For Municipal Pensions, the Can Has Reached the End of the Road

Sidewalk“We shall walk with a walk that is measured and slow,
And watch where the chalk-white arrows go
To the place where the sidewalk ends.”

-Shel Silverstein “Where the Sidewalk Ends”


In 2014, Kevin Williamson used this as the title of an article he wrote for National Review, in which he describes driving from Pat Quinn’s hometown of Hinsdale, “where it’s easy to be optimistic”, down Route 55 (“the dyspeptic alimentary canal of Illinois”) to East St. Louis, where the rubber of sclerotic and unserious government meets the road of unintended consequences affecting real people. The saddest thing about the article is that, looking four years back in the rear view mirror, nothing has changed. Nothing, that is, except that now it appears that Illinois has finally reached the end of the sidewalk.

While I’ve been pointing out for years that the State’s 5 pension systems are headed for insolvency (the General Assembly’s pension plan is less than 14% funded), this particular crisis revolves around municipal pensions, particularly police and fire pensions. In August, a state appellate court ruled that as a matter of law, the City of Harvey’s firefighters’ pension fund had actually reached the point of constitutional impairment. This is the first time a court has made this determination on any governmental pension fund, and it opens up a whole new can of worms.

That’s because in 2015 a statute went into effect giving the Illinois Comptroller the authority to make up for any town or county’s delinquent pension payments by seizing its share of sales, excise, and other taxes collected by the state, collectively known as its “Local Government Distributive Fund” (LGDF).

This month, Public Act 99-8 fully kicked in. It says in pertinent part:

If a participating municipality fails to transmit to the fund contributions required of it under this Article for more than 90 days after the payment of those contributions is due, the fund may, after giving notice to the municipality, certify to the State Comptroller the amounts of the delinquent payments in accordance with any applicable rules of the Comptroller, and the Comptroller must…deduct and remit to deposit into the fund the certified amounts or a portion of those amounts from the following proportions of payments grants of State funds to the municipality:

(3) in fiscal year 2018 and each fiscal year thereafter, the total amount of any payments grants of State funds to the municipality. (emphasis mine)

Municipalities across Illinois are now confronted with the choice of cutting essential services or raising taxes to avoid having their pension contributions certified as delinquent, thus risking the loss of millions in LGDF funds:

During the upcoming session we’re going to see legislators tying themselves into knots to mitigate the change in Federal tax deductions with goofy schemes to create charitable deductions in exchange for state tax credits or property tax abatements, or invoking in loco parentis authority to ban tackle football for kids under 12. But at no time will we have an adult conversation about what’s about to be dumped upon thousands of unsuspecting citizens of Illinois.

Kevin finishes his piece this way:

“Driving though East St. Louis, you’ll see a dozen signs reading: “Casino — this way!” But you won’t see any pointing the way to jobs, prosperity, basic physical safety, or hope. Nor will you see them in Joliet, Carbondale, Rockford . . .”

And between now and May, you certainly won’t see them in Springfield.

Posted in 2018 Election, Public Pensions | Tagged , | Leave a comment

This Is What Happens When Democrats Do Tax Bills

Clown CarCombine a limitation on state and local taxes (SALT) under the new Federal tax bill with Democrats scrambling to score political points in an election year, stir in a dash of hypocrisy, and what do you get?

You get H.B. 4237, which was introduced in the Illinois House on January 16th.

The tax bill that Congress recently passed and which was signed into law limits the amount of SALT which can be deducted on an individual’s personal income tax return to $10,000, whereas before, this deduction was unlimited. As a result, people living in high-tax states like Illinois will possibly see their Federal taxes go up as a result of the limitation. (I say “possibly” because of potential offsets due to an increased standard deduction and a broadening of the base income levels subject to generally lower rates. Consult your tax advisor.)

I’m going to try to explain with a straight face why H.B. 4237 is going nowhere. It won’t be easy.

The bill provides for the establishment of what’s being called the “Illinois Excellence Fund”:

“The Illinois Excellence Fund is hereby created as a special fund in the State treasury. The Fund may accept contributions for exclusively public purposes, as specified under Section 170 of the Internal Revenue Code relating to charitable contributions and gifts. All moneys in the Fund shall be used for those public purposes, subject to appropriation by the General Assembly.

Any taxpayer who makes a contribution to the Illinois Excellence Fund is entitled to a credit against the taxes imposed under subsections (a) and (b) of Section 201 (of the Illinois Income Tax Act) in an amount equal to 100% of the contributions made by the taxpayer to the Fund during the taxable year.”

If this sounds eerily familiar to you, it’s because this is the same type of program that was contained in the education funding bill that was passed by the General Assembly in August allowing for the establishment of private scholarships. If you run into any of H.B. 4237’s sponsors, ask them what they had to say about that.

Without going too much into the weeds, this bill is going nowhere because it flies in the face of established Federal tax law.

At its most basic, for a charitable contribution to be deductible, it must be made without expectation of financial return. Here, the “contribution” is made with nothing but the expectation of financial return, i.e.: a reduction in one’s Federal income tax. Also, if the contribution results in the assumption of a liability by the recipient in the form of providing a dollar-for-dollar tax credit, the deduction would also be disallowed. For those and many other reasons, at the state level, this bill is a total non-starter.

But wait! There’s more! The bill goes on to amend the Counties Code to allow counties:

“To establish a fund in the county treasury for the purpose of accepting contributions for exclusively public purposes, as specified under Section 170 of the Internal Revenue Code relating to charitable contributions and gifts. All moneys in the Fund shall be used for those public purposes. The county may provide for a credit against the taxpayer’s property tax liability in an amount equal to the amount of the contribution.” (emphasis mine)

So what these geniuses are doing is telling counties that they can set up a fund to accept donations to be used for undefined charitable purposes in exchange for a reduction or elimination of your property tax bill, which will either raise taxes on everybody else or destroy the budgets of every school district and taxing body in the County. If you want to have some fun, show this to your local mayor or school board president and watch as their hair catches fire.

The article from the Tax Foundation linked above says it best:

“The scramble to restore the uncapped state and local tax deduction in high-tax states is…a curious political exercise, as it largely involves elected officials who have championed progressive taxation contemplating intricate, almost Rube Goldbergesque ways to make the federal tax code less progressive for wealthy taxpayers in their states.

If high-tax states are genuinely concerned that, absent federal subsidization of their tax rates, they might see outmigration or changes in taxpayer behavior, it would be more productive to revisit state tax rates than devising increasingly convoluted ways to enable high-income earners to reduce their federal tax liability.”

Amen to that.

Posted in 2018 Election, Property Taxes | Leave a comment

Whatever Happened to the Party of Small Government?

“The natural progress of things is for liberty to yield, and government to gain ground.”  -Thomas Jefferson

“I want to run McHenry County…being an executive able to really change fundamentally the structure of government.”  -Jack Franks “The Download” WGN Radio (8/24/16)

McSweeney & Franks

NW Herald, AP File Photo

So it comes as no surprise that Chairman Franks has enthusiastically embraced Representative David McSweeney’s bill (H.B. 4244), which would allow voters in (only) McHenry County to abolish a township by forcing a referendum onto an election ballot with a petition containing signatures of at least 5 percent of voters from a previous comparable election.

Think about that for a minute. On April 4, 2017, an election was held in Algonquin Township to elect sundry township-wide officials, and the average turnout of the 4 races was 5,956. If all it takes to put a dissolution referendum before the voters on a similar, off-peak ballot is 5% of the vote, then all it would take is for 298 people to allow proponents to force a vote upon over 90,000 of their neighbors to abolish the township. All of the Township’s functions would be taken over by the County.

H.B. 4244 is the legislative corollary to the old line “bad facts make bad law”.  From a story in the Northwest Herald discussing the bill:

McSweeney’s bill follows on the heels of the in-house lawsuits, budget-busting legal fees and corruption allegations that have engulfed Algonquin Township.

“[Algonquin Township] is the best example of bad government,” McSweeney said. “It is a great example of a government that will hopefully be eliminated.”

Not that there’s any discussion in Rep. McSweeney’s bill of making proponents show how such a move would save taxpayers money. No, he’s using the current uproar over alleged actions of the previous road supervisor to create a larger and more centralized McHenry County government. Not that what’s going on in Algonquin Township is a model of rectitude, but once again we have a politician jumping in front of a parade as if he organized the thing. He’s making a naked appeal to emotion in order to avoid the heavy lifting necessary to prove his case.

Do you want to know what’s going to happen if this bill passes? You’re going to be one step further away from participatory democracy.

Last week, the McHenry Township Board met to consider adopting a motion to place a referendum on the November ballot to dissolve the Township’s road district and fold everything into the Township. It was pretty much assumed that a “yes” vote was a fait accompli. But a bunch of motivated citizens showed up and told the Board to prove their case. The final vote was 3-2 against the motion. Try doing that in front of the County Board with Jack Franks holding the gavel. In supporting McSweeney’s bill, Franks is quoted in the Northwest Herald: “We want to be a laboratory for the state.” The thought of that kind of power in his hands scares me to death.

It used to be you could count on Republicans to be the party of small government. There’s a principle long embraced by conservatives known as “subsidiarity”, which says that matters ought to be handled by the smallest, lowest or least centralized competent authority. Political decisions should be taken at a local level if possible, rather than by a central authority. Republicans used to believe in it; I still do.

Posted in Cost of Government, Local Government | Tagged , , , | 1 Comment

Let Voters Decide on Township Road Districts

That’s the headline of an article written by Jack Franks published in today’s Northwest Herald, a headline with which I am in full agreement.

Franks goes on, however, to fully distort what I’m trying to accomplish with the trailer bill I’ve introduced, House Bill 4190, which would require a cost analysis to be completed before any referendum consolidating road districts into and under township government could be put on the ballot.

In 2015, an effort was made by the McHenry County Board to put the issue of township consolidation on the 2016 primary ballot. The measure was defeated, and as I wrote at the time:

“I’ve said all along that I don’t know if consolidation would lower taxes or raise them, but I could not support putting the measure on the ballot unless the proponents made their case. They didn’t. I couldn’t support a leap of faith to change things from what they are now on the strength of some vague promise that their claims would prove to be correct.”

This has been my message all along, consolidation may save money. If it does, then I’ll be the first to support it. But it’s up to the proponents of consolidation to prove their case. Bob Anderson has been outspoken about what I’ve done, saying that I’m in the pocket of local township officials and road commissioners. But the next time you see Bob, ask him if I’ve ever been anything but consistent on making that point, because I’ve had many conversations with him about it and my position has never wavered. He’s never disagreed.

The Chairman says that H.B. 4190 throws another roadblock in the way of consolidation. It seems to me that those who favor consolidation only want voters to judge the issue on the basis of the facts they’re willing to give them. My position is that this “roadblock” might be the only thing keeping local government from driving over a cliff.

Chairman Franks goes on to say that my bill is “undemocratic” and is based on the fact that I think “the electorate has to be protected from itself” He says that it’s a “political literacy test [to] ensure that voters and officials they elect are intelligent enough to know what they want”.

Quite the contrary.  A “literacy test”?  Far from it.  I trust the voters more than he does, because I know they’re “literate” enough to judge all the facts when they’re put before them. Wanting to deny full disclosure before we move toward larger and more centralized government is the mark of someone who thinks he knows better as to how to protect the electorate than they themselves do. It’s also coming from someone who’s now in a position to influence the direction that County government will ultimately take. In short, it’s patronizing and terribly opportunistic.

And since Chairman Franks saw fit to brand me as a something that I’m not, I feel obliged to set the record straight on a few other items he brought up.

He says I was silent on the matter of the 32% tax increase passed this year over the Governor’s veto. If he cares to check the record, he’ll see that I voted against the increase and voted against the override. I even posted a little video discussing the issue.

He also can’t avoid thumping his chest over being on two “blue ribbon” commissions to explore consolidation. I wrote about this back in 2015, when I examined the Chairman’s participation on one of those commissions. I found that of the 16 meetings held, he missed 8 of them and phoned it in on 5 others. On the May 20, 2015 meeting which he missed, causing a lack of a quorum, I wrote:

“And what was supposed to be done on May 20? Before the lack of a quorum was discovered, the Task Force voted to enact a 4-year moratorium on creating new local governments. If that sounds familiar to you, it’s because the recommendation is based on HB 228, introduced by none other than…wait for it… Rep. Jack Franks. Franks wasn’t there to vote on his own recommendation, and his absence caused a lack of the quorum necessary to allow it to pass!”

It’s not my style to run to a microphone or issue a press release every time the wind shifts. I would think that the people of this district would find that to be refreshing. What I do care about is doing the best I can to protect the interests of the people of the 63rd District, and if that means demanding a closer look at an issue that has yet to be fully fleshed out, then that’s what I’ll do. I’ll end this post as it began: I’m fully in favor of any measure that will lower taxes and maintain needed services. But if you want my support, prove it.

Posted in Cost of Government, Local Government | Tagged | 1 Comment

“Silence of the Dems”, Lisa Madigan Edition

illinois-land-of-corruption-hatIn the past several months, the Chicago Tribune has extensively researched and written about the assessment practices of Cook County Assessor Joseph Berrios, finding a pattern of:

“[C]lout, patronage and incompetence…that assigns property values and thus helps shape tax bills. Low-income and minority communities get hit harder than wealthier communities whose residents often hire attorneys to win assessment reductions.”

As ProPublica Illinois further stated:

“Amid the most tumultuous real estate market since the Great Depression, Cook County Assessor Joseph Berrios produced valuations for thousands of commercial and industrial properties in Chicago that did not change from one reassessment to the next, not even by a single dollar.

That fact, one finding in an unprecedented ProPublica Illinois-Chicago Tribune analysis of tens of thousands of property records, points to a conclusion that experts say defies any logical explanation except one:

Berrios failed at one of his most important responsibilities — estimating the value of commercial and industrial properties.

What’s more, a separate analysis reveals commercial and industrial property assessments throughout Cook County were so riddled with errors that they created deep inequities, punishing small businesses while cutting a break to owners of high-value properties and helping fuel a cottage industry of politically powerful tax attorneys.”

We all know who they’re talking about. As the Tribune goes on to say:

“The clout-rich lawyers whose firms profit from Cook County’s property tax dysfunction — Speaker Madigan, Chicago Ald. Edward Burke and Senate President John Cullerton, to name a few — say almost nothing about Berrios. Worse, they’re rarely asked.”

There are those who have finally spoken up to call for change:

“U.S. Reps. Danny Davis, Bill Foster and Robin Kelly, along with Cook County Clerk David Orr, Cook County Board member Jesus “Chuy” Garcia and state Sen. Heather Steans, among others, have endorsed one of Berrios’ opponents.”

But have you noticed one name that’s noticeably absent?

Lisa Madigan.

The State’s Chief Law enforcement officer, someone who holds herself out as an advocate of Illinois taxpayers and consumers, has been totally silent on the Berrios “racket” (the Tribune’s word, not mine). And if there’s one person in this State who has the authority, not to mention the responsibility, for investigating what’s going on in the Assessor’s office, it’s the Attorney General of the State of Illinois.

The most important role of the Attorney General is to investigate and prosecute corruption anywhere it’s found. Here we have a case of “clout, patronage and incompetence” pointing to a pattern of corruption that screams for an investigation at the very least, perhaps leading to prosecution. Why haven’t we heard from our State’s chief prosecutor?

Those of us living outside of Cook County have long ago given up hope that it will someday shed itself of its well-earned reputation for political log-rolling and corruption. We understand that Attorney General Madigan’s father, Speaker Michael Madigan, controls the Illinois House, and the party which he leads, with a checkbook. We also understand that those of us who live outside of Cook County are thought of as nothing more than a collection of hayseeds who are expected to do nothing more than keep quiet and continue to subsidize Cook County’s excesses. But the fact is, this Cook County “friends and family” assessment racket not only benefits the high rollers, it hurts minorities, working families and those without political juice in Cook County as well as taxpayers throughout the entire State of Illinois.

The Illinois legislature just spent months creating an education funding formula that gives the Chicago Public Schools millions of dollars of other peoples’ money. Since the burden for paying for education in Illinois falls so heavily on the property tax, this shell game has the effect of lining the pockets of the very people who are the beneficiaries of doing business “The Chicago Way,” because what those beneficiaries don’t pay toward education falls onto the rest of us. This kind of blatant conflict of interest and self-dealing is Exhibit A when people talk about political corruption in Illinois, and it has to stop.

It shouldn’t fall to some rookie representative from McHenry County to point out the obvious here. If our State’s top lawyer will not immediately investigate this outrage, then it’s time to turn it over to someone who will. Chicago just picked up three new U.S. Attorneys; let’s see what they can find.

As for Ms. Madigan, as she plays out the string before stepping down next January, it would be nice if she’d finally let us know where her true loyalty lies: either with those who game a corrupt system which has allowed a select few to make fortunes, or to the oath she took to protect the people of Illinois. She can’t do both. If she can’t bring herself to investigate something so open and obvious sitting right beneath her nose, she shouldn’t wait to serve out the rest of her term. She should resign. Now.

Posted in Local Government, Property Taxes, Taxes | Tagged , , , | 1 Comment