Dear Neighbor,

There was a great deal of activity in Springfield this past week, with another voluminous week likely ahead of us. Key bills that were passed are:

Medicaid Reform (HB5240). Medicaid spending accounts for one-third of the State's General Revenue Fund and continues to grow. Reducing and slowing the growth in Medicaid costs is a critical component to restoring fiscal integrity. I, along with my Republican co-chair of the Senate Special Committee on Medicaid Reform, Senator Dale Righter, negotiated a bill with the Governor's Office that will save the State up to $1.4 billion over 5 years. The bill passed the Senate (58-0-1) and the House (111-4-2). Key components of the bill are below and you can read the bill for more details.

1. Reducing waste, fraud and mismanagement in the program by tightening eligibility verification procedures, establishing civil actions against perpetrators of Medicaid fraud, and improving data sharing and systems.
2. Implementing care coordination programs for 50% of the Medicaid population by 2015. Currently only about 150,000 of the State's 2.8 million Medicaid recipients are in a managed care program. The new care coordination programs will require the State to pay for performance for improved health outcomes and to share risk with our providers.
3. Rebalancing our long term care programs to move individuals who are able and prefer to receive care in home and community based settings out of institutions.
4. Changing pharmacy provisions to reduce the cost of drugs and payments to pharmacies.
5. Ensuring future State budgets are truly balanced by phasing out that state's ability to pay current year liabilities out of next year's appropriation ("Section 25 liability reform").

Budgeting for Results (HB5424). This bill requires the Governor to base his budget proposal on actual projected revenue and spending priorities rather than on the previous year allocations. It establishes performance standards for State agencies and programs. It also prevents the Governor, any Constitutional Officer or Department head from entering into labor contracts that extend 6 months past the end of the Governor's term. This bill passed both the Senate and the House.

Online Sales Tax (HB3659). This legislation, supported by Illinois retailers, allows the State to collect revenues from online sales and purchases made from out-of-state companies. Illinois will generate an additional $150 million from this proposal. It passed both Chambers this week.

Revenue Proposal

As you have likely been reading and hearing in the media, the Governor and Illinois Legislature are also working on an agreement to increase revenues, contain spending and increase borrowing to address our enormous budget deficit. Currently, Illinois has the lowest credit rating in the country thanks in large part to our large pension liabilities. Moreover, the State owes vendors about $6.5 billion. In addition to a $1/pack increase on the cigarette tax to fund education (provides about $377 million), the revenue plan to date is to raise the income tax on personal income from 3% to 5.25% and on corporate income from 4.8% to 8.4%, with the following components:

                                                   "Dollars Raised" amount shown in Millions.

I believe there will be changes to this proposal. For example, the corporate income tax is likely to be reduced. The revenue plan is also likely to include provisions to ensure there is no new spending. You may also recall that I have had concerns about additional borrowing and did not vote for $3.7 billion in pension obligation bonds. I continue to have reservations about the size of the borrowing that is being considered. I am very concerned about adding over $8 billion in borrowing for operating expenses.

The House returned to Springfield last night and the Senate returns this afternoon to continue deliberations on a plan to address the State's fiscal crisis. I will continue to provide updates, and please let me know your thoughts or if you have questions. You can reach me at hsteans@senatedem.ilga.gov or 773-769-1717.