Capitol Fax.com - Your Illinois News Radar

* UPDATED x1 - Sears responds * The ripple effect of Quinn’s budget cuts

Posted in:

Illinois
Updated Posts

* Gov. Pat Quinn’s proposal to shutter several state facilities and eliminate 2,300 jobs will cost the state $250 million in economic activity, according to a new report by the University of Illinois…

Those figures are based on economic impact statements for just eight of the 14 prisons, mental institutions and other facilities Quinn wants to close. When more reports are filed, the total impact could be significantly higher. For instance, closures planned in Centralia and Joliet will cost another 600 jobs just in state layoffs.

When the Democratic governor laid out his budget plan in February, he mentioned only the government jobs that would be lost. He estimated that figure to 2,300 state jobs at all 14 facilities combined.

But the new impact statements, which he is required to file before closing state facilities, also include estimates of the “ripple” effect on nearby communities.

For example, closing the “supermax” prison in Tamms would mean 295 state employee layoffs — and a ripple effect of 43 jobs lost in the community, such as grocery store clerks or car mechanics. The economic impact would be more than $32 million, the report says.

* More on the ripple effect…

ccording to a report submitted to the General Assembly, the governor’s plan to shutter the super-maximum-prison at Tamms would have an economic impact of over $32.8 million in the southern Illinois region.

The studies, conducted by researchers at the University of Illinois, noted that closing the all-female prison in Dwight would have an impact of $53.7 million.

* And some people think the report missed some things…

Larry Vaupel of the Greater Livingston County Economic Development Corporation, said the study doesn’t count the impact of closing Dwight on surrounding counties. He said the report also doesn’t reflect vendors and contractors who would lose income if the prison closes.

“It grossly underestimates the impact on the area,” Vaupel said.

* And while the state struggles to stay afloat, the CEO of Sears Holding is living large…

Sears Holdings Corp. CEO Lou D’Ambrosio’s total pay in fiscal 2011 was nearly $10 million, according to company filings.

He received $930,769 in base salary; a $150,000 bonus; just more than $8 million in stock awards, and $852,037 in travel-related compensation for a total 2011 pay package of $9.9 million, according to a company proxy filed this afternoon with the Securities and Exchange Commission.

“Other compensation” includes about $793,000 toward “personal use of chartered aircraft” between Chicago and the Philadelphia area, the site of Mr. D’Ambrosio’s principal residence.

He also received more than $3,600 for commuting costs in Sears-provided vehicles; just under $30,000 for temporary housing near Sears’ Hoffman Estates headquarters, and more than $18,000 in “tax gross-ups” that cover any personal tax liability Mr. D’Ambrosio may incur from the travel allowances.

* Chuck Goudie tries to put this revelation into some context…

Sears’ new CEO could be called the $10 million man. That isn’t unusually high pay for a big company boss these days, but there are a few aspects of Lou D’Ambrosio’s eight-figure compensation that are notable. […]

Last year, Sears threatened to move its headquarters from Hoffman Estates — and with it more than 6,000 jobs along with a century of ties to metro Chicago. Governor Pat Quinn and the General Assembly handed Sears a $150 million tax credit that prompted the firm to call off the moving vans.

Despite fourth quarter earnings down 50 percent, 62 additional store closings this year and 100 layoffs just last month at headquarters, Mr. D’Ambrosio has been handsomely paid - $9.9 million that includes a base of $930,000, a signing bonus of $150,000 and $8 million in stock awards, according to federal SEC filings.

But the SEC records reveal another interesting payment to D’Ambrosio, who lives in Philadelphia. To get to work in Hoffman Estates, D’Ambrosio had to fly and drive. For the plane and automobile travel he was reimbursed $803,000 last year alone.

That sum is 400 times more than the average Chicago commuter spends to get to work, and Chicago’s commuting cost is already highest in the nation.

* Statement from Gov. Quinn’s office…

The Governor certainly doesn’t approve of that [the $800,000 travel expense for CEO to get to work.]

However, the package you speak of, which passed the General Assembly with a bipartisan vote and support from all four leaders, pertained specifically to Sears Headquarters - it kept the 6,000 jobs that currently exist at the headquarters here in Illinois. This also has an large multiplier effect Sears headquarters creates a direct economic impact of $1.5 billion and supports thousands of additional jobs in Illinois. The package also ensured a private investment by Sears of $300 million in Illinois, at a time when Ohio was offering Sears a far more lucrative investment package.

In addition, the Governor secured tax relief for working families as part of this package. In fact, he said he would not sign any bill if tax relief for working families was not part of the package. Governor Quinn’s efforts resulted in an annual $105 million dollars in targeted relief for low-income working families through a boost in the Illinois Earned Income Tax Credit and also an increase in the value of the personal exemption. Improving Illinois EITC will help almost 1 million Illinois families.

We are watching Sears carefully and will hold them accountable to live up to their commitment as part of the package. If there is any violation in the agreement on their part- if they did not meet their investment and jobs numbers, for example- the incentive would be eliminated.

Bottom line is that the Governor had a decision to make when it came to whether or not to sign this bill. Save the jobs- or let them go to a state that was offering three times the incentive as Illinois had proposed. He decided to protect thousands of Illinois jobs and hundreds of millions of investment in Illinois while also increasing tax relief to working families.

*** UPDATE *** From Sears…

If you add the cost of his commuting and related expenses to his salary and bonus, you will see that this is not out of line with his peers at other major companies (Fortune 100 CEOs, CEOs in Chicago or retail CEOs). In addition, Sears Holdings won’t receive a dime from the state if we don’t make investments in our HQ facility and campus. We are required to invest $300 million over the 10-year period or $30 million per year to receive our annual benefit (max of $15 million per year). And, any funds we receive back from local property tax due to the extension of the EDA are a reimbursement for monies we already spent on local infrastructure.

* Related…

* Online lottery sales in Illinois set to start Sunday

* Nursing homes feel budget pinch

* Editorial: Paying up your $10,000: Who even knows what bankruptcy looks like for a state, other than the taxpayers at some level will provide the solution and in a fashion that follows demands instead of choices.

* Unemployment System Outdated For Current Economy, Experts Say

* Kiley Center families say group homes not an option for residents

* Editorial: Pension reform needs to look at big picture

* Study Finds Illinois Lacks Affordable Housing, Advocates Lament Proposed Cuts

* Strip club tax would fund sexual violence prevention

* Wisconsin one year later

* IL set to submit appeal to FEMA for storm aid

posted by Rich Miller
Tuesday, Mar 20, 12 @ 9:29 am

Comments

What is the ripple effect of no budget cuts?

Comment by Anonymous Tuesday, Mar 20, 12 @ 9:39 am
I didn’t support the tax giveaways to Sears and the banksters but I think it’s a stretch to scandalize the GA and gov because of the exorbitant CEO pay that D’Ambrosio is pulling down.

Corporate America is just as rotten as our federal and state government and the boards that govern this nation’s top companies are just as disconnected and disinterested from the concerns of average shareholders as elected officials are disconnected and disinterested from the concerns of average taxpayers.

Unfortunately the business/financial press in this country is even more inept, rent-seeking and bigger sycophants for the people they cover than the political press so no one pays any attention to the out of control compensation committee scams that cheat stockholders (and taxpayers when so many big companies are on the govt. subsidy dole) and ensure a total lack of accountability for failure when it comes to corrupt, stupid or lazy corporate executives.

Comment by hisgirlfriday Tuesday, Mar 20, 12 @ 9:45 am
That question, Anon, doesn’t sell dead trees.

Comment by dupage dan Tuesday, Mar 20, 12 @ 9:57 am
It’s not just d’Ambrosio who should get more public scrutiny, it’s the Sears board that approved his pay and perks, apparently in spite of the company’s poor performance. What were they thinking? Who are these people. Until we hold individual board members more accountable, including in the media, there will be no incentive for corporate boards to improve performance and demand real accountability from corporate executives.

Now that Illinois taxpayers have given up $150 million badly needed tax dollars to hold up the fading Sears, we have even more reason to demand
answers not only from corporate executives but from the boards that hire them and decide their compensation.

Comment by cassandra Tuesday, Mar 20, 12 @ 10:02 am
Aren’t these the ripple effects of *any* budget cuts? The only government program that could be cut without any ripple effects is the “burn money in a trash fire” program, and even then, we’d be laying off the guy that pitchforks the bills into the flames and the guy that supervises him.

Comment by lincoln's beard Tuesday, Mar 20, 12 @ 10:21 am
That was hilarious lincoln’s beard. Unfortunately, I think a certain portion of the public thinks that *is* the biggest government program!

Comment by DeKalb Dragon Tuesday, Mar 20, 12 @ 10:38 am
@Lincoln’s Beard — not to get all technical with you, but burning money in a trash fire would raise prices as the cash supply decreased. Of course, the mint could print more money — which I guess would create new jobs, especially if they had to hire another shift to keep up. How big is the fire? Is it a 24-hour operation? What denomination are the bills?

Comment by soccermom Tuesday, Mar 20, 12 @ 11:11 am
More seriously — I am surprised that the economic impact of hatchet-style budget cutting was not a major message in the drive to raise the income tax. It seems pretty clear that wholesale cuts of important programs lead to statewide job loss, both for people whose jobs are directly supported by the state and for those who get hit by the ripple effect of that loss.

Those lost jobs then drive up unemployment costs for the state, negating the effects of the cuts.

It’s a good argument and has the added benefit of being true.

Comment by soccermom Tuesday, Mar 20, 12 @ 11:13 am
But soccermom, raising taxes also has a ripple effect. I.e., the money doesn’t get spent in the hands of the person from whom it is taxed. At best, the government creates “winners” (i.e., where IT spends the money) to the detriment of “losers” (where the taxpayer would have spent the money on his/her own).

Comment by Anonymous Tuesday, Mar 20, 12 @ 11:26 am
The infallible, invisible hand of the marketplace has determined that Sear’s CEO has earned his compensation based on performance.

That’s how it works, right?

Comment by wordslinger Tuesday, Mar 20, 12 @ 11:39 am
@DeKalb Dragon

I am sure that a large portion of the voting public believes that the “burn money in a trash fire” program is the largest government program. I am also sure that those same people believe just as strongly that the “burn money in a trash fire” program in *their town* isn’t wasteful, but is instead a much-needed source of heat, light, and jobs.

Comment by lincoln's beard Tuesday, Mar 20, 12 @ 11:47 am
@Anon — Where state taxes are concerned, there is a negative ripple effect only if the government’s spending results in fewer jobs than the cumulative impact of individual spending of those tax dollars.

And not to get all budget geek-y on you, but there’s also the issue of federal match. When the state government spends on Medicaid, for example, that spending brings in federal matching funds.

Unfortunately, Soccerfamily does not get the same level of match from the feds when we take a trip out to Oakbrook…

Comment by soccermom Tuesday, Mar 20, 12 @ 11:49 am
@ Anonymous

At best, the government creates “winners” (i.e., roads and schools and hospitals and courts and prisons and mental health services and clean water) to the detriment of “losers” (where the taxpayer would have spent the money on his/her own: i.e. all of those things, only more expensive and worse).

Comment by lincoln's beard Tuesday, Mar 20, 12 @ 11:49 am
Yesterday on my way into Springfield I had a blowout from some crap left on the highway. When I told folks, almost to a (wo)man they all nodded and said “Yeah, I’ve been noticing more junk in/on the highway lately.”

This is what cuts mean, people. They don’t take the Caddie back from the big bad welfare queen and sell it. They reduce the very functions government was implemented to perform: “to provide for the health, safety and welfare of the people; maintain a representative and orderly government; eliminate poverty and inequality; assure legal, social and economic justice; provide opportunity for the fullest development of the individual; insure domestic tranquility; provide for the common defense; and secure the blessings of freedom and liberty to ourselves and our posterity”.

Don’t want cuts? Vote for the non-incumbant today and make sure you call him/her every week and make it happen.

Comment by Colossus Tuesday, Mar 20, 12 @ 12:01 pm
Borrowing $6 billion at historic low interest rates to pay past due bills would help offset the economic drag coming from these budget cuts.

Comment by Bill White Tuesday, Mar 20, 12 @ 12:02 pm
Actually, I was surprised that the Sears CEO’s total comp was so low. Most of his “peers” would agree that his pay is way out of line, on the low side.

That’s how out of whack our market has become for senior corporate executive pay. It wouldn’t occur in most free-market economies; it’s a reflection of the US cultural delusion with the Superman/superstar.

Comment by mark walker Tuesday, Mar 20, 12 @ 12:17 pm
Colossus

May I ask who are you quoting about the functions of government.

Comment by Fed up Tuesday, Mar 20, 12 @ 12:44 pm
@Fed Up. He’s quoting the State Preamble.

Comment by Regular Reader Tuesday, Mar 20, 12 @ 12:53 pm
Thank you. Found it interesting.

Comment by Fed up Tuesday, Mar 20, 12 @ 12:55 pm
Would you believe me if I told you it was the OWS working statement?

Comment by Colossus Tuesday, Mar 20, 12 @ 12:55 pm
Fed-up - a little google research reveals that is a major portion of the preamble to the Illinois Constitution. Egads - eliminate poverty? Ensure social justice? Who wrote that - Chico Marx?

Comment by Anonymous Tuesday, Mar 20, 12 @ 12:56 pm
==Borrowing $6 billion at historic low interest rates to pay past due bills would help offset the economic drag coming from these budget cuts.==
Only if we also fixed the problem that lead to the billions in unpaid bills.

My hunch is that low-cost borrowing would take the pressure off trying to actually fix the mess.

Comment by Jimbob Tuesday, Mar 20, 12 @ 1:04 pm
The Illinois Statehouse News reported on 3/16:

“State Rep. Roger Eddy will retire from public life a wealthy man - courtesy of the Illinois taxpayers and the state’s public school teachers. The southern Illinois Republican is drawing two salaries now - $107,400 as superintendent of Hutsonville School District and $75,569 as a state lawmaker. He’s leaving both jobs this year to become CEO of a private organization, the Association of Illinois School Boards.”

I think everyone should pay more attention to what’s going in Illinois government payrolls and pension benefits than what the Sears’ CEO is taking down and the impact on Hoffman Estates if Sears pulls its HQ at some point. Frankly, Sears is starting to look like a likely candidate for venture capitalists to take over, dissect and resell. And considering the cost of doing business in Illinois and the political climate, I expect the pieces will be moved out.

Comment by Cook County Commoner Tuesday, Mar 20, 12 @ 1:10 pm
===My hunch is that low-cost borrowing would take the pressure off trying to actually fix the mess. ===

Yeah, well, nobody has proposed a real solution yet.

Comment by Rich Miller Tuesday, Mar 20, 12 @ 1:12 pm
–Frankly, Sears is starting to look like a likely candidate for venture capitalists to take over, dissect and resell.–

That’s what’s happening now.

Comment by wordslinger Tuesday, Mar 20, 12 @ 1:22 pm
12:56 pm was me. My nickname mysteriously disappeared.

Comment by dupage dan Tuesday, Mar 20, 12 @ 1:31 pm
No one who had anything to do with the Kardashian Kollection deserves a bonus. In fact, that move should put the Sears execs in the unemployment line.

Comment by lakeview Tuesday, Mar 20, 12 @ 2:19 pm
In other news, in 2008 house prices in the USA were not all that high, when compared to the price of all other comparably-sized houses.

Whether they were ALL too high, was of course a different question.

Comment by ZC Tuesday, Mar 20, 12 @ 3:47 pm