July 1, 2017

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No official action was taken on a State budget on Saturday. While optimism was higher Friday after the House adopted an amendment that contained a spending plan for all of State government, it is taking much more time to piece together the rest of a final budget agreement.
Both the Senate and House of Representatives convened session Saturday, but both chambers adjourned without passing any budget-related bills. The House will reconvene tomorrow (Sunday) at 2:00 p.m.; the Senate will not start up again until Monday.
Legislative leaders were in meetings most of the day, and both parties are working to bring an end to the stalemate. However, there were reports that some meetings did get contentious. As highlighted in the last Alliance Legislative Report, the sticking points are: enhanced revenues, a property tax freeze, pension reform, school funding reform, and reform of the State law on workers' compensation.
Little action was taken up on the floor Saturday by the House. The Senate did approve dozens of bills on the regular session calendar.
Here are the potential sticking points to the major budget-related items:
Enhanced Revenues
As approved by the Senate,  SB 9 would have increased the State income tax rates for individuals and corporations, increased taxes on cable, satellite, and digital services, and expanded the sales tax to some services. It seems that the digital tax and the expanded sales tax are out. This will then require a new revenue source to make up that difference or cuts in spending to balance the budget.
There is also a push by the Governor to make the increase in income tax rates temporary. The reasoning is that it is unfair to taxpayers for the income tax increase to be permanent and the property tax relief provision to be temporary.
Property Tax Freeze
The Governor has been pushing for a freeze of property tax extensions by local governments and school districts. Many legislators have been resistant to the concept for fear of the funding loss to school districts. However, the House did craft a bill ( SB 484) that had a four-year property tax extension freeze, with some exceptions for school districts on the financial watch list. The plan also left property taxes levied for pension purposes outside of the cap. There are objections to the exceptions.
And, again, the Governor wants the property tax freeze to be permanent if the income tax increase is permanent.
School Funding Formula
Both chambers have approved  SB 1 which contains a new evidence-based funding formula to distribute funds to K-12 schools.  Late amendments to the bill in the House made changes to the formula that resulted in Chicago Public Schools (CPS) receiving more funding than they would have received under the Senate version. Downstate legislators, mostly Republican, objected to the funding formula changes. Discussions continue as lawmakers try to find common ground. There is still a push by some members to include mandate relief for school districts.
Pension Reform
With pension debt demanding a greater share of State resources each year, there have been numerous attempts over the years to reform the retirement systems. The Senate has focused on the "consideration model" in which current pension eligible employees would have to make the choice between having future salary increases count towards pensionable salary, and receiving the current compounded cost of living adjustment upon retirement.
The House, however, approved a less stringent bill ( HB 4045) last week. It would make this consideration model optional, but would add other provisions. The bill would offer a pension buyout for Tier I vested but inactive members; create a new Tier III formula for new employees which is a hybrid between a defined benefit plan and a defined contribution plan; and would allow Tier I and Tier II employees to opt into a defined contribution (401 (k) plan.
Also being discussed is a partial shift of the normal costs of an employee's pension costs from the State to local school districts. Generally, the shift would be triggered by a specific salary amount. In the last version filed publicly, a school district would be responsibility for the normal pension costs of any employee with a salary of $140,000 or greater.

This legislative report was written and edited by the lobbyists of the Illinois Association of School Boards to provide information to the members of the organizations that comprise the Statewide School Management Alliance.