Dear Neighbor,

Our legislative session ended last week, with some significant steps forward but still no resolution to the State's large and growing pension problem. The legislative leaders and Governor are meeting Wednesday to renew negotiations on pensions. I believe the General Assembly will be called into special session to act on reforms that will stabilize and ensure security of the State's pension systems.

Here are highlights of major action taken last week on the State budget, Medicaid and gaming.

Budget

Overall we passed a $33.7 billion general revenue fund (GRF) budget that lives within conservative revenue estimates, is gimmick free, and begins to seriously pay off old bills. As noted below, this GRF budget is $393.7 million higher than last year. There is increased spending for pensions (nearly $1 billion more) and to pay off $1.3 billion in old bills. These increases are offset by savings in group health insurance, statutory transfers out (due to moving some payments into FY12 and greater scrutiny of these spending items), and increased federal Medicaid matching dollars when we pay off old Medicaid bills.

Discretionary spending for state agencies is down close to $700 million. The chart below shows how this discretionary spending is allocated across major program areas.

You can see line item details for state agency spending here. The areas of reduction that give me the greatest concern are:

• General state aid to schools is reduced $161.4 million,
• Early childhood education is cut $25 million,
• MAP grants that provide college tuition help are reduced $15.4 million, and
• Circuit breaker program is eliminated ($24.2 million).

The Senate passed two revenue measures that would generate about $175 million that could be used to fund these items. The House has not yet acted on them. The first item closes a tax loophole that allows an oil company to not count revenue from an oil derrick located in the outer continental shelf in its taxable income. A number of states have already made this income taxable. The second item assesses direct broadcast satellite and service providers to provide parity among all providers of multichannel video programming (this item passed with bipartisan support in the Senate).   When we return to Springfield we will determine if there is interest in the House to act on these measures.

Medicaid

In arguably the strongest example of fiscal responsibility and bipartisanship in recent history, the Illinois General Assembly - along with the Governor and his team - negotiated a solution to the $2.7 billion Medicaid crisis. We had already passed the legislation that implements $1.6 in program reductions, efficiencies and a rate cut (SB2840). Last week the Senate sent to the Governor additional pieces of the deal, including:

• Cigarette Tax Increase and Expanded Hospital Assessment (SB2194). This bill provides $800 million in new revenue for the Medicaid program. In addition to providing $700 million for healthcare spending, the $1/pack cigarette tax increase is expected to help 59,400 smokers quit this habit and prevent 77,600 youth from starting to smoke according to the American Lung Association. The expanded hospital assessment also brings additional federal dollars to Illinois hospitals, thus mitigating much of the impact on hospitals from rate cuts and other Medicaid program reductions.
• Hospital Property Tax Exemption (SB2194) and Charity Care (SB3261). An Illinois Supreme Court ruling recently stripped some hospitals of their tax-exempt status. SB2194 defines charity care and exempts hospitals from property taxes when they provide charity care valued at more than they would otherwise owe in property taxes. SB3261 further requires hospitals to provide medically necessary care at no charge (when cost is over $300) to low-income patients.
• Banning Use of the State's Medicaid "Credit Card" (SB3397). Illinois is the only state that has allowed current year Medicaid bills to be paid out of next year's budget appropriations. This practice - known as Section 25 Medicaid liability - has enabled Illinois to underfund the program and was a significant factor in creating the current Medicaid crisis. I was the lead sponsor of this bill and helped negotiate getting rid of this budgetary gimmick. While this step has a geeky feel to it, it is incredibly important to restoring fiscal integrity to the State.
• Cook County Waiver Application (HB5007). Pending federal approval, this legislation allows Cook County to run a limited Medicaid program and enables the County Hospital system to receive federal matching dollars to care for 100,000 uninsured adults. There is no cost to the State for this program.

Gaming

You may recall that the General Assembly passed a significant gaming bill a year ago. The Governor did not support that bill and it was never sent to him for his signature/veto. There have been ongoing negotiations, and last week the Senate passed a new gaming bill after it had passed the House (SB1849). It is not clear if the Governor will support this new gaming bill.

Highlights of SB1849 include:

• A Chicago casino that is subject to the state's Gambling Act and all rules of the Gaming Board (change from SB744);
• 4 new riverboats in Park City, Danville, Rockford, and south suburban Cook County;
• Increased number of positions at existing riverboats, but a decrease of over 7,000 new gaming positions from SB744 (no slots at airports or the state fair and fewer new positions in existing riverboats);
• A new Inspector General tasked with oversight of the Gaming Board and its functions; and
• A portion of the tax revenue going to local municipalities and counties, a portion to support agriculture, natural resources and compulsive gambling treatment programs, and the remaining state tax revenues from casino/riverboats for education and state tax revenue from racetracks for capital.

In a future email update I will provide details on other significant legislation that was passed this session. If you have any questions please contact me at 773-769-1717 or at hsteans@senatedem.ilga.gov.

Best regards,

Heather A. Steans