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Weekly Review
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March 3, 2009
 
 
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In This Issue
Comptroller calls for short term borrowing to access federal stimulus dollars
Support the EITC
CTBA fiscal symposium rescheduled
Calendar of Events
 
Federal Stimulus
 
dollarComptroller Recommends Legislators Short Term Borrow to Access Federal Stimulus Dollars

State owes doctors, hospitals and providers $2.2 billion
Other non-Medicaid bills total another $2.3 billion

From the Comptroller:  Comptroller Dan Hynes urged changes in the state's short term borrowing laws saying the move would ensure access to enhanced federal funding from the stimulus package and also tap additional federal monies available from the Hospital Assessment Program.

In testimony before the Senate Executive Committee, Hynes said SB324 would allow state officials to temporarily borrow a maximum of $1.5 billion that would be paid back with federal stimulus and Medicaid funds. He also said the cash would be necessary to meet new federal prompt payment guidelines.

"This is a narrowly focused, fiscally responsible proposal that allows the state to maximize federal dollars and meet its obligations," Hynes said. "Lawmakers should act quickly to pass the measure to obtain those monies within the next few weeks."

Hynes said that without additional borrowing authority the state may be unable to fully access $2.9 billion in additional federal Medicaid funds during the next two years authorized by the President's stimulus initiative. To qualify for the extra funding, the state is required to pay doctors, hospitals and nursing homes promptly, within 30 days. The state is currently holding an estimated $2.2 billion in unpaid Medicaid bills, some of which date back to services provided in September.

"By any standard," Hynes said, "the 30-day prompt payment requirement is not currently being met." Hynes has been a long-time advocate of timely bill payments, as a matter of fairness and to ensure the financial viability of health care providers and public access to health care services.

The borrowing change also would allow the state to keep its commitment for the five-year, $3.8 billion Hospital Assessment Program. The program provides critical funding to the state's hospitals for a variety of programs and up to an additional $1.3 billion to the state for health care spending during that time.

Hynes predicted vendors of all types might have to seek reimbursement for hundreds of millions of dollars in services through the Court of Claims because the state will have insufficient revenues to pay the bills by Aug. 31, the end of this fiscal year's lapse period. In addition to Medicaid bills, there currently is another $2.3 billion worth of non-Medicaid bills awaiting payment, dating back to November of 2008.

SB324 is sponsored by Sen. Jeffrey M. Schoenberg, D-Evanston.

"This proposal is critical if we are to provide the more than 200 hospitals across Illinois who depend on these additional funds with the certainty that they need to meet the critical health care needs in their communities," Schoenberg said.


Background on Deficit and Federal Stimulus Dollars for Illinois
According to Comptroller Hynes, by the end of the fiscal year the state deficit will reach $9 billion.  Although the federal stimulus will provide additional dollars to Illinois, it will not close the deficit.
 

The American Recovery and Reinvestment Act will provide about $6.3 billion to Illinois through 2013.

To help close the current year deficit the stimulus will provide about $880 million for Medicaid payments and about $2,055 billion for a "State Fiscal Stabilization Fund," of which $1,681 must be used for K-12 education and the remainder to avert budget cuts in education or in other basic state services, such as public safety and law enforcement, services for the elderly and people with disabilities, or child care.

If Illinois were to access all of the State Fiscal Stabilization Funds and the $880 in Medicaid funding the deficit will remain at around $6 billion.

 
The White House projects the bill will create 148,000 jobs in Illinois. (View the White House memo here).  

For Illinois taxpayers, the Center for Tax Justice projects Congress's Stimulus Bills Would Provide Illinois Families with Children an Average $786 to $922 in Tax Cuts in 2009. (View the fact sheet here).
 
View the legislation here (H.R.1):

Most states are facing budget problems that the fiscal stimulus will not solve.  As written by stateline.org, according to the National Conference of State Legislatures, the 50 states face budget gaps totaling $132 billion for this year and next. The stimulus bill includes $53.6 billion in education aid and $87 billion in Medicaid aid for the states - $140.6 billion in fiscal relief, but stretched out over five years.

What's In the Legislation?
According to the Center on Budget and Policy Priorities, Illinois is set to get about $6.3 billion in federal aid from FY 2009 to FY 2013 (View the report here.) 
This includes: All dollars in millions
 
 
Fiscal Relief for State Medicaid Costs
FY 2009 $880
FY 2010 $1,340
FY 2011 $680
Total:  $2,900

Education Block Grant
FY 2009 - FY 2010
$1,681
Available immediately but must be used within two years.  Education grants would support K-12 and higher education during state fiscal years 2009, 2010, and 2011. A portion of the funds would be dedicated to helping states maintain K- 12 and higher education funding, the remainder would flow directly to local school districts. The funds must first be used to restore state education funding up to the greater of the FY08 and FY09 level, or, if higher, up to existing state formula levels. They can also be used to allow the phase-in of previously enacted equity and adequacy adjustments. Any funds remaining after these uses must be sent to local school districts. If funds are not sufficient to provide state support for K-12 and higher education at these levels, the state must allocate the funds between K-12 and higher education in proportion to the relative shortfalls.

Flexible Block Grant
FY 2009 - FY 2010
$374
Available immediately but must be used within two years. Flexible block grants to avert budget cuts in education or in other basic state services, such as public safety and law enforcement, services for the elderly and people with disabilities, or child care.

Worker Training and Employment Services (Youth Services, Dislocated Workers, Adult Activities)
FY 2009
$54

Food Stamp Program Administration
 
FY 2009 - FY 2013
$12 to the state for administration of program
$890 Million to participants, would aid an additional 1,371,000 people

Emergency Shelter Grant Program
FY 2009
$72

Unemployment Insurance Modernization Act
$23 for program administration
The Unemployment Insurance Modernization Act (UIMA) is bi-partisan federal legislation (S. 1871/H.R. 3920, Title IV) that provides substantial financial incentives for the states ($7 billion) to close the major gaps in the unemployment program that deny benefits to large numbers of hard-working families. In addition, the measure provides $500 million in necessary funding for state agencies to better serve the record numbers of workers now applying for unemployment benefits and seeking to navigate today's challenging job market.) $316 million to residents.

Education - Increase Title I and IDEA
FY 2009 - FY 2010
$1,041

Childcare
The economic recovery package will provide an additional $2 billion in child care funding under the Child Care and Development Block Grant (CCDBG). CCDBG provides funding to states to subsidize child care for children in low-income working families and low-income families in which parents are
engaged in education or training.  Illinois residents will receive about $147 million in Childcare subsidization
 
Child Supports
FY 2009 - FY 2010
$37
According to the Center for Law and Social Policy, the child support enforcement program is an important part of the safety net for struggling families.  One in four children receives child support services.  Families spend their child support income to pay for basic needs, shoring up consumer demand for goods and services and preserving jobs in the economy.  The program is cost effective, it collects $6 for every federal dollar invested.

Total
FY 2009 - FY 2013
$6,293

 
 
TAX RELIEF FOR INDIVIDUALS AND FAMILIES

 
According to the Center for Tax Justice, Congress's Stimulus Bills Would Provide Illinois Families with Children an Average $786 to $922 in Tax Cuts in 2009. (View the fact sheet here).
 
Highlights of the Legislation

"Making Work Pay" Tax Credit.
The bill would cut taxes for more than 95% of working families in the United States. For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families. This tax credit would be calculated at a rate of 6.2% of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns.
 
Economic Recovery Payment to Recipients of Social Security, SSI, Railroad Retirement and Veterans Disability Compensation Benefits. The bill would provide a one-time payment of $250 to retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration, Railroad Retirement beneficiaries, and disabled veterans receiving benefits from the U.S. Department of Veterans Affairs. The one-time payment is a reduction to any allowable Making Work Pay credit.
 
Refundable Credit for Certain Federal and State Pensioners. The bill would provide a one-time refundable tax credit of $250 in 2009 to certain government retirees who are not eligible for Social Security benefits. This one-time credit is a reduction to any allowable Making Work Pay credit.
 
Increase in Earned Income Tax Credit. The bill would temporarily increase the earned income tax credit for working families with three or more children. Under current law, working families with two or more children currently qualify for an earned income tax credit equal to forty percent (40%) of the family's first $12,570 of earned income. This credit is subject to a phase-out for working families with adjusted gross income in excess of $16,420 ($19,540 for married couples filing jointly). The bill would increase the earned income tax credit to forty-five percent (45%) of the family's first $12,570 of earned income for families with three or more children and would increase the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) by $1,880.
 
Increase Eligibility for the Refundable Portion of Child Credit. The bill would increase the eligibility for the refundable child tax credit in 2009 and 2010. For 2008, the child tax credit is refundable to the extent of 15 percent of the taxpayer's earned income in excess of $8,500. The bill would reduce this floor for 2009 and 2010 to $3,000.
 
"American Opportunity" Education Tax Credit. The bill would provide financial assistance for individuals seeking a college education. For 2009 and 2010, the bill would provide taxpayers with a new "American Opportunity" tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).
 
Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase.
 
Sales Tax Deduction for Vehicle Purchases. The bill provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009. This deduction is subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).

For information on other individual and family tax benefits of the bill and to find out provision on small businesses taxes, manufacturing, renewable energy development and unemployed workers click here


View the Tax Stimulus Report Card by the Tax Policy Center at the Brookings Institution and Urban Institute

More from the Center for Tax Justice here

More from the National Conference of State Legislatures

 

 
Earned Income Tax Credit
 

 
Support Illinois Workers
EITC would provide Illinois an economic stimulus
Support HB 2319 and SB 1562
 


The EITC provides a strong work incentive for low-income families by "making work pay," allowing them to hang onto more of their hard-earned money at tax time. It helps to reduce the heavy responsibility that too many of them shoulder in state and local taxes - just as the federal EITC offsets the effect of the payroll tax. The EITC represents targeted assistance for struggling families who need it most.

Consider that in Illinois the poorest one-fifth of Illinois households pay about 13 percent of their incomes in state and local taxes, while the wealthiest 1 percent of earners spend less than 5 percent of theirs on such taxes. Low-income families simply pay more than their fair share for the public goods that we all enjoy - from roads and schools to police and fire protection. The EITC helps to reduce this disparity. And because families spend their EITC money at the local level, many economists say this credit provides true "economic stimulus" for businesses and communities.

How can the EITC be improved? Currently Illinois' EITC is the smallest of the nation's 21 state EITCs.  It is set at 5 percent of the federal credit.

 
HB 2319 and companion bill SB 1562 would increase EITC assistance for struggling families through a stairstep approach.
 

In FY 2009 the Illinois EITC would rise to 7.5 percent of the federal credit for a maximum value of approximately $360 per qualifying family;
 

In FY 2010 it would rise to 10 percent of the federal credit for a maximum state EITC of about $500.
 
Fact Sheet on SB 12

HB2319 is posted for hearing in the House Revenue Committee this coming Thursday, 5 March at 9 a.m.  in Room 115 of the state capitol.

More on the EITC

Fact Sheet on HB 2319

Top Ten Reasons Working Poor Families Need the EITC

Find out if you are eligible for the Illinois Earned Income Tax Credit

Together, State Minimum Wages and State Earned Income Tax Credits Make Work Pay, from The Center for Budget and Policy Priorities finds that state EITC's are an effective method for fighting poverty.


 
CTBA Fiscal Symposium
 

 
New Date
 

 
Due to scheduling issues, 
 CTBA's 8th Annual Fiscal Symposium

 
has been rescheduled for Monday, March 30, 2009


A panel discussion on how the current economic downturn
is affecting Illinois' ability to provide crucial public services.


Monday, March 30, 2009
Registration:  8:15 am
Continental Breakfast:  8:30 am
Program: 9:00 am to 12:30 pm
 
Union League Club of Chicago
69 West Jackson Blvd.
Main Lounge, 2nd Floor
Chicago, Illinois
 
Please mark your calendars!
 
Details and registration form will be forthcoming
 
 

 
Calendar
 
WHAT: Dupage Federation on Human Services Reform, Making the Connection:  Accessing Public Benefits for Low Income Persons
WHEN: October 1, 8, 15, 22, 29
            February 18, 25
            March 4, 11, 18
            June 3, 10, 17, 24
            July 1
WHERE: All trainings held at NIU Naperville, 1120 Diehl Road, Naperville, IL
INFO: Making the Connection training sessions contain information in an easy-to-understand format regarding many programs available to assist low income persons.

Individuals who register for a Making the Connection training session now receive membership access to the Federation's newly developed Making the Connection Illinois website, www.mtcil.org.

To register and for more information please visit www.dupagefederation.org.

 

 



Do you have something to add to the Weekly Review?
email Chrissy Mancini @
cmancini@ctbaonline.org

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Center for Tax and Budget Accountability

70 East Lake Street, Suite 1700
Chicago, IL  60601
312-332-1041
www.ctbaonline.org
 

 
 
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