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 Weekly Review
Provided through the Generous Support of the McCormick Tribune Foundation
CTBA Weekly Review December 11, 2007
CTBA Quick Links
In This Issue
New Gaming Plan
Transit Funding????
BIMP Still Waiting On Gov
November Revenue Update
November Economic Update: Holiday Sales and the Economy
Calendar
Capital Plan & Gaming
  
 
House Democrats Unveil New Plan
 
This week the House Democrats unveiled new gaming legislation.  
 
The plan adds two casinos, including one in Chicago, and thousands of slot machines at riverboats and horse tracks.  It also proposed reissuing the state's 10th casino license, approved for Rosemont in 1999.
 
Overview of Legislation (Read the entire memo here)
 
Where Does the Money Go?
  • 70% of all revenues would go toward a capital program.  Those dollars would be divided up by the following:  40% for roads, bridges, transit and local projects, and 60% for building schools, parks, cultural institutions and museum projects. 
  • 30% of all revenues would be dedicated to education
  • 20% of all the education revenues would be directed to Chicago Public Schools
  • Of the remaining, 50% would go to needy school districts
  • 30% distributed to schools on a per capita basis
  • 20% to fast growth districts
  • All funding must be used to reduce class size, hire reading or math specialists or hire elementary and middle school counselors.
  • $5 million would be distributed to compulsive gambling prevention programs.

  • Cities with existing riverboats like Elgin would not get more money from the expanded gambling. Their share of the take would be frozen at current levels.  Counties would get 2% of the new gambling money to use for public safety or health care spending.

  • Cook County would get 3% of the revenues from the Chicago casino to go toward criminal justice and public health.

  • Cities with horse tracks would get 2% and counties 3% of the take from the new "racino."

How Does the Plan Work
 
  • A new Chicago casino run by Chicago Casino Development Authority, whose three members will be appointed by the mayor. The city will pay $200 million to the state for the casino license.
  • The unused 10th casino license and one new license would be auctioned off for use anywhere in Illinois but must be on water.
  • Existing casinos get access to 3,500 new gambling spots at a cost of $50,000 per machine. Spots can be on land.
  • Horse tracks split 3,600 gambling positions for video poker and slot machines with Arlington Park getting at least 1,100.  The cost is $50,000 per gambling machine spot.

Ethics and Oversight

  • Existing Illinois Gaming Board abolished and replaced with expanded panel whose members undergo greater scrutiny and given greater power.
Illinois House members are being summoned back to the Capitol for a possible vote on Dec. 17 and told to prepare for more than one overnight stay. A Senate spokeswoman said Senate sessions are "possible."
 
What Is Being Said About the Plan

House Speaker Madigan said gambling has become the last resort for funding construction and education and bailing out the Chicago region's bus and train agencies before a financial "doomsday" early next year.

"In light of this reality, and particularly out of a strong desire to see the unseemly drama over mass transit in northeastern Illinois that has played out over the last six months brought to a conclusion, I am willing to embrace compromise and offer a sincere, serious proposal that will receive my full support and backing," Madigan said in a letter to members of the General Assembly.

This plan is sure to be controversial.  There are already differences on provisions intended to alter how women and minorities gain access to ownership share of the new casinos.
 
The House plan allows any minority or woman who invests $5,000,  to help pick the actual investors. Some like the previous system, which required women and minorities to have significant wealth and the ability to be a part of the ownership applications for the casino license.

Also at issue is how much Chicago should pay for a gambling license. Early estimates said the license could be worth $800 million, while city officials said any fee would be too much. This plan calls for a $200 million payment to the state.

Additionally, aside from the Chicago casino, there's no specific site named for the other two licenses. Senate President Jones has long sought a casino for the South suburbs, others want a casino in the Northern suburbs.

The Link to Mass Transit
Many downstate legislators want a capital bill before they will vote on mass transit funding. Last week a transit funding bill died because many downstate representatives believed if they solved Chicago transit, a statewide capital bill would never be passed.  A transit funding bill needs downstate support to pass the General Assembly so downstate legislators are leveraging their power to tie the two together. 
 
Making the situation even more complicated is that a lack of trust in Springfield has left many legislators to worry that funding will be withheld for capital projects in their district.
 
 
 
Read testimony given in May 2005 by economist Dr. Victor Matheson to the Illinois General Assembly on the fiscal impact of riverboat gaming.  Dr. Matheson claims, among others things, that gaming would generate far less money than current speculations suggest and there are important social costs to consider when reviewing a gaming expansion proposal (such as increased crime and pathological gambling disorders).
 

  • Read the latest Illinois Gaming Board Annual Report, 2006. Commission on Government Forecasting and Accountability report on gaming revenues, Wagering in Illinois: 2007 Update.

  • Commission on Government Forecasting and Accountability report, Discussion on Riverboat Gambling in Illinois (2005) - complete with state by state comparisons.

    		•
    Mass Transit Funding
    		  
    No Progress As Another "Doomsday" Looms
     
    As reported last week, the Governor required the General Assembly to convene special session seventeen and eighteen to discuss funding for the RTA, CTA, Metra & Pace.  SB 307, another mass transit funding bill, was voted down in the house during the session.  SB 307 was modeled on HB 4161 and SB 572.  (Read an analysis of that legislation here).
     
    SB 307 or anything like it is bad public policy because it creates a hole in the budget without providing a stable revenue source to fill the gap.      SB 307 would have created a $385 million hole.  The bill would have diverted the revenues collected from the sales tax on motor fuel in the six county transit region to the Regional Transit Authority.  Those revenues already go toward funding other state services.
     
    Another bill that was voted down is SB 572.  it created a new revenue source for transit by raising the sales tax in the six county transit regions.  Several legislators and the Governor indicated that they could not support the legislation because it raised taxes and did not include provisions for a state capital bill. However, SB 572 is a regional solution to a regional problem.  (Read an analysis of SB 572 here).
     
    There is no telling when a transit funding solution will occur.  Speaker Madigan has indicated he would like to vote on a capital and transit funding package next week, however there is talk that a capital plan will not be ready by next week. 
     
    If a plan is not approved by December 31, agreements by the transit unions to decrease CTA personnel retirement benefits, in exchange for a long-term CTA funding solution, will expire.  The General Assembly will have missed a huge opportunity for cost reductions if that is allowed to happen.
     
    If a solution is not agreed upon by Jan 20 the CTA will eliminate 81 bus routes, lay off 2,400 employees and raise fares as high as $3.25 for rail passengers who pay with cash. 
     
     
    Low Income People Affected More by Fare Hikes Than Tax Increase
    It is important to realize the impact of higher transit fares on low income people.  Low income people tend to rely more on public transit than wealthy.  According to the United States Department of Transportation, the availability of public transportation is particularly important to people with limited incomes.  Also, that bus service is relatively more important than rail service at lower income levels.
     
    The chart below, also from the United States Department of Transportation, shows that most public transit riders are low and middle income.  In fact, those that have incomes under $20,000 make up over 50% of all public transit riders.  (Read the full report here).
     
     
     
    How Do Fare Changes Affect People?

    The Transit Cooperative Research Program found that most fare changes have affected ridership of lower income groups.(Read the full report here).

    Additionally, analysis of data from the Bureau of Labor Statistics, Consumer Expenditure Report finds that low and middle income people spend more of a percentage of their income on public transit than wealthy.  In fact, the lowest income group spent almost twice the amount of the wealthiest, when measured as a percentage of income.

    Quintile Lowest Second Third Fourth Highest
    Income Before Taxes $9,676 $25,546 $42,622 $67,813 $147,737
    % of Income Spent on Public Transportation 1.4% 0.8% 0.7% 0.7% 0.8%
     
     
    Fare Hikes Will Hurt More Than Increased Sales Tax

    Analysis of the Bureau of Labor Statistic (BLS) data shows that the increase in the sales tax rate proposed in SB 572 (0.25%) would impact low and middle income people less than an increase in rail and bus fare would. 

    The data shows, that even if Illinois taxed 100% of expenditures, (Illinois currently only taxes about 13% of the economy) the lowest and middle income groups would be hurt more by the proposed fare increases than the proposed sales tax increase. 

    For example, the average train rider will see their cost go up by $1 per ride during peak hours.  That means about $40 a month or almost $500 a year.  The average bus rider will see about half that increase as fares will go up by $0.50 during peak hours. 

    At the same time, based on the BLS data, the lowest income group would pay an additional $50 per year and middle incomes about $100 per year in sales taxes if SB 572 passes.  Far less than what they would pay under SB 572.
    Quintile Lowest Second Third Fourth Highest
    Average Annual Expenditure $19,120 $28,921 $39,098 $54,354 $90,469
    What a 0.25% Increase in the Sales Tax Would Cost $48 $72 $98 $136 $226
     
     
     
    Resources:
     
    FY 2008 Budget  
     
    Waiting on Governor to Sign BIMP
     
    The Governor still has not signed the Budget Implementation Bill or "BIMP" into law.  SB 783 House Amendment 5 or the "BIMP" was passed by the General Assembly on November 2nd. 
     
    The Governor received the BIMP bill on Nov. 5 and has 60 days to act on the bill or it automatically becomes law.  His office state's that the Governor is still reviewing the legislation and that "there could be a way to actually put more money into education."
     
    Meanwhile, schools, health care and human services are still waiting for their FY 2008 budget appropriation and in some cases, have lost funding for the year. 
     
    While local school districts can receive
    their increased FY 2008 payments retroactively, many human service providers rely on Medicaid funding, which can only be paid prospectively. 
     
    That means programs like those that serve seniors and the developmentally disabled lose funding every day the Governor waits to sign the BIMP legislation.
     
     
    Revenue Update  
    November Revenues Continue to Lag Inflation 
    Overall receipts in November were down $26 million from the same point last year as reported by the Illinois Commission on Government Forecasting and Accountability (COGFA).
     
    Revenue sources that dropped last month include:
    • Federal transfers declined $41 million
    • Corporate income taxes fell $35 million (in large part to a computer system conversion)
    • Public utility taxes declined $25 million
    • Corporate franchise taxes declined by $2 million
    • Vehicle use tax declined by $1 million
    • Riverboat gambling was down $10 million
    • Lottery transfers dipped $5 million
    • Other sources and transfers were down $10 million
    Some Collections Up Last Month

    Luckily collections from the personal income tax performed well, up $39 million net of refunds.  Estate taxes also were up $32 million.  After months of decline, receipts from the sales tax were up $13 million.  Other taxes that experienced revenue gains in November were the insurance tax ($9 million), interest income ($7 million) and liquor tax ($1 million).

     
    Year to Date
    Through the first five months of Fiscal Year 2008, overall receipts are up $478 million.  However, most of that is due to an increase of $303 million in federal sources.  State revenues are only up $175 million through the first five months.
     
    Major sources of revenue are mixed.  Personal income taxes continue to do well, up $229 million.  However corporate income taxes are down $63 million and sales taxes down $45 million. 
     
    After accounting for inflation state sources are down $125 million from this same point last year. 

    To read the entire November monthly briefing from COGFA click here.

    For more information on taxes and revenues contact Chrissy Mancini at cmancini@ctbaonline.org or visit the budget, tax and revenue section of the CTBA website here.

     
    The Illinois Economy  
    Holiday Sales & Economic Indicators
    Holiday sales are extremely important for the overall economy's health.  Consumer spending accounts for about two-thirds of total spending in the economy, and holiday sales make up about 20% of all industry sales for the entire year.  This year, holiday sales are even more important for the health of the economy because of the deterioration of the housing market combined with high energy prices and declines in the stock market. 
     
    According to the National Retail Federation, holiday sales are expected to rise this year by 4.0%, a drop from last year's 4.6% and the lowest gain since 2002.
     
    The Role of the Internet and Tax Collections
    Consumers are expected to use the internet for about 30% of their holiday shopping this year.  Most internet sales are not subject to the sales tax, meaning the state will continue to lose revenue as more consumers look toward the convenience of the internet to do their shopping.
     
    Illinois Economic Indicators
    The unemployment rate for October rose 0.2% over September and is up by 1.2% from this time last year.
     
      Oct-07 Sep-07 Oct-06
    Unemployment Rate 5.3% 5.1% 4.1%
     
      October % Change Over Prior Month % Change Over a Year Ago
    Single Family Housing Permits 2,150 18.1% -30.9%
    Civilian Labor Force 6,739 -0.3% 1.1%
    Employment 6,383 -0.5% -0.1%
     
     
    For more information see pages 1-3 of the COGFA November monthly report here.
    Calendar of Events  

     

     

     

    WHAT? Making the Connection Basic Training
     
     WHEN? Wednesday, January 23, 2008

     

     

     

    WHERE? Naperville, IL

    Presented by the DuPage Federation on Human Services the session contains practical information in an easy to understand format regarding many programs available to assist low income persons.

    Register Here

     

    WHAT? Making the Connection: Public Benefits and Single Adults & Public Benefits for Youths up to 21

    WHEN? March 5, 2008

    WHERE? Naperville, IL

    Presented by the DuPage Federation on Human Services

    Register Here

     

    WHAT? Making the Connection: Mental Health and Public Benefits & Understanding Spenddown

    WHEN? March 6, 2008

    WHERE?Naperville, IL

    Presented by the DuPage Federation on Human Services

    Register Here

     

    WHAT? Understanding Appeals & Domestic Violence and Public Benefits

    WHEN? March 18, 2008

    WHERE?Naperville, IL

    Presented by the DuPage Federation on Human Services

    Register Here

     

    WHAT? Immigrants and Public Benefits & Putting the Pieces Together

    WHEN? March 19, 2008

    WHERE?Naperville, IL

    Presented by the DuPage Federation on Human Services

    Register Here

     

    WHAT? Making the Connection Basic Training

    WHEN? Tuesday, June 10, 2008

    WHERE? Naperville, IL

    Presented by the DuPage Federation on Human Services the session contains practical information in an easy to understand format regarding many programs available to assist low income persons.

    Register Here
     
     
     
    Do you have something to share in the Weekly Review?
     
    Please email Chrissy Mancini