illinois Senate had received the “Guardian of Small Business” award from the Illinois chapter of the National Federation of Small Business (NFIB). The honor is based on a review of key votes affecting small business and their employees.
Tax receipts fall
Two months into the state’s new fiscal year Illinois state government base revenues have dropped by $279 million from the previous year, according to the latest report from the legislature’s Commission on Government Forecasting and Accountability (CoGFA).
The drop in revenues was not unexpected, according to CoGFA, because revenues last fiscal year benefitted from a one-time boost related to the state’s tax Refund Fund.
Still, the state’s tax receipts for the beginning of the fiscal year could raise concerns. Although state sales taxes grew by $48 million the first months of the fiscal year, there were drops in other taxes.
Gross personal income taxes declined $14 million, corporate income taxes were down $17 million, public utility taxes were off by $16 million and corporate franchise taxes were down $1 million.
The lower income tax collections raise concerns that job gains are occurring in fields where employees are likely to earn less money.
At the same time, strong sales tax receipts show consumer spending is up. But, while rising sales tax receipts can indicate that consumers are spending more due to increased confidence in the economy, it can also be an indicator of higher prices due to inflation.
Moody’s report: Illinois has worst pension debt
If Illinoisans needed a reminder that the state’s public pension systems are deeply in debt, they got it when Moody’s Investor Services released a special report showing the state’s ratio of pension debt to revenues is far and away the worst in the nation.
The Moody’s study shows Illinois pension debt at 250% of its revenues. Only one other state comes remotely close: Connecticut with around 200 percent. The U.S. median is 51.2% and neighboring Wisconsin is at less than 25%, as are New York and Ohio.
Illinois and Connecticut are the only states with ratios above 180%. California, which once tied with Illinois for the worst credit rating in the nation, is well below 80%.
The report was not a downgrade of Illinois’ credit rating, which remains at A3 from Moody’s – still the lowest rating of any state.
The report came as pension reform legislation adopted last year works its way through the courts. The Moody’s study ranks Illinois’ legal framework for altering pension obligations as “very inflexible.” Illinois is one of only seven states that has specific constitutional protections for pension benefits of public employees.
The largest of the state pension systems is the Teacher’s Retirement System (TRS) which covers downstate and suburban teachers and administrators and accounts for around 40% of the Adjusted Net Pension Liability. That number does not include Chicago Public Schools (CPS). That one school district accounts for around five percent of all Illinois adjusted net pension liabilities.
Moody’s also points out that large local governments like the city of Chicago have historically made contributions below the amounts actuaries recommend.
Illinois history conference set
The 16th annual conference on the History of Illinois is set to take place Sept. 25-26 at the Prairie Capitol Convention Center and the Abraham Lincoln Presidential Museum in Springfield. There will be sessions on nearly every point in Illinois’ history from prehistoric East St. Louis, to African-American activists and immigrants, to Abraham Lincoln’s speeches, and to the bustling streets of modern, downtown Chicago. A wide range of topics and multiple sessions will be available throughout each day.
The conference will also feature eight sessions designed specifically for teachers interested in learning new ways to explore history in the classroom.
For a complete schedule of the daily events or for more information visit http://www.illinois.gov/ihpa/Involved/Documents/2014.Conference.pdf