* Remember last year when ComEd offered the cash-strapped state $500 million in exchange for guaranteed future profits? Well, the company is back again, but this time there’s no $500 million offer…
Commonwealth Edison Co. plans a big legislative push this spring that would allow electric and natural-gas utilities to hike delivery rates each year and would sharply curtail state utility regulators’ power to control the price for power and heat.
The measure, modeled in part on a controversial rate-freeze bill ComEd tried to move through the General Assembly last May, would give the state’s utilities far more certainty about recouping infrastructure investments in a timely way. But consumer advocates warn it would increase utility bills.
In a major change from the previous legislation, the new version would involve all of the state’s gas and power utilities rather than just Chicago-based ComEd. That means ComEd can enlist industry allies and add clout to its lobbying effort.
Under the proposal, utilities that agree to invest in their systems at a specific level would be allowed to automatically change their rates each year based on their costs. That would enable them to avoid the Illinois Commerce Commission’s review process, which often stretches to 11 months. The ICC instead would be given a narrower, after-the-fact review to ensure the costs aren’t egregious. […]
“To the extent the bill looks like the one they introduced last session, that’s not good for consumers,” says David Kolata, executive director of the consumer watchdog group Citizens Utility Board. “It would reduce ComEd’s risk and put it on the backs of consumers. We believe consumers would be stuck with higher rates than they would otherwise.”
* And they’ve got their ducks lined up. From a ComEd press release…
“This is the right time to decide the right way to modernize a major part of Illinois’ infrastructure,” said Kevin A. McCarthy, Illinois State Rep., 37th District. “Similar to how we facilitated the rapid technology boom in the telecom industry and brought countless advantages to customers, we can manage infrastructure investment and keep necessary consumer protections in place while unleashing the full resources needed to make Illinois an economic hub. This would be a win for everyone, and it is the kind of innovative public policy action our state needs right now.”
“ComEd’s proposal to ensure long-term investment in the electric grid would provide thousands of labor jobs for our members in communities throughout northern Illinois,” said Dean Apple, president, I.B.E.W., Local 15. “Many parts of the grid are aging and in need of replacement to ensure system reliability. This plan would include much-needed programmatic upgrade work and minimize the need for emergent repair work.”
* I heard this rumor the other day and ran it down pretty darned thoroughly over a couple of days. As far as I can tell, it’s bunk…
Tom Cross said he’s hearing Quinn made a deal to get votes for the big tax hike in exchange for promising to sign the bill abolishing he death penalty.
“You know, they were having a tough time getting the votes in the House and the Senate, so I’m told, and in exchange for a number of folks voting in exchange a number of folks voting who were in support of the death penalty abolition, he said he would sign it,” Cross said.
In response, the governor’s office says, “Baseless political attacks do a great disservice to the elected members of the General Assembly who had the courage to take the action necessary to bring economic recovery and budget reform to Illinois.”
First of all, re-read that Cross quote. It makes no sense.
I first heard the rumor from opponents of the death penalty abolition bill. Republicans were also spreading it. At the time, the rumor was that some abolition proponents were threatening to withhold their votes from the tax hike unless Quinn signed the death penalty bill. Some had heard the rumor, but nobody - and I do mean nobody - involved with the tax hike (or the abolition bill) were involved in such a plot that I could discern.
This is just irresponsible on Cross’ part. He’s passing along rail gossip to undermine both bills with this story, and, of course, WLS trumpets whatever nonsense that fits their meme.
* And I’m sure the Republicans, including the four Senate Republicans, who voted for the abolition bill are pleased as punch with his rumor mongering…
The four Republican senators who switched ideological sides were more intellectually honest. They included Dan Duffy of Lake Barrington, who was a small-business owner and political neophyte when he won an open 26th District seat in 2008.
Mr. Duffy is an ultra-conservative and, when tracked down, he was fuming about the big tax increase that also passed at the end of the legislative session. He calls it “the nuclear bomb of jobs bills,” adding, “It will destroy all jobs in Illinois.”
He said he was pro-death penalty until he started researching the issue recently and morphed into a late co-sponsor of the legislation to bar it. […]
Another Republican vote came from Senator Tom Johnson, both a former prosecutor and House member picked by the Republican Party to fill the seat of Randy Hultgren, who was a west suburban senator and is now a new congressman. Mr. Johnson has served on the Illinois Prisoner Review Board since 2004 and was a proponent of the death penalty.
But over time, he said, he discerned a system whose application made it “impossible to rationally use as an effective tool,” especially with state’s attorneys in 102 counties making separate decisions on which defendants were “death eligible.”
* Roundup…
* Judge denies Coleman’s request to delay murder trial: Judge Milton Wharton today denied a defense motion to delay the Feb. 15 start of Chris Coleman’s murder trial until Gov. Pat Quinn decides whether to sign a bill to abolish the death penalty.
* Will Quinn end Illinois’ death penalty? We look at his past comments.
* House lawmakers roast blunt wraps ban: Rep. Jim Sacia, a Republican from Pecatonica, said the legislation is part of a dispute between Chicago-based Republic Tobacco and Kentucky-based National Tobacco Co.
* The Statehouse press room was evacuated today. A water pipe may have burst or a fire sprinkler turned itself on, but whatever happened, the place is flooded. The office that I share with the Daily Herald wasn’t touched, but others got drenched and there’s now a strong moldy smell permeating the whole place, which will be empty until Tuesday at the earliest.
* The Question: Analogies?
We had so much fun with yesterday’s QOTD that I couldn’t resist doing it again today.
* Senate President John Cullerton told Fox Chicago this week that he’d be willing to lower the new, higher corporate income tax rate rate by closing some tax loopholes…
Cullerton said if he can replace the revenue some other way, he would be willing to move immediately to cut the new income tax rate on business, presumably to a level even with Indiana’s 8.5 percent or even lower.
Cullerton said if certain tax “loopholes” were closed, the overall rate could be reduced.
“We could easily do that. We just need cooperation from Republicans,” Cullerton said. “We would actually be shifting taxes, not raising them. We won’t have to raise taxes any more.”
That could open up a whole new can of worms, and I’m not sure the Republicans would cooperate. Those “loopholes” have been in place a very long time and they’re mostly devised to allow the bigger companies avoid paying the full freight.
The reason Cullerton said he’d need GOP cooperation is that it now requires a three-fifths vote to advance a bill that changes the tax hike law.
The Indiana Economic Development Corporation is already targeting companies that have publicly stated they are looking to leave Illinois. The revelation was included in Governor Mitch Daniels’ budget presentation to the State Budget Committee. Lawmakers in Illinois approved massive tax hikes this week, and Governor Pat Quinn signed the increases into law Thursday. […]
A bill to decrease Indiana’s corporate income tax rate is being filed at the Statehouse. State Senator Brandt Hershman (R-7) says it is the result of several hearings into the issue, not a sudden reaction to developments in Illinois.
Republican lawmakers have nixed GOP Gov. Scott Walker’s plan to give tax breaks to small businesses and replaced it with a measure that would cut taxes for businesses of any size that create jobs.
Rep. Robin Vos (R-Rochester), co-chairman of the Joint Finance Committee, said Wednesday he planned to make changes to Walker’s bill so that it would provide businesses a $1,000 tax deduction for each job they create. Walker said Wednesday he could support the idea.
Illinois has one of those as well and it’s bigger, $2,500 vs. Wisconsin’s $1,000. Illinois’ applies to companies with 50 or fewer employees, but that’s 95 percent of Illinois businesses. Illinois’ credit expires in June.
As for the state divide, Mr. Walker is happy to talk about it beyond business and the economy. “I was kidding the Chicago media guys, saying ‘Have me back on when the Packers are ready to beat the Bears, and I’ll talk some smackdown.’”
Yeah. OK. That’ll help attract lots of Illinoisans.
But New Jersey? Trenton is about 900 miles from Springfield, Ill. Jersey City is a 13-hour drive from Chicago. None of that deterred Gov. Chris Christie, a New Jersey Republican who spent much of last fall stumping around the country, from speaking up even before Gov. Patrick J. Quinn of Illinois, a Democrat, had signed the legislation.
“I’m going to Illinois,” Mr. Christie said in an interview on Wednesday. “I mean soon. I’m going to Illinois, personally, and going to start talking to businesses in Illinois and get them to come to New Jersey.” […]
Illinois raised its personal income tax rate to 5 percent from 3 percent, and its business income taxes to 9.5 percent from 7.3 percent. Despite the eye-catching increases in Illinois, New Jersey may have a tough time making the case that it offers businesses a friendlier environment.
New Jersey’s personal income tax — 6.37 percent for married couples earning more than $150,000 a year, and 8.97 percent for those making more than $500,000 — is among the nation’s highest. The state’s business income tax is 9 percent for businesses with income over $100,000, so Illinois’ is now somewhat higher, but Illinois has lower sales and property taxes.
Keep in mind that many small businesses and corporate execs are more concerned with the personal income tax than the corporate tax. It’s no contest there, especially considering that state’s high property taxes. And things are not going so great there…
After cutting spending for schools by about $1 billion last year, the Christie administration today was ordered by the New Jersey Supreme Court to prove the reduced funding can sufficiently provide a “thorough and efficient education” to the nearly 1.4 million children in the state’s classrooms.
If nervous investors were looking for another excuse to stay out of the battered municipal bond market, they got it from New Jersey Gov. Chris Christie on Thursday.
Speaking at a town hall meeting, the Republican governor warned that healthcare expenses for public workers “will bankrupt” the state if those costs aren’t reined in.
Christie may not have meant it to be taken literally, but a governor probably shouldn’t be dropping the B-word in a muni market that is already so badly spooked by fears over state and local government budget woes.
Prices of muni bonds fell broadly for a fourth straight session Thursday, driving yields on some securities to new two-year highs.
Oops.
* Related…
* N.J. cuts bond sale after Gov. utters ‘bankrupt’ - New Jersey Gov. Chris Christie said Tuesday that health care costs “will bankrupt” the state; minutes later, the state Economic Development Authority slashed a bond offering by about half.
* Minnesota to Wisconsin: Pay up: Wisconsin is overdue in paying Minnesota $58 million — and Minnesota wants the money now.
With all the hyperventilating news coverage of the state’s new 2 percentage point income tax increase, almost nobody has reported what Gov. Quinn actually said Wednesday when asked why he broke his campaign promise not to raise taxes by more than a single percentage point.
“As the last couple months have ensued, it was pretty clear from talking to major entities that lent money to the state of Illinois that the opportunity to borrow was fast eclipsing, and we had to do some very serious things on an emergency and temporary basis in order to get our fiscal house in order. You have to do what’s necessary at this moment, and that’s what I did.”
In other words, the big Wall Street bond houses laid down the law: Your problem is so horrible that you’d better fix your deficit now or forget about borrowing money at anything near a reasonable rate ever again.
When the bond guys say “Jump!” states usually ask “How high?”
Last spring, Illinois was threatened with a huge reduction in its credit rating if it didn’t immediately do something about its underfunded pension system. Within days, the General Assembly passed a sweeping pension reform bill.
But the bond houses never stopped making demands. They never do. “They always want you to raise more revenues,” said a onetime aide to former Gov. Jim Edgar, who said that Edgar always chafed at their insistent ways.
Illinois has built up so much debt, however, that we’re more vulnerable to the demands of Wall Street than most states. And so last summer, when the New York drumbeat increased in intensity, it seemed pretty obvious what was going to happen.
Back then, Quinn’s budget director, David Vaught, told Bloomberg News reporters that he expected the governor and the Legislature would pass a tax increase come January.
“We think it’s going to be substantial,” Vaught said. Asked to define “substantial,” Vaught pointed out that Quinn had testified to a House committee in favor of a 2 percentage point increase.
John Sinsheimer, Quinn’s director of capital markets, then piped up with a story about when he told overseas investors that Illinois could balance its budget with a 2 percentage point income tax increase.
“They looked at us and said, ‘Only a 2 percent increase?’ They were amazed by that.”
It doesn’t look so small now that the thing is the law of the land.
The truth is that this problem has been building for more than 30 years. Governors and legislatures have been skipping pension payments, pulling off one-time revenue gimmicks and increasing spending on things people demand, such as education and health care, without caring that Illinois didn’t have enough sustainable revenues to pay the piper.
Not enough was done when state revenues collapsed after the 9/11 attack, and nothing was done while the national economy collapsed in 2008.
The budget cuts made over the past couple of years haven’t stopped the flood of red ink because the problem was just too big.
Those of us who follow this stuff closely knew Quinn’s campaign promise last year to limit a tax increase to a single point was way too small to balance the budget. Not that his Republican opponent’s fish story was any better. Bill Brady promised to reduce corporate taxes and cut the budget by just 10 percent. One way or another, New York would’ve knocked all those ideas off the track because they wouldn’t have worked.
Were there alternatives to this tax increase? Yes. But Illinois didn’t elect an anti-government, slash-and-burn governor in November. We’re stuck with what we’ve got.
With his coveted income tax hike in hand, Gov. Pat Quinn quickly deployed his financial troops to New York in hopes of convincing rating agencies that Illinois bonds are now a safer haven for investors.
John Sinsheimer, director of capital markets for Quinn’s budget office, was slated to spend Thursday meeting with the nation’s Big Three ratings agencies: Moody’s, Fitch and Standard & Poors.
The object: Convince analysts that the nearly $7 billion that will be raised through the higher taxes is a major step in the right direction when it comes to shoring up the state’s still-shaky finances.
If the agencies decide the tax hike has set Illinois on a better financial path, they could upgrade the state’s ratings, which could give the state better interest rates when it borrows money.
Municipal bond investors had been steadily losing confidence in Illinois bonds in recent weeks as Wednesday’s deadline for the General Assembly to approve a fiscal bill grew nearer and a plan to cover the state’s pension obligations remained undefined. But after Tuesday’s vote, the bond market reflected a change in sentiment.
For example, a 2003-issued Illinois municipal bond with a 30-year maturity and coupon of 5.1 percent rose 1.5 percent in price on the secondary market between Tuesday and Wednesday after the income tax was approved, according to a bond trader at a Chicago-based investment management firm. The yield on this bond decreased 17 basis points one day after the tax increase was passed. The bond price rose to 80.83 cents on the dollar Thursday from a meager 76 cents two days before.
The state’s credit risk factors into bond prices, bond traders say. When bond prices rise, it reflects that traders believe risk has decreased. Ultimately this is good news for the state’s finances, indicating Illinois can offer new bonds with lower interest rates to entice investors.
* Related…
* Quinn signs tax, Democrats point to spending caps
