The Senate unanimously advanced on April 22 two bipartisan measures to bridge funding for higher education and critical human services. The proposals aren’t perfect solutions, but the legislation does include the money necessary to finance the spending – a “reset” in budgeting that is much needed in Illinois.
The need for institutional reforms in Illinois was reinforced earlier in the week, when anti-violence programs administered by former Governor Pat Quinn were once again the subject of a critical audit. Additionally, overpayments to local governments and schools that occurred under the Quinn Administration have many of us questioning whether the $168 million in overpayments were the product of incompetence, or a deliberate effort by Quinn to funnel money to Chicago during an election year.
Even as these reports surfaced, several “good-government” reforms – any of which could be the important first step in changing the course of Illinois – were blocked during the week by partisan maneuvering. Instead, Senate Democrat lawmakers passed one constitutional amendment to change legislative and congressional districts, over Senate GOP objections that the proposal still allows politicians to draw their own districts.
Senate advances stop-gap funding for higher education and human services
On April 22, the House of Representatives and the Senate approved a bipartisan, bicameral solution for funding higher education that was the result of cooperation and productive conversation between rank-and-file legislators, legislative leaders and the Governor’s Administration. Governor Bruce Rauner has indicated he will sign the stop-gap funding bill for higher education, which will help universities, colleges and community colleges remain operational through September, at which point they’ll start collecting their fall tuition money.
It is important to note that the budget measure is fully funded – not a false promise like other bills offered by Democrat leaders in the past. The funding will serve as a bridge while lawmakers continue working on a full budget for the fiscal year. The challenges aren’t over, but legislators from both parties noted the agreement indicates an interest by Illinois’ leaders to resolve the state’s issues.
Senate Bill 2059 contains funding from the Education Assistance Fund: more than $350 million for state universities; more than $74 million for community colleges; more than $169 million for Monetary Award Program (MAP) grants; and $6 million for the Illinois Mathematics and Science Academy.
The Senate also passed Senate Bill 2047, which appropriates $600 million from the Education Assistance Fund to higher education and $441 million from the Commitment to Human Services Fund to help pay for critical human service programs. This proposal is currently pending in the House of Representatives.
‘Significant breakdowns’ within Quinn’s anti-violence initiatives
A recent audit revealed $2.2 million in unrecovered grant dollars associated with several programs created during the Quinn Administration that were intended to help combat violence. This type of abuse, mismanagement and lack of oversight in state government underscore the need for reform and change in how Illinois operates.
The audit determined that high-ranking Quinn officials made decisions on which communities and grantees would receive funding as part of the program, but provided no data to support how grantees or funding were selected. According to the Auditor General, it’s difficult to determine whether the Quinn program “achieved the goals that it was supposed to do.” The Auditor General noted there were “significant breakdowns” in the process of distributing and managing grant dollars during the third and fourth years of spending associated with the programs.
A review of the programs overseen by the Illinois Criminal Justice Information Authority (ICJIA) noted the Quinn Administration repeatedly parted with grant protocol when distributing grant funds through the program, and failed to adequately oversee how those monies were spent.
The audit also cited problems with how contracts were executed, noted that often the financial information provided didn’t match up with supplementary documentation, and also stressed that millions of dollars in unspent funds associated with the programs have not been recovered. Of note, 41 organizations were selected to receive part of the $1.7 million for the Department of Human Services’ Summer Youth Jobs Program, but it is not clear how those agencies/organizations and funding levels were selected.
Additionally, the audit pointed out that a “misunderstanding” by ICJIA officials resulted in $7.3 million in intergovernmental transfers being directed to ICJIA for Quinn’s programs from the Temporary Assistance for Needy Families Program and the Comprehensive Community-Based Youth Services programs.
The current director of ICJIA has accepted the findings and issued a statement noting that the Authority is working to resolve those issues. Criticism and confusion have surrounded Quinn’s Neighborhood Recovery Initiative for years. A previous audit found similar instances of mismanagement, lack of oversight and serious abuse within the program, which prompted an investigation by the Legislative Audit Commission. Additionally, at least three grand jury subpoenas were filed on the program – two from US Attorney’s offices in Chicago and Springfield, and one from the Cook County State’s Attorney.
Overpayments by Quinn Administration raise questions
During Fiscal Year 2014, former Governor Quinn’s Administration overpaid at least $168 million in Personal Property Replacement Tax payments to thousands of local governments and schools, according to data recently uncovered by the Illinois Department of Revenue (IDOR). Questions have been raised about whether the overpayments reflect mere incompetence, or a deliberate effort by the Quinn Administration to funnel money to Chicago during an election year. A review of overpayments revealed more than $23 million was directed to Chicago schools and almost $20 million to the City of Chicago.
Regardless of why the overpayments occurred, communities and school districts across the state will be asked to repay that funding – an expense that has many concerned. As the Department works to recoup the misallocated funds, the Rauner Administration is sensitive to the impact this will have on local governments and schools. According to Connie Beard, IDOR Director, “We will be working with the impacted taxing districts to establish a plan to recapture the funds over an extended period of time.”
The overpayments appear to have been caused following a switch to new reporting forms. According to IDOR, the issue was discovered during the agency’s implementation of a new general ledger system. Ten taxing districts received overpayments of more than $1 million. Most were much smaller, including 5,291 taxing districts that received less than $10,000 in overpayments.
Powerful tool of change being abused
The Senate this week advanced one amendment to the Illinois Constitution that would change the process of drawing the state’s legislative and congressional district lines, though the measure, SJRCA 30, still gives politicians the power to draw their own political boundaries. The process of drawing legislative districts should be handed over to a non-partisan, independent body – a critical provision not included in SJRCA 30. Some of us skeptics believe this proposal is a meaningless step intended to confuse and prevent true redistricting reform.
However, a Republican proposal that would strip the Legislature of the direct power to draw districts in Illinois, was one of a number of constitutional amendments sponsored by Republican Senators that were not allowed a hearing or vote by lawmakers this week. Additionally, constitutional amendments were stalled that would have established terms limits for state lawmakers; set term limits for constitutional officers; and increase votes needed to pass legislation during a “lame-duck session,” which is the time period after an election and before a new General Assembly begins.
Two additional amendments to the constitution pending before the Senate failed to advance for consideration by voters on the November General Election Ballot. SJRCA 1 would have allowed the state to move from a “flat” tax rate to a “graduated” income tax and SJRCA 29 would have eliminated the Lieutenant Governor’s office. A graduated income tax would just accelerate the exodus of high earners (high taxpayers) from Illinois. Eliminating the Lieutenant Governor position makes sense but this proposal would have named the Attorney General as the successor if the Governor steps down or is unable to serve. That doesn’t make sense.
Madigan’s ‘millionaire tax’ fails
Another proposed constitutional amendment that did not advance was House Speaker Michael Madigan’s “millionaire tax,” which fell three votes short in the House April 21. The amendment sought to tax all personal, adjusted gross income above $1 million at an additional 3 percent. The vote was 68-47, but because the measure would amend the state’s constitution, it needs a three-fifths majority, or 71 votes, to pass.
Many people readily agree with the concept of a “millionaire tax;” however, many don’t stop to consider the real-life implications of such a move. I found a story that explains the tax system in terms of 10 friends going out once a week for a beer. It illustrates the different prices each person would pay, based on their income/tax bracket.
THE TAX SYSTEM EXPLAINED IN MILLER LITE
Suppose that once a week, ten men go out for a beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this.
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
And the tenth man (the richest) would pay $59.
So, that’s what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. “Since you are all such good customers” he said “I’m going to reduce the cost of your weekly Miller Lite by $20”. Drinks for the ten men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?
They realized that $20 divided by six is $3.33 but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his Miller Lite.
So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100% saving).
The sixth man now paid $2 instead of $3 (a 33% saving).
The seventh man now paid $5 instead of $7 (a 28% saving).
The eighth man now paid $9 instead of $12 (a 25% saving).
The ninth man now paid $14 instead of $18 (a 22% saving).
And the tenth man now paid $49 instead of $59 (a 16% saving).
Each of the last six was better off than before with the first four continuing to drink for free.
But, once outside the bar, the men began to compare their savings. “I only got $1 out of the $20 saving” declared the sixth man. He pointed to the tenth man “but he got $10”
“Yes, that’s right” exclaimed the fifth man. “I only saved $1 too. It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back when I only got $2? The wealthy get all the breaks!”
“Wait a minute” yelled the first four men in unison “we didn’t get anything at all. This new tax system exploits the poor!” The nine men surrounded the tenth and beat him up.
The next week the tenth man didn’t show up for drinks, so the nine sat down and had their Miller Lite without him. But when it came time to pay the bill, they discovered something important - they didn’t have enough money between all of them to pay for even half of the bill.
And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.