Rep. Wheeler's Weekly Roundup: June 9

Budget
·         COGFA report shows slight uptick in total Illinois tax revenue.  The monthly report by the Commission on Government Forecasting and Accountability (COGFA) showed State general funds tax receipts up $143 million in May 2017.  The tax receipt increase is independent of “transfers in,” a separate table of non-tax general funds revenues such as profits from Illinois State Lottery ticket sales.  The increase in May 2017 tax revenues was entirely attributed to increased revenues from the personal income tax paid by almost all Illinois employees, with personal income tax receipts up $179 million over comparable figures reported in May 2016. 

Corporate income tax receipts continued to plunge during the 31-day reporting period, with this revenue stream down $72 million.  The decline of almost one-half in year-over-year corporate income tax payments to the State of Illinois reflected the continued movement of U.S. business from C-class corporate taxpayers, which was the dominant business model in former years,  toward the attribution of taxable revenues to pass-through entities, often organized as wholly-owned subsidiaries of holding companies.  The Illinois Department of Revenue (IDOR) has taken account of this change and has re-classified much of its remaining business tax receipts as individual income tax receipts, paid at individual income tax rates.

The relatively good numbers posted for State coffers in May do not wipe up the effects of the revenue shortfall posted for most of the months that were notched earlier in FY17 (ends June 30, 2017).  For the first 11 months of FY17 as a whole, Illinois general funds tax receipts fell $604 from the first 11 months of FY16.  As in the single month of May 2017, this eleven-month decline was entirely attributable to the decline in corporate income tax receipts.  Corporate income tax collections were down $909 million during the almost year-long period.   The FY17 revenue shortfall is only a part of the budget crisis surrounding Illinois’ backlog of more than $14 billion in unpaid bills.     

·         Federal judge rules Illinois not in compliance with full funding of Medicaid payments.  The argument, presented in federal court to District Judge Joan Lefkow, is that health care providers are suffering irreparable harm for being forced to wait for payment of Medicaid health care treatments that are billed to the State of Illinois.

Illinois currently owes more than $14 billion in unpaid bills.  More than $1 billion of these bills are moneys owed to Medicaid care providers.  Since July 1, 2015, Illinois has not operated under a budgetary plan to control State spending.  During this period, tax monies coming in have been allocated to various beneficiaries under a maze of court orders, consent decrees, and continuing appropriations. Billions of dollars are being spent on “autopilot.” 

The Comptroller of Illinois has stated that if Judge Lefkow were to order immediate payment of all of the moneys due and owed to Medicaid care providers, Illinois’ general-funds cash flow will no longer to be sufficient to cover all of the court-mandated payments that Illinois must make, let alone payments to secondary stakeholders such as State universities and providers of community social services.  

In a preliminary response to the arguments, Judge Lefkow has ruled that Illinois is “not in compliance” with previous court mandates that these moneys be paid.  As a pathway toward compliance, she has asked the State to negotiate the subject of priority payments with representatives of health care providers who possess standing under this lawsuit.  Should these negotiations not prove fruitful, further court orders may be issued. 

Constitution of Illinois
·         Nearly 50 years since last Constitutional Convention, Rep. Butler pushes to let voters decide.  With a desire to start a serious discussion about the many large issues facing the State of Illinois, State Representative Tim Butler has introduced House Joint Resolution 68 which would allow the question of calling a state Constitutional Convention to be on the 2018 Illinois General Election ballot.

"We have now gone over 700 days without a real budget in our State, and last week we once again ignored our mandated deadline to get something done for the people of Illinois,” Rep. Butler said. “I have heard so many of my colleagues, as well as citizens around the State, say that we need changes to our Constitution to truly move forward, and that is the main reason why I have introduced this call for an Illinois Constitutional Convention.

“Next year will represent a half century since Illinois' last Constitutional Convention was called and our State faces challenges today not envisioned by convention delegates 50 years ago. I believe it is time the citizens of our State once again have the ability to provide their say on if they want to change our Constitution through a comprehensive convention. Read more.

Economy
·         Illinois credited with 36 firms on Fortune 500 list.  The 2016 Fortune 500 list tallies U.S. business firms by gross revenue.  Illinois’ highest-revenue firm on the list, the pharmaceutical and general-merchandise retailer Walgreens Boots Alliance, was scored at No. 17 nationwide.  Its $117 billion in Year 2016 revenue marked an increase of almost 14% from $103 billion in year 2015.  Illinois’s second-largest listed firm, aerospace giant Boeing, was ranked No. 24.

While most of the Illinois firms listed on the Fortune 500 tally are headquartered in the Chicago area, two of the largest companies are headquartered Downstate: State Farm (#33) and Deere & Co. (#105).  Changes in the U.S. economy, caused by economic trends and corporate restructurings, created some changes in the index.  Two Illinois newcomers are Conagra (#197), which moved its headquarters from Nebraska, and list newcomer TreeHouse Foods (#427).  By contrast the former biopharmaceutical giant Baxalta was acquired by a European conglomerate in 2016, and left the ranking.             

Sharp declines were suffered by several Illinois-based firms.  Machinery manufacturer Caterpillar dropped 15 spaces to #74, and general retailer Sears Holdings relinquished 16 notches to #127.  The venerable firm R.R. Donnelley & Sons has traditionally specialized in the printing of information on paper.  In 2016 it spun off several of its operating units and took other steps to embark on a paradigm shift in its business model.  It yielded 133 places, falling to #388.

·         Profile of business movement to Indiana.  In its story “The Border War,” Chicago-based WGN-TV this week portrayed the movement to the Hoosier State of businesses historically based in the Chicago area.  The feature story profiled Hoist Liftruck, now of East Chicago, Indiana, and its CEO Marty Flaska.  Hoist Liftruck, a U.S. manufacturer of high-capacity “liftrucks” ranging from 15,000 to 125,000 pounds, specializes in high-capacity material handling equipment.  Hoist is only one of 51 Illinois firms that have moved to Indiana in recent years, taking more than 5,000 jobs across the state line. 

Speaking to WGN, CEO Flaska described the workers’ compensation cost issues and property tax bills that had encouraged him to move the firm from its former Bedford Park place of business.  Flaska described how his firm’s property was frequently reassessed and how he had to hire politically-connected law firms to achieve some relief from the reassessments.  House Republicans and Gov. Bruce Rauner recognize the problem with Illinois’ business climate and are fighting for dramatic reform in these two key policy areas. 

Property Taxes
·         Governor Bruce Rauner repeats call for property tax relief.  Various State laws allow local taxing bodies to increase the property tax bills paid by Illinoisans without a referendum or other act of public authorization.  One of these “automatic increase” pathways is a loophole in Illinois’s property tax extension limitation law (PTELL).  This loophole allows each taxing body to get an upward adjustment each year based on inflation.  Larger taxing bodies, such as urban school districts, are able to use this loophole to get millions of additional dollars each year. 

This week, Governor Bruce Rauner joined many House Republicans in renewing the call for a four-year freeze on PTELL extension increases.   A four-year freeze will create a window of opportunity to change State policies and reduce pressures on local taxing bodies.  In some cases, these taxing bodies see themselves as compelled to ask every year for more money.  For example, legal mandates enacted in Springfield often force school districts and other taxing bodies to pay more for locally available services than they would otherwise be required to spend.

Suburbs – Elmhurst Quarry
·         Flood-control project will get observation deck.  A former quarry in Elmhurst is now the Elmhurst Quarry Flood Control Facility, a reservoir built to store stormwater.  It is part of the growing Chicago-area infrastructure of water storage facilities that are being built to prevent flooding due to stormwater runoff.  The former quarry will be the recipient of rainwater runoff that flows into flood-prone Salt Creek.  The DuPage County flood control project began in 1991. Construction is expected to begin in July on a small observation deck to allow interested local citizens to enjoy public access to see the impressive pit.  The deck is scheduled to be completed in September 2017.

The Elmhurst Quarry, when it was in use, was one of the pits dug in the Chicago area to extract aggregate stone for the manufacture of cement and concrete.  Substantial quarries dot the southern and western suburbs.  The former quarry’s stone-producing days are over and it now can serve as a temporary home for up to 2.7 billion gallons of stormwater runoff. 

Transportation – Gas Prices
·         Spot price survey shows Illinois drivers enjoying lowest early-summer gas prices in 12 years.  The survey of the average price of motor fuel in Illinois shows that the average purchaser could expect to pay $2.40/gallon during the first days of June.  This was the most reasonable price point for Illinois motor fuel during the early-June driving season since 2005.  Experts warned that prices are likely to increase throughout June in anticipation of heavy consumer demand in and around the Fourth of July holiday, which is a peak-driving spike point.

The comparable average price for motor fuel in early June 2016 was $2.53/gallon.  The relatively reasonable price point for 2017 motor fuel is accompanied by gusher-level crude oil production from shale beds throughout the eastern United States, particularly North Dakota and Texas.  So much oil is being produced as to threaten the viability of many traditional oil production platforms that drill for and pump oil from the U.S. continental shelf in states such as California and Louisiana.  The added cost of pulling up oil from underneath salt water may drive some of this production out of business.  This and other factors could lead to a possible uptick in Illinois consumer motor fuel prices.    

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