Next session dates: January 13-15, 2008
Download this document in .pdf format
This week...
Governor breaks campaign pledge, will sign sales tax hike for mass transit
After a long and arduous year of failed negotiations and unprecedented levels of distrust between lawmakers and the Governor, a compromise (HB 656) was reached by members of the House and Senate to bail out the mass transit system through a local sales tax increase in Cook and the collar counties (DuPage, Kane, Lake, McHenry, and Will). If enacted into law, this state-funded bailout will avoid the Regional Transportation Authority’s (RTA) predicted "doomsday scenario" on January 20 that would include fare hikes, massive layoffs, and severe route reductions.
HB 656 passed the Senate by a vote of 30-25-1 and the House with a vote of 62-51.
While there is light at the end of the tunnel, the future of mass transit will remain in doubt until the General Assembly deals with a reported amendatory veto from Governor Blagojevich. Instead of choosing to actively participate in discussions with lawmakers, the Governor intentionally waited until legislators passed HB 656 and left town before announcing that he planned to veto the bill and insert a provision providing free mass transit for all senior citizens (aged 65 and older) on main line and regularly scheduled routes.
The Governor’s announced action to support the sales tax represents a 180 degree turn from all previous public statements and his campaign promise not to raise the income or sales tax increase.
Sponsored by Rep. Julie Hamos (D-Chicago), the mass transit legislation will increase the sales tax in Cook County from 1.00 percent to 1.25 percent while the sales tax in collar counties will rise from 0.25 percent to 0.75 percent. One-half of the collar county sales tax increase (0.25 percent) will go for mass transit while the other half will remain with the counties for public safety or transportation purposes.
According to a fiscal analysis, the counties will share nearly $121 million for public safety or transportation based on the tax collection point of sale. No county board action or referendum will be required to charge this additional tax. Estimates show the funds will be divided as follows: DuPage ($47 million), Kane ($16 million), Lake ($29 million), McHenry ($9 million) and Will ($19 million).
In addition to the hike in the sales tax, the mass transit legislation increases the real estate transfer tax in the city of Chicago at a rate of $3 for every $1,000 of equalized assessed value (EAV) of property. With the rate increase, the real estate transfer tax will increase from $9 to $12 for every $1,000 and is estimated to generate nearly $100 million annually for mass transit.
Overall, the mass transit legislation will send more than $400 million annually to the Regional Transportation Authority and its three service boards (Metra, PACE, CTA). In providing funding to these three entities, it dictates that some funds be used for specific purposes including paratransit ($100 million), innovations ($10 million), and PACE’s suburban mobility ($20 million).
While the mass transit bill was primarily a financial windfall, it also included some needed reforms including increased payments from the Chicago Transit Authority and its unions for health care costs and pensions. The state Auditor General will now be involved in reviewing and ensuring that financial projections and assumptions for future pension refinancing and bond sales are reasonable and good for the fiscal stability of the systems. Finally, a "fare box recovery" requirement is being adjusted to ensure that one-half of the RTA funding comes from fares and will likely mean a fare increase in 2010.
The reimbursement for downstate mass transit systems increases from 55 percent to 65 percent, providing an additional $27 million in FY08.
The final plan to help mass transit came after another proposal to divert $400 million in gas tax revenue from the state’s general revenue fund to mass transit did not muster support. Despite passing the House this week (SB 307), lawmakers could not agree on a way to backfill the hole in the budget that would result from the diversion. Ideas were tossed around including an increase in the cigarette tax while the Governor again sought to eliminate corporate tax incentives.
If, as expected, the Governor amendatorily vetoes the bill and inserts a provision providing free mass transit for senior citizens, the General Assembly will have to return to Springfield by January 20 to vote on these changes. At this point, no new session dates have been added to the calendar.
BIMP bill now law
In other action, both the House and Senate finally approved the Budget Implementation Bill (BIMP) that reinstates tax incentives removed by the Governor during the 2007 spring legislative session. Further, SB 783 allows school districts to spend an additional $500 million in state aid funds that had been appropriated by the General Assembly in the state budget but could not be spent until the implementation bill was passed. The action by the General Assembly came after the Governor vetoed the bill to address two technical problems with the bill.
Comptroller reports unpaid bills
According to Comptroller Dan Hynes, the State of Illinois ended 2007 owing a record $1.7 billion-plus in unpaid bills. This represents a 28% increase over 2006. The Comptroller also reported that because of the State's poor cash-flow situation, it now takes 34 business days to pay bills once they land in his office. It should be noted that it is often taking more days than 34 to get to his office. Therefore, the actual average number of days it takes the State to actually pay a bill is approximately 54 days and could get worse if the economy continues to slow.
Other Springfield Highlights available online
