Synopsis: State of Illinois Gets a Budget But No Need to Celebrate--We Continue the Inevitable Approach to the Financial Abyss of Governments Like Detroit, Puerto Rico and Greece.
Editor’s comment: Governor Bruce Rauner has tried to forestall the never-ending financial crisis caused by Speaker Madigan and other IL legislative leaders. If you aren’t sure, Moody’s indicates we have $251 Billion—yes, a Quarter of a Trillion(!) dollars in gov’t pension debt! As I advised last week, our IL State legislators can pay in about $32,000 in fake gov’t pension contributions to get millions upon millions of dollars for the rest of their lives. Former U.S. President Barack Obama and former Chicago Mayor Richard M. Daley are both eligible for this “impossible to fund” largesse. Our IL judiciary can similarly contribute about one years’ pay to their fake gov’t pension program to then get $5-10M in benefits, all from IL taxpayers. Those “doomsday engines” and others like them are pointing our State to the bottom of the financial ocean if someone doesn’t do something about spiraling fake gov’t pensions, overspending and waste.
I read a very defiant article by House Speaker Madigan castigating Governor Rauner for trying to straighten out our State’s impossible financial situation. The problem I have with Speaker Madigan’s point of view is the multi-billion-dollar financial problems occurred on his watch while he played a leading role in creating his impossible-to-stop power base that was built on skyrocketing compensation for all IL state gov’t workers, unmanageable fake gov’t pensions and duplicative/wasteful use of our tax dollars. I feel our IL State WC defense program for State workers continues to be run poorly in part due to the role of Speaker Madigan. In my view, our great-great-great-grandchildren will be paying off the mistakes of this generation of IL legislative leaders for decades to come. If Speaker Madigan wants real and lasting reform to cut spending and waste, combine/streamline state agencies and make financial sense of IL State government, go-for-it--he doesn’t need the Governor’s help; no one can stop him. To me, it is part of the tragedy of our lifetimes he won’t do it and may be dedicated to blocking any real IL gov’t reform while taxes and debt spiral.
Governor Rauner devoted this part of his life and work to trying to find solutions to the morass. He offered an IL State budget proposing $37.3B in spending, but included no correlating revenue or tax increase. After the failure of the General Assembly to enact a state budget by the end of this past May, the Governor called lawmakers back to Springfield for a special session in July. As part of this call for a special session, he joined with GOP Leaders announcing "The Capitol Compromise" which included an IL State income tax increase to achieve a balanced budget. In addition, the Capitol Compromise included spending caps, property tax relief, workers' compensation reform, government consolidation, education reform, term limits and gov’t pension reform. Governor Rauner tried to wedge the Compromise through, as the Democrats needed Republican support to pass any budget—instead, as you will read, the Republicans blinked.
Earlier this month the IL House took the final votes to override Governor Rauner's veto of the bills that constitute the fiscal year 2018 budget
· SB9, the revenue portion of the budget;
· SB6, the spending portion; and
· SB42, the budget implementation portion.
All three bills were vetoed by the Governor and the General Assembly quickly overrode his veto. The bipartisan package spends over a billion less than what the Governor proposed in February, and $3B less than what was spent in FY 2017.
This new State budget increases the individual income tax rate from 3.75% to 4.95% and from 5.25% to 7% for corporations. While several states have no income tax at all, our State is now just under 5% on top of the levy of the federal gov’t. For Illinois Department of Revenue guidance on income tax withholding go to:http://tax.illinois.gov/AboutIdor/PressReleases/PR-2017-07-11.pdf)
The new budget increases funding for K-12 education over FY17 levels by approximately $700M, relying on a more equitable school funding formula that benefits low-income school districts like Chicago's. A drafting glitch in the budget regarding school funding will require lawmakers to return to Springfield before the school year starts next month.
This State budget plan includes paying down a little more than half or $8 billion of our State's enormous backlog of overdue and unpaid bills. The State of Illinois currently has about $15 billion in unpaid bills. The devices being used to pay the late bills and fees will be with a combination of borrowing and fund “sweeps.”
Please Note This State Budget Has No Reforms—It is Basically Higher Taxes and More Borrowing to Try to “Tread Water” While IL State Government Continues to Approach The Financial Abyss
The biggest objection to the income tax increase from Governor Rauner and legislators voting against it was the lack of any reforms to prevent a reoccurrence of the overspend-and-tax-and-borrow approach to clunky/junky/poorly run IL State Government. Consequently, it is expected Governor Rauner may again be calling our General Assembly back to Springfield later this month to see if we can develop reforms to gov’t pensions; state employees' group health insurance; procurement; a real estate property tax freeze; workers' compensation reform and term limits.
What's Next for IL Workers' Compensation Reform?
Our industry continues to ask is there an opportunity for IL workers' compensation reform and hopefully lower costs?
The challenges to getting IL WC reforms have changed. Approximately $6 billion in education spending is in limbo due to an obvious/glaring glitch in the State budget. Legislation has to be presented and pass to resolve the mistake. The question is whether the Governor will use this problem to extend his never-ending efforts for WC reform. Whether Gov. Rauner leverages the budgetary problem beyond education needs does not mean IL WC reform is forever off the table. Gov. Rauner along with Republican Leaders Sen. Bill Brady and Rep. Jim Durkin are committed to pursuing a WC reform agenda that includes improving workers' compensation. Insiders believe Gov. Rauner will call the General Assembly back to Springfield, possibly during July, to deal with the continuing need for reform.
The challenge will be whether House Speaker Madigan and Senate President Cullerton are dug in or could they have interest in allowing a modest and meaningful workers' compensation proposal to be presented and passed. Of the two, Senate President Cullerton has been the most willing to negotiate—we salute him for doing so. Speaker Madigan has made it clear his only acceptable path for “reform” is regulating workers' compensation insurance rates. We and lots of business observer don’t consider his position a “reform” at all. I personally think of it as a fake and intentionally confusing WC “deform” effort that won’t happen even if passed. At minimum, it will infuriate the WC insurance industry that doesn’t need the interference, just to make the General Assembly feel like they did something.
We have pointed out easy and simple reforms that are certain to save IL WC costs and hope all sides consider them—one easy way to cut PPD is to go back to the PPD values for body parts before the Blagojevich era. This is sort of like what Senate President Cullerton called a “hair-cut” that should be acceptable and a positive development.
I want my readers to know the Illinois State Chamber of Commerce is committed to achieving workers' compensation reform—they aren’t giving up the fight to get us back to the middle of the U.S. WC pack. IL WC Reform grows in importance as other costs for employers via tax changes make Illinois even less attractive to invest and grow job in. Without legislative changes that demonstrate our political leaders are interested in advancing economic opportunity as much as they are on a spend/borrow and tax agenda, Illinois will continue to lag in job growth and the revenues necessary to sustain the growth of State government. I hope my readers will join and support the Chamber—for more information go to their website at www.ilchamber.org.
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Synopsis: IS IT MID YEAR ALREADY??--NEW IL WC RATES ARE POSTED—UPDATED RATE SHEETS AVAILABLE SOON FOR ILLINOIS WC RATE INCREASE!!!
Editor’s comment: Illinois WC Rates Jump Again So Please Be Aware Of The New Rates or Your Claims Handling Will Suffer and Penalties May Ensue.
We like to hope it’s a sign of a growing economy—even though rates continued to increase almost every cycle as we continue to watch the growth of IL WC rates. As we have mentioned in the past, since in the 1980’s, the IL WC Act provides a formula which effectively insures no matter how poor the IL economy is doing WC rates continue to climb.
We caution our readers to pay attention to the fact the IL WC statutory maximum PPD rate is $775.18. However, this rate is only through June 30, 2017 and the new max PPD will be published in January 2018. When it will be published in January 2018, this rate will change retroactively from July 1, 2017 forward. If you don’t make the change, your reserves will be incorrect--if this isn’t clear, send a reply.
The current TTD weekly maximum has risen to $1,440.60. A worker has to make over $2,160.09 per week or $112,366.80 per year to hit the new IL WC maximum TTD rate.
The new IL WC minimum death benefit only increased by about $5 but we have now cracked the $700k ceiling. That amount is now 25 years of compensation or $540.23 per week x 52 weeks in a year x 25 years or $702,299.00! The new maximum IL WC death benefit is $1,440.60 times 52 weeks times 25 years or a lofty $1,872,780.00 plus burial benefits of $8K. IL WC death benefits also come with annual COLA increases which we feel can potentially makes Illinois the highest in the U.S. for WC death claims.
The best way to make sense of all of this is to get Shawn Biery’s colorful, updated and easy-to-understand IL WC Rate Sheet. AGAIN—If you want just one or a dozen or more, simply reply to Shawn at firstname.lastname@example.org and Marissa at email@example.com They will get a copy routed to you once we get laminated copies back from the printer—hopefully before they raise the rates again! Please confirm your mailing address if you would like laminated copies sent to your home or office!
Synopsis: John "Jack" McAuliffe age 95 of Winnetka rest in peace.
Editor’s comment: John McAuliffe was licensed to practice law in May 1956. He and Frank Wiedner founded Wiedner & McAuliffe, Ltd. in 1973, as a two-person firm concentrating on workers' compensation defense. The firm has grown to over 70 attorneys with four offices representing clients throughout the Midwest United States. John was an extremely skilled advocate, whose knowledge of medicine and appropriate standards of care surpassed anyone.
As an advocate or someone to break down complicated situations, he was in high demand, even outside of the firm. More important, he was a consummate gentleman, who treated everyone with dignity, kindness and respect. There was never a time that he was not available, for advice, to talk, to offer words of encouragement and support, and to help with any matter.
I always remember him for his bow ties and ardor as an advocate. He will be missed.