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By DIANE ROSS and SHELLEY DAVIS Legislative Action
FOR A YEAR NOW, Gov. James R. Thompson had pleaded, threatened and cajoled for someone, anyone, to defuse Illinois' transportation crisis. But finally, on March 24, warning that the bomb was about to go off and that the explosion would plunge Illinois into the deepest of economic depressions, it was Thompson who unveiled a plan for defusing the crisis. And it was Thompson who assumed the political liabilities of such a plan: he proposed to finance transportation by creating a new 5 percent gross receipts tax on the first Illinois sales of oil refiners and major distributors. Surely this was the most comprehensive, the most complex, the most controversial program Thompson has proposed as governor. Had he not put some two dozen lawyers on his payroll, at as much as $140 per hour, to produce the seven-bill package he introduced in the House? Even so, some observers said it was only the plan of a Grand Panjandrum and not a "move ahead" program. For example, the infusion of revenue generated by the new oil tax would mean Thompson could spend $900 million on highways in fiscal 1982, $350 million more than his March 4 budget allowed. But by Thompson's own (1979) standards, anything less than $1 billion means Illinois falls behind on highways. In any case, it was a plan. Despite a seven-day struggle to push it through the House, it never got off the drawing board. And the House, in a fit of frustration, adjourned April 2 and was not to reconvene until April 21. But if nothing else, Thompson's plan forced General Assembly Democrats to come forward with their own, long-awaited plans. In the House, Minority Leader Michael Madigan was willing to go along with Thompson on the new oil tax — if Republicans went along with Madigan on how to divide the revenue between mass transit and highways and on how to restructure Chicago's Regional Transportation Authority (RTA). In the Senate, President Philip Rock came up with a plan of his own, a combination of a privilege tax on all financial institutions, a gross receipts tax on oil companies and an increase in license plate fees. Just what did Thompson propose? Tax the oil companies How would Thompson's new oil tax work? Thompson would tax oil refiners and major distributors, starting July 1, 1981, five cents per dollar on the gross receipts of their first Illinois sales of gasoline, diesel fuel, jet fuel, aviation gasoline; distillate fuels, petrochemicals, LPG or propane, butane, etc.; and residual oil, asphalt, and road oil. He would not tax them, however, on the sale of military jet fuel, or retail products whose petrochemicals would already have been taxed, such as styrofoam cups, paint, roofing paper, etc. How much revenue would Thompson's new oil tax generate? He projects $400 million in fiscal 1982, but he bases that on only six-months of collections. (He assumes a six month delay while oil companies challenge the constitutionality of the new tax in the courts, since such tests are already underway in New York and Connecticut.) For fiscal 1983, the first full year of collections, Thompson projects revenues will move up to $623 million, a 50 percent increase over the preceding year. In fiscal 1984, the second full year, he projects revenues will reach $850 million, a 35 percent increase, and then stabilize at that level, at least for the next two fiscal years. Exactly how would Thompson spend the new oil tax revenue? Well, that depends. Thompson wants to create two new funds. All collections would go into a new Gross Receipts Tax Fund. Whatever the General Assembly appropriated for mass transit would be transferred out of the Gross Receipts Tax Fund and into the second new fund, the Illinois Transit Fund. There would not be a set formula for mass transit appropriations, except for downstate systems, which would be limited to one-third of their operating costs with annual increases capped at 10 percent. May 1981 /Illinois Issues/29 Under Madigan's plan, on the other hand, all mass transit appropriations would be limited to one-third operating costs with a 10 percent cap. How much of Thompson's new oil tax revenue would be left for highways, then? Who knows? Whatever the amount, Thompson would use a formula to split it between state and local highways: 75 percent would go into the Road Fund, the major depository for state highway construction money, and .25 percent into the Motor Fuel Tax Fund, a similar account for local roads. Under Madigan's plan, the 75 percent would go into a new State Construction Fund; it would be spent exclusively on state highways; transfers would be expressly forbidden. (Road Fund money can be, and is, diverted, although such diversions are being phased out.) And Madigan would put the other 25 percent into a new Supplemental Motor Fuel Tax Fund, where 70 percent of the revenue would be set aside strictly for local highways and 30 percent would be diverted back to the Road Fund for state highways. (That's similar to the formula now used to split motor fuel tax receipts.) Again, exactly how would Thompson spend the new oil tax revenue? In fiscal 1982, with six months of collections, Thompson would give 30 percent to mass transit and 70 percent to highways. But in fiscal 1983, the first full year of collections, he would split the revenue 50:50. Of the $400 million available in fiscal 1982, then, Thompson would give mass transit a total of $291 million, $116 million or 66 percent more than his March 4 budget allowed. And Thompson would give highways a total of $2.6 billion (including bonding power), $684 million, or 36 percent more than his March 4 budget allowed. Under Madigan's plan, however, in fiscal 1982 mass transit would get about 40 percent and highways would get about 60 percent. In fiscal 1983 that would become a 55:45 split. Of the $400 million available in fiscal 1982, Madigan would give mass transit $154 million or 88 percent more than Thompson's March 4 budget. And Madison would give highways $646 million or 34 percent more than Thompson's March 4 budget. Juggle the surtax For the short term, the RTA would sell $200 million in state-backed interim finance notes to cover the deficit now projected at $150 million by the end of the RTA's fiscal year on September 30. The RTA would have until January 1, 1985, to repay the $236 million in principal and interest. Under Madigan's plan, the RTA would have 10 years. For the long term, once Thompson proposed the new oil tax, it was logical to return to a state subsidy. But it was surprising that he also insisted on juggling the old sales surtax once more. He had said all along that the current combination of revenues — the sales surtax, federal aid and fares, couldn't possibly keep the RTA solvent. (See "The RTA Cri$i$: Not the first, but the worst," April 1981, p. 4.) 30/May 1981/Illinois Issues Thompson would take away some of the RTA's sales surtaxing power. Chicago Cook County residents would continue to pay the full one-cent surtax now levied there. Effective July 1, 1983, however, suburban Cook County residents would pay only one-half of the one cent now levied there, and collar county residents would continue to pay the full quarter cent now levied there — unless they chose to withdraw from the RTA and get out of the transit business altogether. The sales surtax would remain the RTA's single largest outside (non-fare) source of revenue, generating a projected $327 million in fiscal 1982. Under Thompson's plan, though, that could drop to about $320 million in fiscal 1983 when the suburban Cook County tax rate dropped and collar counties could no longer be taxed, if they chose. Replace the RTA board Thompson would give his new TFA complete financial oversight (including all taxing and bonding powers the RTA now enjoys) over the Chicago Transit Authority, the commuter rail services and the suburban bus services. Thompson's TFA could withhold state subsidies to these groups if their budgets were not balanced. Since Thompson would allow the collar counties to withdraw from the RTA/TFA, he would also create the new Collar Counties Transit Assistance Program. Like the formula now used for subsidizing downstate mass transit systems, the new program would provide state subsidies of up to one-third of operating costs of collar county or city mass transit systems that withdrew from the RTA/TFA. If a county withdrew, it would have three options: Authorize more bonds He would increase the authorization to sell general obligation bonds by $400 million (in addition to adding the new oil tax revenue to the old sources of revenue). That would increase the total authorization in Transportation Series A bonds from the $1.362 billion now in effect to $1,762 billion. (Of the current $1,362 billion authorization, $940 million had been sold by January 31, 1981; $422 million remained unissued.) May 1981/Illinois Issues/31 However, Thompson would sell only $100 million in highway bonds in fiscal 1982 under this plan, the same amount he would have sold under his March 4 budget. The increased authorization means he would sell more highway bonds in succeeding years. After Thompson unveiled his transportation plan before a joint legislative session, Republican House Speaker George Ryan tried to push the seven-bill package (H.B. 737-743) through the House. Meeting in a rare Committee of the Whole, the House began hearings March 27 and continued through the weekend to hear the 75 witnesses who registered to testify. All momentum collapsed on March 30, however, with the attempted assassination of President Ronald Reagan, who had been scheduled to address a joint session of the legislature two days later. A week after Thompson had unveiled his plan, Madigan came up with the Democratic alternative, which was among the 200 amendments introduced to the seven Thompson bills. The House began to amend the bills March 31, but by April 2 a series of procedural manuevers forced Ryan to rule out consideration of most of the amendments, including those which embodied the Democratic alternative. When the first of the governor's bills, H.B. 737, came up for a vote April 2 — the first and crucial test of Thompson's plan — it failed miserably, 68 yes, 61 no, 41 voting present. The yes votes were all Republicans; most of those voting present were Madigan's Chicago Democrats. Ryan had no choice but to table the remaining six bills and adjourn the House. While the House was in recess, though, the Senate was still meeting. Rock, however, had not introduced his plan by April 8. 32/May 1981/Illinois Issues Meanwhile, there are other legislative issues Civil judiciary: bankruptcy, inheritance, child custody Like other areas, it is hard to predict if anything substantial will be passed in civil judiciary this session. Legislators, however, are expected to continue revisions begun last year on inheritance tax and bankruptcy laws. The 1981 session may see greater exemptions being given for inheritance and stiffer requirements for declaring bankruptcy. Home-state jurisdiction became an issue because of a January Supreme Court decision involving court jurisdiction in child custody cases. The court said that if Illinois courts wish to retain continuing jurisdiction in custody disputes, legislation was needed. This is a new issue this session and chances for passage are uncertain. Criminal judiciary: child porn, fetal homicide, search warrants The major criminal judiciary legislation eyed as having the best chance of passage in the 1981 session are measures that would curb child pornography. The major issue deals with the use of children in pornographic films. The legislation resulted from a recommendation made by the Legislative Investigation Commission in its report on sexual exploitation of children. Legislation setting greater penalties for those who lure children into prostitution by the use of force or drugs also has a good chance of passing. The fetal murder proposal, amended out of existence last year, is again an issue this year. Observers, however, are reluctant to predict which way it will go. The proposal represents neither abortion nor pro-life legislation and simply makes it a crime to kill a fetus either by murdering its mother or ferociously assaulting a woman, resulting in a miscarriage. The measure would exempt women who consent to abortions. Other issues that are expected to pass in some form this session are measures dealing with exemption of all third parties from search warrants; regulation of the sale of gold and silver; and disclosure of medical records for the purpose of evidence. Financial institutions: interest rates, holding companies, branch-banking The current moratorium enacted in November 1979, eliminating interest rate ceilings on home mortgages and most loans, ends January 1, 1982. If the legislature wants to permanently eliminate usury ceilings it must act before that time, otherwise the state will go back to the previous law. The issue centers on whether to allow banks to charge the prevailing interest rates for loans such as residential mortgages, contract for deeds, installment loans and other forms of revolving credit. The three main banking groups in the state all support the concept, if not the exact language of the legislation that has been introduced. Another issue, which has been introduced every year since 1973, is multi-bank holding companies. This proposal faces a good chance of passage in the 1981 session. The proposal would allow banks to buy into other banks and combine management efforts while retaining separate directors. It is supported by the Association for Modern Banking in Illinois (AMBI), which represents the largest banks in the state. Lobbying for the smaller banks are the Illinois Bankers Association (IBA) and the Independent Community Banks in Illinois (IC-BI), who feel multi-banking will decrease competition and do away with personal service offered by community banks. A related issue, also supported by AMBI, is branch-banking. AMBI looks at branch-banking, which allows banks to open full-service branch facilities, as another step in its efforts to update the conservative nature of Illinois banking laws. Again, IBA and ICBI are not for branch-banking, feeling that it would force the closure of smaller banks that can't afford to open a branch. Insurance: excessive rates Not much in the way of insurance legislation is expected to come out of the 1981 session, unless sponsors push their bills harder than usual. The issues facing the legislature include preventing excessive rates in non-competitive markets; strengthening anti-redlining legislation; and exploring certain licensing procedures, in particular the licenses slated for retirement in October by the "sunset committee" unless legislation is passed to keep them alive. Labor & commerce: worker's comp, unemployment insurance Worker's compensation and unemployment insurance will both receive labor and commerce attention again this year. While little is expected to be accomplished with worker's comp in the way of further reform, legislation will focus on standards for determining the degree of disability and benefits; the level of benefits; and pre-existing injuries. Unemployment insurance, however, will receive considerably more scrutiny, partly because of loans made to the state by the federal government to cover a shortfall in employers' contributions caused by an increase in unemployment benefits. Labor and business broke off negotiations recently casting doubt on whether a bill agreed on beforehand could be introduced. But labor and business will have to get together on some package to reduce benefits. Tightening eligibility is again the focal point of UI reform. Specific reforms suggested include decreasing or eliminating benefits for those who voluntarily quit their jobs, are fired for misconduct, or refuse to accept "suitable" employment. Pensions: investments Although Gov. Thompson announced in his State of the State address February 3 that the state must look at what could be done with the "single largest pools of investment funds available ... $4 billion in public employees pension funds," it doesn't appear as though any changes will be made during the 1981 session. The governor has formed a commission to study the matter, but it probably won't make any recommendations before the end of the legislative session. The investment issue centers on redirecting pension investments into Illinois securities and industries. Pension officials fear such a restriction will cause both a decrease in the rate of return and an increase in risk factors for the securities. Pension officials, however, are pushing for investment reform, hoping to make the current statute less restrictive. Public utilities: rates Public utility issues for the 1981 session are focusing on limiting the amount of costs that utility companies can pass on to the consumer. However, few of these measures are expected to pass. Construction-work-in-progress costs tacked onto utility bills remain an issue, but apparently nothing will be done this year. Progress on other issues might proceed at a better pace. These include limiting the amount of advertising expense that can be passed on to the consumer; limiting inclusion of the cost of transporting coal in fuel adjustment costs; and changing the criteria for determining a fair rate of return from fair value/replacement cost to original cost. Although considered in the Revenue Committee, another public utility issue that came up again is election of Illinois Commerce Commission members rather than appointment. No change appears likely during the 1981 session since two different measures have failed in committee. □ |
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