State of Illinois

$500 Million Chicago Public Schools Budget Shortfall Could Mean More Taxpayer Pain

Yesterday I spotted the following on the Chicago Tribune website concerning the budget gap last year for Chicago Public Schools. Juan Perez, Jr., reported Friday:

Chicago Public Schools faced a shortfall in its operations budget of roughly $500 million at the close of its past fiscal year, leaving the financially troubled district with a significant bill to cover even as it struggles to balance this year’s spending plan.

The budget shortfall was reported in a recently issued financial postmortem for 2016 that also repeated a long-held conclusion: CPS either needs an infusion of new money or will have to make major cuts if it is to keep operating as it has been.

CPS has faced budget gaps for years, but has been able to cover them partly by dipping into cash reserves and tapping costly lines of short-term credit for cash to pay the bills. Those strategies are beginning to reach their limit, district officials acknowledge

(Editor’s note: Bold added for emphasis)

While reading the article I thought, “Where’s the mention of potential new/higher taxes on Chicagoans?” Sure enough, I spotted the following further down the piece:

There’s also expectations from some observers that the city will again turn to its taxpayers for revenue…

(Editor’s note: Bold added for emphasis)

On January 12, the Global Credit Research division over at Moody’s Investors Service suggested:

CPS could consider more difficult options to address its finances should the State of Illinois (Baa2 negative) be unable or unwilling to provide additional relief: levy for debt service on GO alternate revenue bonds, stop making employer pension contributions, or seek state authorization to file for Chapter 9 bankruptcy.

(Editor’s note: Bold added for emphasis)

Stay tuned, Chicago. In the meantime, check out the entire article on the Tribune website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, February 6th, 2017 Bankruptcy, Education, Government, Taxes No Comments

Illinois State Senator Toi Hutchinson (D) Proposes Wide-Ranging Anti-Gun Tax

Now that the November elections are over, it was only a matter of time before the next assault was launched against the Second Amendment in Illinois.

The National Rifle Association’s Institute for Legislative Action published the following on their website Monday:

Illinois: Anti-Gun Tax Proposed on Exercising Second Amendment Rights

Last week, the Illinois Senate received Senate Amendment 2 to Senate Bill 9 from state Senator Toi Hutchinson. In an attempt to address the ongoing budget problem in Illinois, Sen. Hutchinson decided to tax Illinois residents’ Second Amendment rights, and by extension, their right to safety.

Under SA 2, a 5% tax would be imposed on any membership or access fee for gun clubs, shooting ranges, hunt clubs, training classes and match fees. Not only is this an abhorrent tax on your Second Amendment rights, it also requires that any of those places/people to register with the state and pay an annual fee of $75 just so that they can offer their service or membership with the 5% tax added.

By increasing the price of self-defense classes as well as any fee spent on range time and practice, this amendment is making it more expensive for Illinoisans to seek training to be able to defend themselves. SA 2 to Senate Bill 9 effectively sees Illinois residents’ right to safety as an opportunity to ease the budget burden on the entirety of the state. Further, any “repair, servicing, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of tangible personal property” is also taxable under SA 2. This section would include all gunsmithing and gun refinishing under taxable services.

It is extremely important that NRA members and Second Amendment supporters contact their state Senator and strongly urge them to oppose Senate Amendment 2 to Senate Bill 9. The Second Amendment rights and right to safety of Illinoisans is not something that the legislature should tax

(Editor’s note: Bold added for emphasis)

The NRA-ILA offers opponents of Senate Amendment 2 to Senate Bill 9 a way to take action via their website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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State Of Illinois Downgraded By Fitch Ratings

Fitch Ratings, a major U.S. credit rating agency, announced this afternoon it had downgraded the State of Illinois. From their news release:

Fitch Ratings has downgraded the following ratings of the state of Illinois:

Issuer Default Rating (IDR) to ‘BBB’ from ‘BBB+;
$25.9 billion in outstanding general obligation (GO) bonds to ‘BBB’ from ‘BBB+’;
–$431 million Illinois Sports Facilities Authority sports facilities bonds (state tax supported) to ‘BBB-‘from ‘BBB’;
–$2.6 billion Metropolitan Pier and Exposition Authority McCormick Place expansion project bonds to ‘BBB-‘ from ‘BBB’;
–$267.8 million city of Chicago motor fuel tax revenue bonds to ‘BBB-‘ from ‘BBB’.

The Rating Watch Negative is maintained…

(Editor’s note: Bold added for emphasis)

With this downgrade, Illinois’ new credit rating is just two notches above “junk” status.

Fitch noted:

The downgrade of Illinois’s IDR and related ratings reflects the unprecedented failure of the state to enact a full budget for two consecutive years and the financial implications of spending far in excess of available revenues, which has resulted in increased accumulated liabilities and reduced financial flexibility. Even if the current attempts at a resolution to the extended impasse prove successful, Fitch believes that the failure to act to date has fundamentally weakened the state’s financial profile….

Fitch expects to resolve the Rating Watch within the next six months based on an assessment of the state’s fiscal trajectory as it starts fiscal 2018. If the state continues on the current path, a further downgrade would be warranted

(Editor’s note: Bold added for emphasis)

You can read the entire Fitch Ratings news release here on their website.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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State Of Illinois’ Unpaid Bills Could Spike To $15 Billion By July

Bad news about the State of Illinois’ finances keeps rolling in. Monique Garcia reported on the website of the Chicago Tribune this morning:

The state has a record stack of unpaid bills that’s expected to hit $15 billion by July if nothing is done, and it must fork over interest when it’s late paying them. Putting a hard dollar figure on those interest costs is difficult, however…

The potential price tag is high enough that Senate leaders from both parties are pushing a plan to borrow billions of dollars to help whittle down the bill backlog and limit interest payments…

Under the plan being pushed by Democratic and Republican leaders in the Senate, Illinois would borrow $7 billion over seven years to pay down the bill backlog and bring the payment cycle closer to 30 days…

(Editor’s note: Bold added for emphasis)

The Tribune article comes after Governor Bruce Rauner pointed out in his State of the State address last Wednesday:

We haven’t had a full year budget of some kind in a year-and-a-half- and we haven’t had a state budget that is truly balanced in decades. We have more than $11 billion in unpaid bills, a $130 billion unfunded pension liability, and the worst credit rating in the nation. We have the 5th highest overall tax burden and one of the lowest rates of job creation of any state

(Editor’s note: Bold added for emphasis)

Garcia’s piece took a close look at the interest payments associated with the bill backlog debacle, which you can read about here on the Tribune site.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Amended Illinois Tax Hike Plan To Hit Taxpayers, Businesses, And Employment?

Back on January 16 I published a post on Survival And Prosperity entitled “Illinois ‘Grand Bargain’ Legislation Includes 32 Percent Personal Income Tax Hike.” I started the piece with:

Illinois taxpayers may get hit with a significant income tax hike pretty soon…

Yesterday morning, I learned the potential “hit” could be a “combination of punches” directred at taxpayers, businesses, and employment.

From the Greg Hinz On Politics blog on the website of Crain’s Chicago Business:

There’s still no word on when lawmakers are going to vote on it, but an amended tax-hike plan has been introduced in the state capital.

It’s a doozy, with an even higher income tax, a limited service tax and a sort of minimum tax on business. But the soda pop levy is gone, as are a couple of those corporate loophole closings that business groups didn’t like…

The highlights:

The Individual income tax would go to 4.99 percent from the current 3.75 percent, and the corporate income tax to 7 percent from 5.25 percent. Combined, that would pull in about an additional $5 billion a year.

A new “business opportunity tax” ranging from a fee of $225 to $15,000 a year would be imposed, based on payroll. The intent is to make sure that all companies pay something, whether they are profitable or not. The state’s net on this is an estimated $750 million a year.

However, the research and development tax credit would be made permanent and the manufacturers purchase and graphics arts credits would be combined, as some businesses wanted.

A service tax—extension of the sales tax—would be imposed on certain items including repair and maintenance of personal property, use of amusement services including gyms, landscaping, laundry and dry-cleaning, and storage of personal goods such as cars and property. This would pull in a projected $400 million a year.

The telecom excise tax would be extended to cable and satellite services.

Both Radogno and Cullerton are said to have negotiated and support the above, pending action on the rest of the package…

Hinz does a good job summarizing the proposed expanded revenue grab. At this point, I want to go back to that bit about a new “business opportunity tax.” From the actual legislation for the so-called “Business Opportunity Tax Act”:

Section 1-10. Tax imposed.
(a) Beginning on July 1, 2017, a tax is hereby imposed upon each qualified business for the privilege of doing business in the State.
(b) The tax under subsection (a) shall be imposed in the following amounts:
(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then then annual tax is $225;
(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then the annual tax is $750;
(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then the annual tax is $3,750;
(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then the annual tax is $7,500; and
(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax is $15,000…

I can see a number of existing and prospective Illinois business owners having concerns with the proposed “Business Opportunity Tax Act.”

First, Illinois already has poor business reputation. For example, early last year Chief Executive magazine asked 513 CEOs to rank states they are familiar with on the friendliness of their tax and regulatory regime, workforce quality, and living environment. The “Land of Lincoln” came in as the 48th worst state in this annual survey, beaten only by New York and California in that order. The “Business Opportunity Tax Act” has the real potential of increasing the perception that Illinois is business-unfriendly.

Second, if my understanding of the legislation is correct, the larger the payroll an Illinois business has, the more taxes they will pay. Consider the following. If I’m an Illinois business owner with a payroll just shy of $250K who would like to bring on more staff, I may be dissuaded from doing so to avoid forking over an additional $3,000 to the state (unless I’m convinced the hiring would offset the $3K hit). And how might employee raises be impacted once payrolls start approaching a higher tax bracket? The proposed “Business Opportunity Tax Act” may not be too terrific for Illinois employment.

Third, readers of this blog may know that I am in the process of rolling out a research business focusing on specialized asset protection. It’s been my intention to launch in the Chicago area. Lately, however, I’ve been thninking of opening up shop in southeast Wisconsin (where my family has a residence) due to the direction Illinois looks to be heading with taxes and its treatment of the business community. The passage of the “Business Opportunity Tax Act” could be the straw that breaks the camel’s back. I wonder how many other prospective Illinois business owners might be in the same boat?

Stay tuned…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Hinz, Greg. “New, wider tax plan rolls out in Springfield.” Greg Hinz On Politics. 24 Jan. 2017. (http://www.chicagobusiness.com/article/20170124/BLOGS02/170129931/springfield-lawmakers-roll-out-new-wider-tax-hike-plan). 26 Jan. 2017.

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More Wisconsin Welfare Reform Coming?

Wisconsin Governor Scott Walker is pushing for additional welfare reform in the state. Reid Wilson reported Monday afternoon on The Hill website:

Twenty years after a Republican governor of Wisconsin spearheaded an ambitious welfare reform package, the current governor is trying to build momentum for a new round of reforms.

Wisconsin Gov. Scott Walker (R) on Monday said he would ask the state’s Republican-led legislature to undertake one of the most aggressive welfare reform packages since a wave of new measures passed in the mid-1990s.

Walker’s plan, “Wisconsin Works for Everyone,” would impose new work requirements on both able-bodied adults with school-age children who receive state food assistance and those who receive housing assistance. Both work plans, which would be tested on a pilot basis, would require recipients to be employed for at least 80 hours per month, or to be enrolled in job training programs. Those who do not meet work requirements would see part of their benefits cut…

(Editor’s note: Bold added for emphasis)

Food stamp work requirements for abled-bodied adults without dependents have existed in Wisconsin since April 2015.

As for it’s neighbor to the south, critics contend the food stamp program in Illinois is ripe for abuse. A work requirement does not exist for even abled-bodied adults without dependents. According to the Illinois Department of Human Services:

“We expect people who can work to try and do so.”

Hmm.

Head on over to The Hill website here to read the entire piece.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Tuesday, January 24th, 2017 Employment, Government, Housing, Political Parties No Comments

16,700 Illinois Jobs Gone In December

Illinois lost 4,500 jobs in November, followed by a whopping 16,700 jobs last month. From an Illinois Department of Employment Security news release Friday:

The Illinois Department of Employment Security (IDES) announced today that the unemployment rate in December inched up +0.1 percentage points to 5.7 percent and nonfarm payrolls decreased by -16,700 jobs over the month, based on preliminary data released by the U.S. Bureau of Labor Statistics (BLS) and IDES. November job growth was revised down to show a decrease of -4,500 jobs rather than the preliminary figure of +1,700 jobs. The downward revision, coupled with the drop in December payrolls kept job growth well below the national average, with Illinois -52,500 jobs short of its peak employment level reached in September 2000.

“Nonfarm payrolls reflect the job market and this kind of drop is troubling, to say the least,” said IDES Director Jeff Mays. “It’s the largest monthly decline we’ve seen this year and the drop was across most sectors.”

“Another month of climbing unemployment numbers that are far from the national average,” said Illinois Department of Commerce & Economic Opportunity Acting Director Sean McCarthy. “Illinois needs structural reforms and a balanced budget to attract new jobs and investment in our state. We cannot repair the damage of losing 11,000 manufacturing jobs, 9,700 construction jobs and 5,800 information and financial activities jobs over the course of just one year without real changes that create growth and opportunity in our economy.”

(Editor’s note: Bold added for emphasis)

To be fair, IDES added:

Over the year, nonfarm payroll employment increased by +28,400 jobs with the largest gains in two industry sectors: Professional and Business Services (+31,600); and Leisure and Hospitality (+11,900)…

Hmm. “Professional and Business Services,” which includes temporary staffing (booming after the bust). And “Leisure and Hospitality,” one of the lowest-wage sectors of the economy. Get where I’m going with this?

January’s job report should be interesting.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, January 23rd, 2017 Business, Employment, Government, Manufacturing No Comments
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