Legislative Action

An agenda with everything but time and money

By DIANE ROSS

IN 1981, the question is not what the Illinois General Assembly will do, but what it can do — given the politics of reapportionment, an economy in recession, and the uncertainty of federal policy and funds under the Reagan administration.

There are, however, a number of issues before the legislature that will demand some attempt at resolution this year:

•  abiding by the new law which allows lawmakers to mandate local programs only when the state reimburses them;

•  moving to "demandate" state and/or federal education programs;

•  revising the rate-setting process for health care purchased by the state;

•  reforming worker's compensation and unemployment insurance;

•  investing state pension funds; and

•  solving the financial problems of the Regional Transportation Authority. (See "RTA CRISIS: Not the first, but the worst," on page 4.)

The General Assembly has reapportionment as its No. 1 overall issue in 1981, and lawmakers' political advantage will figure prominently in other "substantive" issues being resolved this year.

And the General Assembly knows that, due to the recession, the budget/appropriations issues in 1981 will focus on the "old" rather than the "new" money. But the General Assembly may discover that the major fiscal issue of 1981 is revenue. And here, state government is caught between the federal government, which is cutting back on funding, and local government and school districts, which are receiving a share of those funds. Federal aid will drop if Congress approves the Reagan cuts, and state revenues cannot make up the difference.

Local government mandates
The major local government issues of 1981 will stem from the fact that state government, under its own statute, can no longer mandate a program without guaranteeing reimbursement. The new law went on the books in 1978, but did not take effect until January 1, 1981. As is the case with any major change in policy, the idea's fine in theory, but it's something else in practice. The battle lines are already drawn.

On one side are the legislators who want to repeal, or at least roll back, the new law. They have no quarrel with its intent, but they question the effect of its implementation on the legislative process. The new law requires that before any new bills on local government are heard in committee they must carry not only a fiscal note on the estimated cost, but a policy statement on the purpose. The pro-repeal legislators argue that those requirements could reduce the already sluggish bill-hearing process to a snail's pace when it comes to bills on crucial, but complex issues like property taxes or pensions.

28/April 1981/Illinois Issues

On the other side of the issue is local government, which isn't about to stand for any more surprises like the little bombshell legislators dropped late last year when they overrode Thompson's veto and paved the way for pay raises for county officials — at local government's expense. Those pay raises would have been impossible this year because under the new law, the state government who would have to pay for its promises.

Local government has assembled a massive army of lobbies, led by the awesome Illinois Municipal League, to stave off repeal or roll back. And Thompson is on local government's side in this one since his philosophy has been to hold down government spending.

The whole question of local government finance remains an issue. In 1980, the General Assembly accepted Thompson's proposal to create a Local Government Finance Study Commission and ordered it to report by April 1. But its recommendations may be too late for full consideration this session.

Progress on other perennial local government issues could easily get lost in the reapportionment shuffle in 1981. But some efforts will be made to limit home rule power, reduce Illinois' record-breaking (6,600) number of taxing districts, increase state subsidies to public libraries (especially in Chicago), mandate with state reimbursement the 911 emergency telephone system, and codify township laws.

Property tax limits
Any limits on property taxes, which are a main revenue source for Illinois local government, will be difficult to establish in the General Assembly. Gov. Thompson's January State of the State address marked the fifth time he has called on the Illinois General Assembly to limit property taxes. But, limiting property taxes for local governments seems unlikely in this reapportionment year. There is an alternative: Let the voters resolve the issue. But this requires a constitutional amendment proposed by the legislature, and there seems little chance this year. The strongest supporter of such a constitutional amendment is Republican Donald Totten, but he is now in the Democratic-controlled Senate.

The major property tax action in the last two years has centered on the circuit breaker and the homestead exemption. Thompson, however, is sure to veto any substantial expansion of eligibility or increase in benefits, since the General Assembly in 1980 doubled the homestead exemption from $1,500 to $3,000 and expanded circuit breaker eligibility to those earning $12,000 a year and increased benefits to $700.

The issue this year may center on grants designed to offset increases in fuel costs for seniors, the disabled and others receiving circuit breaker benefits. The Democrats passed the fuel grants last year, but Thompson vetoed them as duplicative of the federal low-income fuel assistance program. The Republicans may want to reconsider a state fuel grants credit this year, if the federal program is dropped or cut way back.

Corporate replacement taxes
The increase in revenue generated under the taxes replacing the corporate personal

The whole question of local government finance remains an issue

property tax may produce a plethora of other tax issues in 1981. In 1980, the General Assembly effected a bookkeeping change to speed payments to local government, but otherwise didn't tinker with the new taxes because it was too early to tell if the revenue generated would be sufficient or, on the other hand, higher than necessary. But the income tax surtax (one of the three replacement taxes) which was in effect at a 2.85 percent rate since January 1, 1980, was reduced to a 2.50 percent rate on January 1, 1981, as prescribed in the original legislation.

April 1981/Illinois Issues/29

Rock elected Senate president IT WAS a typical denouement. As ordered by the Illinois Supreme Court, Gov. James R. Thompson duly convened the Illinois Senate February 17; all 30 of the majority Democrats — at long last ready, willing and able — duly elected Philip Rock president of the 82nd Senate. The curtain had come down, and the lawmakers got down to doing "the people's business." Act I in the Senate drama came January 15, with Thompson presiding over the Senate organization, when the 29 Republican senators elected David Shapiro president. A ruling by Thompson allowed the minority Republicans, all of whom were there, to elect Shapiro president, in effect stealing the Senate from the majority Democrats, two of whom were missing. The plot twisted when the embarrassed Democrats took their case to the Illinois Supreme Court, which heard oral arguments January 27. Act II came the morning of February 3, when, about 20 minutes before Shapiro had scheduled the Senate to reconvene, the Democrats assumed the chair and elected Rock president. Illinois had two Senates. Act III came the afternoon of February 3 when the Democratic Senate boycotted Thompson's State of the State address. House Democrats eventually walked out, leaving Thompson to address an all-Republican audience. The climax came February 9, when the Supreme Court in a four-three decision, split along party lines, overturned Shapiro's election and ordered Thompson to convene the Senate for yet another election. As the curtain came down on the last act February 17, Rock was sworn in as president without pomp or ceremony.

The rate change, however, will probably not be the issue anticipated in 1979 when the General Assembly passed the new taxes. The new taxes have generated far more revenue than the old tax. In calendar 1980, the new taxes generated about $675 million, which is about $225 million more than would have been generated by the old corporate personal property tax. Since the new taxes are replacing the revenues of the old tax, there appears to be little reason to raise the rate. In fact, Republicans, who had wanted a lower rate, have a sounder reason for capping collections. Any attempt to restrict collections, will run into opposition from schools, local government, and other taxing districts which depend on the revenue. It seems likely that schools and local governments would want at least one year's experience at the lowered rate for the income surtax.

Yet local governments can be criticized. The Illinois Supreme Court had declared the old tax unconstitutional before the General Assembly passed the replacement taxes in 1979, and once passed, there was a court test. Concerned with losing revenue, many local districts raised their 1980 property tax levies to cover the loss of revenue in case the court declared the new taxes unconstitutional. The high court, however, ruled the new taxes were constitutional, and Gov. Thompson immediately asked municipalities and other districts, which had the power and time by statute, to lower their levies. He also asked the General Assembly to immediately enact legislation to extend the deadlines or grant the power to all districts so they could lower levies. Failing that, Thompson asked the legislature to limit levy increases for local government to 10 percent. But few, if any districts lowered their levies, and the General Assembly did not act. Thompson said the result was a 13 percent increase statewide in property taxes for local government.

School income tax
Switching from property taxes to income taxes to finance elementary and secondary education at the local level could become an issue in 1981, depending on the strength of a compromise proposal.

In 1980, the compromise, which would give districts the option, via referendum, of switching from property taxes to income taxes, narrowly passed the House but was never considered in the Senate. It may draw even stronger support this year.

Proponents argue, among other things, that the income tax would provide a much broader base and a more equitable tax since all the residents of the district, not just the property owners, would support education.

Inheritance tax
Repealing the inheritance tax could possibly be an issue in 1981, but Thompson is sure to veto any repeal since relief was granted last year. The revised inheritance tax is expected to generate a tidy $45 million in fiscal 1981.

The issue stems from the fact that most estates are in the form of farms, businesses or other real estate, rather than cash. Taxes on smaller estates often force liquidation. On one side are those fighting to preserve what they see as an endangered species: the family farm, business or real estate. On the other are those that put inheritance at the bottom of the tax relief list since it benefits the comparatively rich.

In 1980, a repeal bill passed the House, but was never considered in the Senate. Instead, the General Assembly compromised, with Thompson's approval, to defer payments five years and permit 10 annual installments at 6 percent interest. The new deferral installment law took effect January 1, 1981, and is expected to cost Illinois about $20 million in fiscal 1982.

Farmland assessment and ag sales exemption
Farmland assessment will be the major agriculture issue in 1981, since some farmers are demanding yet another revision in the formula. But the farmland assessment issues won't take shape until the farmers see what legislation the General Assembly's Farm Assessment Study Committee recommends. (The committee was scheduled to report by April 1.)

The farmland assessment formula has been revised five times in the last 10 years, with the latest revision, in 1979, requiring that the fair market value of the farmland be added to the gross income of the farmer when figuring the assessment for property tax purposes. The 1979 revision seems to have produced fair assessments in larger counties, but the farmers in smaller counties still complain that assessments are less than equitable. With the help of powerful lobbies such as the Farm Bureau, the small-county farmers could get yet another revision in 1981. (In 1980, the General Assembly merely limited the increase in 1980 assessments to 8 percent over 1979 assessments.)

30/April 1981 /Illinois Issues

On another front, farmers may find themselves fighting a rollback of sales tax relief. In 1980, the General Assembly gave farmers a sales tax exemption similar to theone it gave manufacturers in 1978. One half of the 4-cent state sales tax on new or used farm machinery costing $1,000 or more, and on replacement parts costing $1,000 or more, was phased out last September; the other half will be phased out this September. Illinois could save an estimated $16 million by delaying the second half of the phase out. Thompson has already called for a rollback of the sales tax relief for manufacturers, since Illinois government is losing double the revenue expected.

Legislators may also try to further restrict foreign ownership of Illinois farmland, specifically foreign corporate ownership. (In 1979, the General Assembly required foreign owners to register when they bought Illinois farmland.)

Farmers have also been pressing the state to share the cost of soil erosion control. Efforts to secure matching funds failed last year, and the tight fiscal 1982 budget has probably doomed any efforts this year.

Hazardous waste and disposal sites
On the environmental front hazardous waste becomes the No. 1 state issue in 1981 since federal policy on nuclear waste and pollution control has yet to be set under the Reagan administration.

The focus of the hazardous waste issue is the lack of safe disposal sites. Less than a dozen of the more than 200 licensed landfills in Illinois currently accept hazardous waste. Of the 20 million tons of waste generated annually by Illinois industry, nearly a quarter is hazardous. The lack of safe sites had apparently led to an increase in the fees owners charge for disposal — and to an alarming, but corresponding increase in illegal dumping. The Illinois Environmental Protection Agency has begun one of the nation's first "cradle-to-grave" tracking systems, but still can't account for about one-fourth of Illinois' hazardous waste.

On one side of the issue are the 25,000 Illinois manufacturers generating the hazardous waste, who fear regulation will only provoke more price increases and more dumping. On the other side are the environmentalists, led by the Illinois Environmental Council, who point to public pressure to regulate in the wake of the notorious 1979 Love Canal incident in which leakage of hazardous waste forced the evacuation of the residents of that New York city. And it was public pressure in Illinois' so-called "Wilsonville" case now before the Illinois Supreme Court, that produced a court order barring the Earthline company from disposing of any more hazardous waste in a licensed Macoupin County landfill since it was located above an abandoned mine.

With strong support from Thompson, the General Assembly in 1979 tackled the problem by restricting the location of future hazardous waste disposal sites and by creating a Hazardous Waste Fund to finance cleanup of abandoned and illegal dumps. Disposal fees charged by site owners provided the money. And the General Assembly followed through in 1980 with what Thompson calls the "toughest criminal dumping law in this nation" making illegal dumping a Class 4 Felony punishable by one-to-three years imprisonment and up to $10,000 in fines. For his part, Thompson went on to create a special 25-agent investigation unit within the Illinois Department of Law Enforcement to crack down on illegal dumping; he budgeted $1.4 million in fiscal 1982 for the crackdown. The 1980 legislation also banned disposal of some types of hazardous waste, if the Illinois Pollution Control Board rules the public health would be endangered or feasible disposal alternatives exist; authorized state reimbursement for voluntary cleanup, created a Hazardous Waste Research Fund financed by disposal fees; and made tax exempt revenue bonds available to industry to develop recycling and other alternatives.

Thompson plans to introduce further follow-up legislation in 1981, presumably aimed at balancing the need for new disposal sites against regulation of licensed landfills.

Mandatory Emissions Tests; landfills; bottle bill
State compliance with a federal mandate to test motor vehicle exhaust emissions in the Chicago and St. Louis areas remains another environmental issue. Under 1977 amendments to the 1970 U.S. Clean Air Act, Congress required urban areas which do not expect to meet clean air standards by 1982 to test motor vehicle exhaust emissions annually. Noncompliance could mean a ban on new high-pollution urban industry and the loss of federal pollution control, highway and sewage treatment funds. Under the so-called "inspection and maintenance," or "I/M" program, owners of cars on which the tail pipe emits more than allowable levels of carbon monoxide or hydrocarbons would be forced to tune up their vehicles in order to get their drivers' licenses. The cost of running such a test program in Chicago and East St. Louis is estimated at $25 million a year, which would necessitate charging a $10 fee per initial inspection.

The Illinois Environmental Protection Agency (IEPA) introduced its plan for the test program in 1980, but failed to impress the General Assembly. But the IEPA may be spared another attempt in 1981 since Congress is considering yet another series of amendments to the Clean Air Act. One issue in Illinois is how to test — when the engine is idling or when speed is simulated? Another issue is who will do the testing — the public or private agencies?

Other long shot environmental issues in 1981 involve (1) location of sanitary landfills and gravel pits, and (2) banning throw-away bottles and cans. Local government may take on landfill and gravel pit owners, demanding greater control over the location via zoning powers. And environmentalists will undoubtedly take on the bottlers and canners — for the umpteenth time — to demand a ban on throw aways. The bottlers and canners beat down the last attack on their industry in 1979. But environmentalists, led again by the Illinois Environmental Council, which has formed a special statewide coalition (Citizens to Save Illinois Resources) to back the bottle bill this time, will press the General Assembly for some kind of action in 1981.

April 1981/Illinois Issues/31