Leadership Matters August 2013 issue.pub

Legislative Agenda:

School funding formula, graduated income tax on radar

focus on General State Aid. “The General State Aid formula, by statute, is intended to be the equalizing factor,” Manar said at the time. “It’s very intricate and it’s based on a state that existed in 1998, not based on a state that exists today in 2013 … so now we need a distribution method that accounts for those things.” Manar’s advisory panel is due to report its recommendations in February of 2014. ‘Six-Step Plan’ may be pension reform framework Regarding the pension reform issue, many signs appear to be pointing toward the conference committee adopting much of the framework of the plan proposed by university presidents, referred to as the “Six-Step Plan” because it contains six main elements, including:  Increasing employee contributions by 2 percent (from 8 percent to 10 percent) at a rate of ½ percent per year for four years;  Changing the way to calculate the effective rate of interest used to determine a range of benefits, refunds and service credits set each year by the SURS Board and the State Comptroller;  Shifting the normal pension costs from the state to universities at a rate of ½ percent per year; and  Ensuring that the state and/or universities make their payments into the pension system While that plan is specific to the State University Retirement System (SURS) and might need to be tweaked to fit the other four state retirement systems, the presidents said that they estimated it could save as much as Speaker Madigan’s Senate Bill 1 proposal. The conference committee is awaiting reports from the retirement systems’ actuaries, but when a proposal might emerge – and, more importantly, whether it could garner enough support to pass both chambers – is still a question. While the veto session still is a couple of months away, this is a great time to reach out and make contact with your representatives and senators while they are in their home districts. We encourage you to make calls or visits to establish or re-establish connections with them and to let them know your thoughts and concerns regarding public education.  Adjusting the compound COLA for retirees to ½ of the Consumer Price Index (CPI);  Placing new employees into a hybrid pension system that is a combination of the defined benefit and defined contribution plans;

While the timing for a pension reform bill to surface from the conference committee remains an unknown, there are some legislative issues that would appear to be predictable as we head into a new school year. In addition to the fight to gain funding for public education that plays out near the end of session each spring, a couple of new issues could arise in 2014 given the fact that it is an

Diane Hendren, Director of Governmental Relations/ Chief of Staff

election year that includes a race for governor. The state’s budgetary issues revolve around revenue, much like the planets circle the sun. And revenue must be addressed next spring because the 2 percent income tax increase is set to expire January 1, 2015. Expect a graduated income tax to be part of the revenue discussion. Also, expect talks about changing the school funding formula. While no politician wants to

utter the word “tax” – especially in an election year – many legislators acknowledge the need for increased revenue, the pension situation notwithstanding. A graduated income tax might be more politically fathomable because while it is estimated to increase revenue, those same estimates indicate that it would either lower or hold steady the

state income tax for the majority of residents in Illinois. The “losers” would be those making the most money, always a politically popular tact. The school funding formula almost certainly will be a topic of discussion for an advisory panel that was set up to study the funding distribution method for public education in Illinois. That panel was established by unanimous approval of Senate Resolution 431, sponsored by Sen. Andy Manar (D-Bunker Hill). In addition to Manar, who is a co-chair of the panel, the other seven members include:  Sen. David Luechtefeld (R-Okawville), co-chair  Sen. Jason Barickman (R-Champaign)  Sen. Melinda Bush (D-Grayslake)  Sen. Kimberly Lightford (D-Maywood)  Sen. Karen McConnaughay (R-St. Charles)  Sen. Michael Noland (D-Elgin)  Sen. Sue Rezin (R-Morris) In calling for creation of the panel, Manar cited inequities in school funding and said the panel would

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