Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
A number of different topics to report on today. Congress is working through the annual appropriation process before their summer recess at the end of July. A new report is out forecasting our state unfunded pension liability and the Illinois Chamber cautions about job cuts. At the same time, $100 million has been added to the state “rainy day” fund and new funding is in place for a grant aimed at early childhood facility construction, expansion, or renovation.
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House Appropriations Bill Sprint
As usual this time of year, the House majority is trying to rally its troops to pass 12 of the annual appropriations bills before the August break, scheduled to begin July 29. Sources familiar with the process are skeptical that that much more than half of them will get that far, given House Democratic leaders have a slim margin for error on partisan bills.
House Democrats can lose at most four votes and still pass legislation without GOP support, and no Republican votes are expected on the spending bills judging from their party-line votes in committee. Divisions among House Democrats over defense spending levels, border security policies and law enforcement funding spell trouble for the Defense, Homeland Security and Commerce-Justice-Science bills in particular.
The Labor-HHS-Education bill also faces difficulty getting enough Democrats’ buy-in, in part because of opposition to an amendment adopted in committee that would temporarily continue the pandemic-era “Title 42” public health directive former President Donald Trump imposed allowing border agents to expel migrants regardless of asylum claims. The Biden administration tried to rescind the policy, but a federal judge blocked the move.
While party leaders attempt to assuage lingering concerns, the House is set to consider a roughly $405 billion package of six bills this week. The vehicle is the Transportation-HUD measure, which will also carry the Agriculture, Energy-Water, Financial Services, Interior-Environment and Military Construction-VA bills.
Democrats are confident they can get those across the finish line, but of the six remaining bills, the State-Foreign Operations measure appears to have the best chance of getting to the floor, sources said. Democratic leaders and lawmakers say they are working to build support for the bills that face the most serious obstacles. But privately, there is considerable uncertainty about how much can be accomplished with two weeks left before the August recess, and the possibility other legislation could crowd out appropriations bills on the House floor.
House Appropriations Chair Rosa DeLauro, D-Conn., said last week she wants to get all 12 bills on the floor before August. House Majority Leader Steny H. Hoyer, D-Md., set a goal of passing the six-bill appropriations package and then bringing at least three more spending bills to the floor the week of July 25.
“We should be able to do all 12,” David E. Price, D-N.C., chairman of the Transportation-HUD Appropriations Subcommittee, said. “And we’re certainly aiming to do all 12.” But Price said some Democrats’ reluctance to vote for military spending, immigration enforcement funding or law enforcement spending in the measures would pose challenges to passing the bills.
New Forecast Shows Illinois’ Unfunded Pension Liability Could Grow Substantially
A public policy research group has a dire outlook for Illinois’ public pension systems. After huge investment returns in 2021, the Reason Foundation reports several states’ pension systems most likely will experience financial losses for this year, including Illinois, as the stock market experiences significant declines. The forecast found that Illinois’ unfunded pension liability could grow from $121 billion in 2021 to $142 billion if the state’s major pension plans report -6% investment returns for 2022.
Only five other states, California, New York, Texas, Ohio and Florida, are expected to see their unfunded pension liabilities jump over $20 billion compared to 2021. With a -6% return, unfunded liabilities would increase by more than $10 billion in an additional nine states – Georgia, Minnesota, New Jersey, North Carolina, Oregon, Pennsylvania, Virginia, Washington and Wisconsin.
Reason Foundation policy analyst Ryan Frost said 2021 was a record-setting year for state pension plans, but it appears Illinois will lose those gains. “Just a -6% return basically eliminates all the gains they made from last year, and it puts them on the same poor funding track that they were on before last year,” Frost said.
The analysis shows if public pension systems post -6% investment returns for the fiscal year, the nation’s aggregate unfunded liability for state-run pension systems would grow to $1.3 trillion in 2022, up from $783 billion in 2021. The funded ratio of state pensions, the percentage of assets on hand to pay for the retirement benefits already promised to workers, would fall from 85% in 2021 to 75% in 2022. The most recent audit of Illinois’ five pension funds shows a funding ratio on a smoothed basis of 42.4%.
Frost said this year has been difficult for most pension plans, similar to the Great Recession of 2009, but some states rebounded better than others. “The well-funded plans were able to rebound much faster, they flattened out their funding throughout the 2010’s, whereas some of the poorer funded plans like Illinois, they never flattened out and their debt just kept rising, even during the period of the best market performance in our country’s history,” Frost said.
The forecast notes if the returns are even worse, like -12%, Illinois’ unfunded liability could grow to nearly $153 billion. “During this time of economic volatility, policymakers and stakeholders should recognize that many problems that kept public pension systems significantly underfunded for multiple decades still exist,” the report said.
Out of a $46.5 billion spending plan, Illinois taxpayer will put in nearly $10 billion toward the state’s pension funds this fiscal year.
State Adds $100 Million to Rainy Day Fund
When Illinois’ budget impasse started, the state had no money in its savings account. The same can be said for the pandemic. But that is changing as the state continues to pour money into its Rainy Day Fund. State Comptroller Susana Mendoza deposited $100 million into the fund on Wednesday, bringing the total amount inside to $854 million.
In a press release, Mendoza’s office explained that the fund protects the programs that Illinoisans rely on from their state, including schools, care for the elderly, investigating claims of child abuse and many other things the state does. The goal is to hit $1 billion by the end of the year, a far cry from the amount the fund had when Mendoza took office.
“During the budget impasse when I first took office, the Rainy Day Fund had less than $60,000 – not enough to run state operations for 30 seconds,” Mendoza said. “The bond rating agencies noted Illinois had the lowest Rainy Day Fund in the country.”
Since then, Mendoza worked with State Representative Michael Halpin (D-Rock Island) and State Senator Elgie Sims (D-Chicago) to introduce a bill that would require automatic payments into the Rainy Day Fund and the Pension Stabilization Fund. Mendoza said that Illinois is now budgeting responsibly and prudently building the Rainy Day Fund up to $1 billion by the end of the year.
“Any financial advisor would tell someone that in their own home, they should save for a rainy day, and they should have at least six months worth of savings set aside in case of an emergency,” Mendoza said. “And I don’t think state should be any different.”
Mendoza called the progress a good start, but said there is still a long way to go to get the Rainy Day Fund to where experts said it needs to be. For the state to be in a strong financial position, Mendoza said the Rainy Day Fund would need to be closer to $3.4 billion. That way, the state could continue operating through another crisis like a budget impasse.
Governor Pritzker Announces $60 Million Competitive Grant Program for Early Childhood Construction in Illinois
Governor JB Pritzker has announced $60 million in capital grant opportunities for Illinois Early Childhood Education providers through the Rebuild Illinois Capital Program. The funding will support the construction, expansion, and renovation of facilities that support early student learning.
“If we want to improve and transform our state’s education system, then we must invest in our facilities,” said Governor Pritzker. “From cradle to career, every Illinois student deserves quality, welcoming school environments where they can learn, grow, and thrive. And thanks to Rebuild Illinois, we have been making long overdue investments at educational facilities at every level—addressing critical renovations, deferred maintenance projects, and site upgrades. This additional $60 million in grant funding will ensure that the youngest of Illinoisans get the best learning experience possible.”
The initial grant installment delivers $60 million to qualifying public school districts and not-for-profit early childhood facilities providing educational, health, social, or child development services to children aged zero to five years old and their families. Centers seeking to increase their capacity to provide care or educational opportunities for children in underserved communities are eligible for up to $10 million under the Early Childhood Construction Grant. A three to ten percent match is required. Rebuild Illinois, Governor Pritzker’s historic $45 billion bipartisan capital plan, will provide a total of $100 million in state funding for early childhood education provider grants.
“Illinois’ early childhood workforce provides critical care and education for thousands of families across the state. This construction opportunity bolsters the physical infrastructure for educators and children during a crucial time in their lives,” said Grace Hou, Secretary of the Illinois Department of Human Services. “This investment builds powerfully on Governor Pritzker’s proven commitment to making Illinois the best state in the country to raise young children.”
Applications for the Early Childhood Construction Grant will be accepted through October 10, 2022. For more information, including selection criteria, visit Grants – Grants (illinois.gov).
Illinois Chamber warns job cuts could follow record inflation, urges policy makers to prepare
An economic storm is coming and the state of Illinois could do more to be better prepared. That’s the warning from the Illinois Chamber of Commerce after sustained historic inflation. In case you missed the news, inflation set another 40-year record last week with the consumer price index up 9.1% over the past 12 months.
In May, the consumer price index for the year rose 8.8%. The June increase for the year was 9.1%. In the past month, prices on average increased by 1.3%, the highest monthly increase since December. While fuel oil decreased 1.2% over the past month, it’s increased 98.5% over the year. All types of gasoline are up nearly 60%.
Todd Maisch, CEO of the Illinois Chamber of Commerce, said inflation impacts everyone from business owners to consumers. And while business owners are resilient, Maisch said the signs ahead are troubling. “Even the great success story for the state of Illinois, Rivian Motors, up the road in Bloomington have announced job cuts,” Maisch said. “Unfortunately you’re going to see more of those coming.”
Maisch has faith the U.S. economy is well positioned to weather the storm but urged Illinois policy makers to send a signal. Are they going to increase taxes citing a recession, “or are we going to weather the storm and show that government can be on sound fiscal footing, be conservative in our expenditures and not raise taxes at the worst possible time, that’s the question for policy makers in Illinois.”
IDES: State reaches historic low of continued unemployment
The Illinois Department of Employment Security announced last week that the state has reached a new historic low of continued unemployment claims since 1987. The previously recorded low was 70,454, and Illinois has remained below that number for 10 consecutive weeks. The most-recent data shows that claims amount to a little over 65,000.
State officials said this is a reflection of pandemic-related economic recovery and that it signals a strong labor market. They pointed to job growth in nondurable goods manufacturing, transportation and warehousing, professional and technical services and business services, which have exceeded pre-pandemic levels.
In addition to unemployment benefits, IDES provides job training and employment services to help people find the next step of their careers, including resume and interview skill building, job and hiring fairs and workforce training opportunities. These services can be found on Get Hired Illinois, a website the state launched in 2020 to help people find jobs and to help employers find new hires.
Executive Vice President
Joliet Region Chamber of Commerce & Industry