URGE YOUR LEGISLATORS TO SUPPORT A RESPONSIBLE BUDGET AND INCOME TAX INCREASE

 

Despite looming deadlines and threats of a governmental shutdown, Illinois legislators have yet to complete work on a budget for Fiscal Year 2008; however, the buzz around the Capital suggests that legislators may be getting close.  Part of the challenge facing lawmakers is the lack of available funds for Illinoisans' top priorities, including school funding reform, healthcare, paying off the state's pension debt, and property tax relief.  In order to adequately address these funding priorities, legislators have been considering different revenue options.  A recent proposal garnering a lot of attention is the idea to expand gaming.

 

CTBA has concerns over the use of gaming expansion as a revenue source to fund vital public services.  Many of these concerns are echoed in a 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).

 

For decades, advocates, lawmakers and taxpayers have strongly supported education funding and fiscal reform in Illinois.  Many of us continue to hope that this is the year when legislators take a stand and get something accomplished.  CTBA and other advocates know it is imperative for Illinois to create a new revenue source for education funding reform - one that is less reliant on property taxes.  A fiscally responsible way to generate this new money is by imposing an income tax increase (read a CTBA fact sheet on the four principles of good fiscal policy).  CTBA and our partners support a responsible budget that adequately funds schools and other vital state services, and includes a modest income tax increase dedicated to education.

 

Income Tax Options: read a CTBA analysis on potential uses of, and revenue generate by, increasing the state income tax by 1% or 2%.
 

What you can do - Call your legislators!  Use the A+ Illinois toll-free legislative hotline.  Even if you've called before, lawmakers need to hear from you before it's too late.

Call: 1-800-651-0315

 

RESOURCES

• Read a message from State Superintendent Christopher Koch, informing school districts that they will be allowed to borrow money from the Illinois Finance Authority in the event that no budget is passed and schools don't receive their General State Aid payments for August.

• Read the latest Illinois Gaming Board Annual Report, 2006

• Commission on Government Forecasting and Accountability report on gaming revenues, Wagering in Illinois: 2006 Update.

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

NEW REPORT SHOWS FINANCIAL CONDITION OF THE ILLINOIS RETIREMENT SYSTEMS

 

The Commission on Government Forecasting & Accountability's recently released July 2007 Report on the Financial Condition of the Illinois Public Employee Retirement Systems finds that:

 

• From FY 1998 through FY 2006 the unfunded liabilities grew for all of the five state retirement systems, with the combined unfunded liabilities of the systems increasing by $27.0 billion.

• Over the last nine years, the State of Illinois has contributed $19.4 billion to the five retirement systems; of that amount $7.3 billion was from the sale of $10 billion in pension obligation bonds.

• The Teachers Retirement Systems has received by far the largest amount of contributions, totaling over $10.9 billion.  The Judges’ and General Assembly Retirement Systems have received the smallest amount of contributions, as they have far fewer participants. 

 

Summary of Contributions State Retirement Systems, FY 1998-FY 2006 ($ in Millions)

Fiscal Years	TRS	SURS	SERS	JRS	GARS	Total
1998	466.9	201.6	200.7	15.7	3.1	888.0
1999	573.0	217.7	315.5	18.7	3.7	1,128.6
2000	634.0	224.6	340.9	21.4	4.0	1,224.9
2001	719.4	232.6	366.0	24.2	4.3	1,346.5
2002	810.6	240.4	386.1	27.5	4.7	1,469.3
2003	926.0	269.6	396.1	31.4	5.2	1,628.3
2004	5,357.6	1,743.7	1,864.7	178.6	32.9	9,177.5
2005	903.9	270.0	427.4	32.0	4.7	1,638.0
2006	534.6	166.6	203.8	29.2	4.2	938.4
Totals:	$10,926.0	$3,566.8	$4,501.2	$378.7	$66.8	$19,439.5

*FY 2004 State contributions include $7.3 billion in proceeds from the sale of pension obligation ponds.

 

• The total unfunded liabilities of the State retirement systems totaled over $40.7 billion on June 30, 2006, led by the Teachers Retirement System (TRS) whose unfunded liabilities amounted to $22.4 billion.

• As the largest of the State systems, TRS accounts for over half of the total assets and liabilities of the five state systems combined. 

• At the beginning of FY 1998, Illinois’ State funded retirement systems' total unfunded liabilities were approximately $13.7 billion.  At June 30, 2006, these liabilities stood at about $40.7 billion, or 197% above the FY 1998 level.

• The primary cause of this increase, in order of impact, were insufficient employer contributions (when compared to contributions based on normal cost plus interest), increases in retirement benefits (essentially the increase in the benefit formula for TRS and SERS members in fiscal year 1998 and 2002 SERS ERI), lower than assumed investment returns, and to a lesser extent, underestimation of salary increases. 

• The cumulative funded ratio for the State funded systems grew steadily from FY 1999 to FY 2000, mainly due to higher than assumed investment returns and adherence to the funding plan established in Public Act 88-593, which more than offset the increase in accrued liability caused by benefit increases. 

• In FY 2002, the funded ratio fell to the lowest level since FY 1998 primarily due to investment returns totaling $5.6 billion less than previously assumed. 

• In FY 2003, investment returns continued to be lower than assumed (by $2.2 billion), but not nearly as low as the previous two years.  Investments began to bounce back in FY 2004, helping to increase the funded ratio.

• In addition, in 2003 the State sold $10 billion in pension obligation bonds and used part of the proceeds to pay all of the contributions for FY 2004.

• The bond sale generated $7.3 billion to reduce unfunded liabilities of the state funded retirement systems.

• The funded ratio remained relatively stable in FY 2005 and FY 2006 despite insufficient employer contributions, mainly due to very high investment returns. 

• In accordance with the funding method contained in current law, the State appropriated $1.37 billion to the State retirement systems in FY 2007.

• Under current law, required State contributions are expected grow to $4.26 billion in FY 2015.  These steady annual increases will support attainment of the 90% funded ratio goal in FY 2045. 

• If the State continues funding according to current law, the accrued liabilities of the State retirement systems will increase from approximately $108.8 billion at the end of FY 2007 to an estimated $463.5 billion at the end of FY 2045.  At the same time, assets are projected to increase from $64.6 billion to $417.1 billion.  Consequently, the unfunded liabilities are projected to increase from $44.2 billion at the end of FY 2007 to $46.4 billion at the end of FY 2045, and the funded ratio is expected to decrease slightly from 59.4% in FY 2007, and then increase to 90.0% by the end of FY 2045. 

 

Funding Projections for the State Retirement Systems

Projections Based on Laws in Effect on June 30, 2006

($ in millions)

Fiscal Year	Annual Payroll	Total Sate Contribution	State Contribution as a % of Payroll	Total Employee Contribution	Accrued Liabilities	Assets	Unfunded Liabilities	Funded Ratio
2007	15,132.2	1,372.3	9.1%	1,292.3	108,838.4	64,639.4	44,198.9	59.4%
2008	15,787.9	2,018.7	12.8%	1,343.2	114,409.7	67,429.7	46,979.9	58.9%
2009	16,428.1	2,739.1	16.7%	1,396.4	120,185.2	70,906.5	49,278.8	59.0%
2010	17,092.9	3,498.7	20.6%	1,449.9	126,141.1	75,122.9	51,018.2	59.6%
2011	17,772.6	3,641.9	20.6%	1,504.2	132,244.2	79,447.0	52,797.2	60.1%
2012	18,469.0	3,788.2	20.6%	1,559.7	138,473.2	83,864.4	54,608.7	60.6%
2013	19,188.6	3,939.6	20.6%	1,617.0	144,801.9	88,350.8	56,451.1	61.0%
2014	19,938.2	4,096.7	20.6%	1,677.8	151,219.9	92,900.9	58,319.0	61.4%
2015	20,725.3	4,261.5	20.6%	1,743.1	157,729.7	97,573.1	60,156.6	61.9%

 

Read the full report: Commission on Government Forecasting and Accountability Report on the Financial Condition o f the Illinois Public Employee Retirement Systems, July 2007

 

Read this article in PDF format.

Read IRSI's updated Public Employee Retirement System FAQs.

 

For more information on Illinois Public Employee Retirement Systems please contact,

Jourlande Gabriel,

Director of the Illinois Retirement Security Initiative,

at (312) 332-1103 or jgabriel@ctbaonline.org.

 

CONGRESS CLOSE TO EXPANDING CHILDREN'S HEALTH PROGRAM

 

An update from the Coalition on Human Needs:

 

This week, prior to leaving town for the August recess, both the House and Senate approved proposals to renew the State Children’s Health Insurance Program (SCHIP). The Senate voted 68-31 to approve the Senate Finance Committee’s SCHIP package on August 2. The vote signals a firm bipartisan commitment to reauthorize and strengthen the program. Furthermore, with more than two-thirds of the Senate voting in favor of the bill (including 18 Republicans), the Senate has sufficient votes to override a Presidential veto. The House passed its SCHIP proposal, the Children’s Health and Medicare Protection (CHAMP) Act of 2007, H.R. 3162, by a vote of 225 to 204 on August 1. The House vote was far more partisan, with only 5 Republicans joining the majority. The President has issued veto threats against both bills because of their funding increases. The President proposes a scanty $5 billion increase over five years – not enough to cover the number of children now enrolled.

The Senate proposal, S. 1893, provides $35 billion in increased funding over five years for SCHIP. The increase is financed by a 61-cent tobacco tax increase. The Congressional Budget Office (CBO) estimates that under this proposal four million children who would otherwise be uninsured would be covered by 2012. The approved Senate Finance Committee package includes other positive features aimed at strengthening the overall program and increasing enrollment. (For a detailed summary of the Senate Finance Committee package, click here.)

The House bill, however, goes even further than the Senate bill to strengthen the SCHIP program and cover more uninsured children. The CHAMP Act, which also contains improvements to Medicare, commits the full $50 billion over five years set aside for SCHIP in the budget resolution. The additional funds, primarily paid for by a 45-cent federal tobacco tax increase and by reducing the subsidies provided to private insurance companies participating in Medicare, would provide health insurance to five million more children by 2012, one million more than the Senate’s bill. The House bill produces greater coverage gains than the Senate because it contains an additional $15 billion increase, but also because it expands states’ eligibility options. Under the House bill states can opt to cover older children (up to the age of 25, phased in from 2010-2013), as well as legal immigrant children and pregnant women during their first five years in the United States (currently states can only cover legal immigrant children and pregnant women after they have lived in the United States for five years). Like the Senate bill, the CHAMP Act also grants states the option of covering pregnant women without having to seek a waiver from the federal government.

The CHAMP Act’s Medicare improvements emphasize preventive care. The bill allows Medicare to add preventive health benefits without seeking approval from Congress, and waives deductibles for preventive benefits. In addition, it makes mental health care more affordable by reducing co-payment from 50 percent to 20 percent. Rural fee-for-service Medicare protections are prevented from expiring, and subsidies to help low-income Medicare beneficiaries pay prescription drug and other costs are made more available.

There are other provisions in the CHAMP Act that make it a good bill. The proposal guarantees dental benefits and assures that mental health care services are treated the same as physical health benefits. It continues to give states the flexibility of deciding the income eligibility levels for their SCHIP programs and allows the few states with parent coverage waivers to continue operating them. No new parent coverage waivers would be granted unless the state can prove it is attempting to reach all children under 200% of the poverty line and that no children would be denied coverage in order to cover adults. Another positive feature of the bill is that it gives states more flexibility to address problems created by a burdensome citizenship documentation requirement in the Deficit Reduction Act (DRA) of 2006. The citizenship documentation requirement has caused thousands of U.S. citizen children to lose or be denied coverage and has been costly for states to administer. The CHAMP Act does alleviate some of these problems by giving states the option to return to pre-DRA rules to prove citizenship for children and by allowing additional types of documents to prove citizenship for adults and for those states that decide to continue to operate under DRA rules. For an in-depth look at this issue, see the Center for Budget and Policy Priorities issue brief, New Charges About how House Children’s Health Bill Affects Undocumented Immigrants are False. 

Families USA has produced a helpful comparison of the Senate and House bills; click here to see their side-by-side comparison.

What’s next: Differences in the two bills will have to be resolved by a House-Senate Conference Committee. Bipartisan support will be needed to pass a final bill and override a potential veto. For now, the approval of the two bills signifies a major victory for low-income families and children and health advocates.

 

SUPPORT TRANSIT FUNDING NOW!

 

Bring Illinois into the 21^st Century by supporting sustainable transit funding. The Northeast region has relied on a 24 year old funding formula that has not accommodated population growth or the loss of federal operating dollars eliminated over a decade ago. 

 

Call your legislators and Governor Blagojevich TODAY to urge them to support the funding and accountability reforms (SB 572, House Amendments 1 and 2) for the Regional Transportation Authority (RTA).   This is a good solution for the region and the state because it can reduce congestion and facilitate the movement of goods across the state and to the rest of the country.

 

These reforms will:

 

• Update the funding formula to restore fiscal health to the transit system and set it on a course for improvements and growth;

 

• Strengthen the RTA’s powers to ensure greater fiscal accountability from CTA, Pace and Metra and to evaluate performance and to improve coordination;

 

• Ensure 5-year strategic planning cycles that, among other objectives, take into consideration access to area jobs for low income communities, and;

 

• Create the Innovation, Coordination and Enhancement Fund as well as the Suburban Mobility Fund to furnish resources for demonstration projects and projects that address mobility for transit dependent populations.

 

(Legislation will eventually include reforms to the CTA pension so that expenditures are in-line with the new funding package.)

 

Every Vote Counts.  Since the legislature is now in an overtime session, every bill needs 3/5 majority in order to get passed out of its respective chamber.  That means that your support is more important than ever.

 

To contact your state Representative and Senator, click here.  To reach the Office of Governor Blagojevich, call (217) 782-0244 or (312) 814-2121.

 

RESOURCES:

• Hear from the Chair of the House Mass Transit Committee, Representative Julie Hamos (D-Evanston) about the legislation, go to www.juliehamos.org.

• Learn more about how transit is funded and planned, take a look at the primer, Transit Uncovered.

For more information, contact Dia Cirillo at 312-332-6522 or dcirillo@ctbaonline.org.