CHICAGO — Illinois lawmakers convene Tuesday for a discussion on the impact of the partial government shutdown that looms due to a continuing budget impasse.
Lawmakers may also vote on temporary cash flow relief for the Chicago Public Schools.
The session comes as Illinois enters the new fiscal year Wednesday with no end in sight to a stalemate between freshman GOP Gov. Bruce Rauner and the General Assembly's Democratic majorities on a budget for fiscal 2016. Rauner vetoed all but the education bill in the $36.3 billion budget lawmakers approved in May after they rejected his $32 billion general fund budget.
The House is holding a committee-of-the-whole meeting on Tuesday and Wednesday on the looming shutdown and the chamber would also get the first crack at reviving a bill that failed last Tuesday that would grant the cash-strapped Chicago Public Schools an extension on the deadline for a $634 million teachers' pension payment. The payment is due Wednesday and would be extended to Aug. 10, when the district expects to have collected July tax revenues and August state aid.
"We asked a number of agency directors to come before the House to give us answers to very specific questions about the impact of a shutdown," said House Speaker Michael Madigan, D-Chicago.
Directors from 15 state agencies were invited. The state comptroller previously warned that most state payments will halt, although debt service payments would continue to be made under a continuing appropriation.
The bill to grant CPS an extension on its pension payment comes with the district warning that it doesn't have the funds to cover that payment, payroll, and other obligations by the end of the month and needs extra time both to collect more cash and work on a long-term solution with the state's help.
The bill failed in the House last week.
The Chicago Board of Education last week authorized $1.135 billion of short-term financing, including a $200 million credit line backed by anticipated taxes for use now and expected to be repaid in October. A separate line is in the works for $935 million to provide cash-flow help in fiscal 2016.
Municipal Market Analytics said Monday in its weekly outlook that the short-term relief is just that, but still a positive sign because it illustrates "a more positive attitude toward the district on the part of the governor and state legislative leaders."
This increases the odds the state will insert itself into CPS funding and budget remediation discussions, MMA said. "Note that this is not, on its own, a good reason to expect CPS spreads will tighten in the near?term," the outlook piece said.
The Senate will hold a committee-of-the-whole hearing on worker's compensation changes, one of the five business and political governance measures Rauner wants tackled before agreeing to higher taxes to stave off deep budget cuts.
On Sunday, The Associated Press reported that Rauner's administration was offering to speed up the delivery of $450 million of fiscal 2016 grants to help CPS meet the end-of-month payment deadline. The move would allow CPS and Rauner to bypass the legislature.
Rauner's office last week used the failed House vote to lash out at Madigan, blaming him for its failure. Madigan fired back that more work was needed on securing votes as the legislation had only just surfaced that day. Tensions between the two have grown more hostile as the impasse has continued.
The Emanuel administration rejected Rauner's short-term salve Monday.
"We appreciate the governor's gesture, but the use of this year's dollars to pay last year's pension payment follows the same path that got the schools into the current financial mess," said Emmanuel spokeswoman Kelley Quinn. "We need a real solution like Governor Rauner's proposal last week -- pension parity and funding relief so that Chicago schools are finally treated like every other district in the state."
Quinn was referring to a plan laid out by Rauner on Thursday that offered pension relief and reforms for Chicago, Cook County, CPS, and other local governments. It also scaled back some of Rauner's turnaround agenda demands that have gone nowhere with Democrats and held up a budget agreement.
Documents offering more details on the proposal explained the new hybrid pension reform plan that would be applied to the state's pension system, downstate public safety plans, and Chicago teachers. The package would also include Chicago's proposal to extend by 15 years the amortization schedule to reach a 90% funded ratio for its public safety funds and phase in over five years a shift to an actuarially based contribution.
The move, already approved by lawmakers but not signed by Rauner, would trim more than $200 million off a $550 million spike in Chicago's contributions next year. Cook County would be allowed to choose between the bill it has submitted or the hybrid "consideration" model.
The consideration model was initially floated by state Sen. John Cullerton, D-Chicago as a means to pass constitutional muster. The Illinois Supreme Court recently rejected a 2013 reform package finding benefit cuts violated the constitution's rules against impairing or diminishing benefits.
Some believe the opinion opened the door to allowing a package based on what's known in contract law as consideration. Employees would agree to move to a lower-tier benefit plan that either doesn't count raises toward benefit calculations or limits cost-of-living adjustments. In exchange they would receive incentives for making the shift. Some of the incentives outlined in the Rauner plan include a one-time salary increase, changes to overtime, and additional vacation time.
The package also includes plans to move 642 individual downstate police and fire funds into the better funded Illinois Municipal Retirement Fund, which covers general suburban and downstate employees, "for investment efficiency."
On the Chicago Teachers' Fund, the state would cover employer's normal cost but the district would have to give up some grant funding in 2017 if changes in state aid formulas are made. The administration says CPS would come out $400 million ahead over the next two years. CPS would also have to end its coverage of a portion of teachers' contribution.
A commission would be named to explore revisions to school funding formulas and poverty funding would see a lump sum bump to $159 million from $85 million in fiscal 2016.
On his turnaround agenda items, Rauner would limit his agenda demand for a property tax freeze to two years. That remains controversial as does other measures in the outline tied to the property tax freeze measure.
Rauner wants to give local governments the ability strip some issues from collective bargaining and establish their own prevailing wage requirements on contracts. He also wants to allow local governments the option to "initiate a Chapter 9 filing after review from a neutral evaluation process or the declaration of a fiscal emergency."
The state has no general Chapter 9 provision on the books and Republican-sponsored legislation putting one in place gained little traction even after it was amended over the spring to protect bondholders. The bill — an amendment to House Bill 1605 — calls for a neutral evaluation process to assist in pre?filing settlements and attaches a first priority, statutory lien to all bonds sold under the Local Government Debt Reform Act or related laws, including bonds issued under home rule powers.