Senate Grand Bargain Legislation

Revenue Positive
• SB 7 is a comprehensive gaming bill, including a Chicago casino. ($300MM - $400MM annual gross receipts for
Chicago including , $990m one-time revenue for state, $25.6m annually for the state)
• SB 11 is a comprehensive pension reform bill with a “consideration model” for TRS, SURS, GARS, and CTPF. Closes
new member participation in GARS. 70% NPV payout offered for retired (but pre-annuity) members of SERS, SURS, and
TRS. ($700m - 1b annual contribution savings)
• SB 9 is a comprehensive revenue bill. ($6b annually)
• Increase corporate income tax rate to 7% ($577m annually)
• Increase personal income tax rate to 4.99%. ($4.6b annually)
• Eliminate corporate tax loopholes ($145m annually)
• Creates a maximum $1.5m annual “Opportunity Tax” tax based on total payroll, ($750m annually)
• Establishes a service tax on cable & satellite television, storage services, amusements, repair and
maintenance services, landscaping services, and laundry and dry-cleaning services. ($413m annually)
• R&D tax credit becomes permanent

Increases liabilities
• SB 5 makes Chicago Teacher pension normal cost contributions through a continuing appropriation.
(FY17 $215.2m, FY18 $221.3m, FY19 and afterward normal cost)
• SB 6 is a FYI 7 supplemental appropriation totaling $4.5 billion. The funding is focused on higher
education, human services, and agency operations.

Revenue Neutral – Credit Positive

• SB 3 expands local government consolidation opportunities 36 Yeas, 14 Nays, 7 Present
• SB 10 permits home rule municipalities to enter into agreements with their lenders to have the State directly
transfer taxes, revenues, and grant funds, owed to local governments, to their lenders.
• SB 8 is a procurement reform bill to streamline the process for cost savings.( . Estimated $500m in cost
savings) 34 Yeas, 14 Nay, 11 Present
• SB 4 authorizes the issuance of $7 billion in general obligation bonds to pay past due bills (estimated $1.4b
total interest payments) and issue $250 million in state pension obligation acceleration bonds.
• SB 13 Freezes all taxing district property tax extensions for two years. Increase in levy for pension (excluding
PABF and FABF), and debt are capped at the lesser of CPI or 5%. Provides school mandate relief for driver's
education, physical education, and third party contracting (est. total savings for school districts $200m).
 SB 3 – Local Government Consolidation

Expand Dupage County' s Consolidation Program to all Counties.

• Permits all counties to have a process to dissolve units whose governing body is appointed by the
county chairman. (Currently just DuPage, McHenry, and Lake County Boards.) Enacted by ordinance,
but subject to backdoor referendum.
• Excludes Fire Protection Districts with any full time employees; Community Health Boards; or
boards concerning the Developmental Disabilities Act. Protects the collective bargaining status
and rights of former employees of the dissolved unit, excluding DuPage, Lake, and McHenry
Counties. Protects collective bargaining agreements, representation rights, and pensions
ofemployees ofthe former unit.

Authorize Township/Road District Consolidation

• Creates processes for township consolidation through referendum initiated by the township board
to: (1) consolidate 2 or more adjacent townships; (2) merge and divide a township between two
other townships; and (3) dissolve a township coterminous to a municipality.
• Permits County governments to maintain their current form of government or convert to a
commission when dissolving township government. Provides for the continuation of the necessary
tax collection from the separate townships. Provides for the transfer of powers, duties, assets, and
liabilities of dissolving townships within these processes. Exempts township consolidation
referenda from the 3 question limitation under the Election Code.
• Removes the limitation capping ofa townships size of 126 square miles for county-wide
consolidations. (Removes this obstacle to consolidation plans.)
• Permits township boards to initiate a referendum to the voters on the question of the merger of a
general township and its road districts if that road district maintains less than 15 miles of road.

Authorize Drainage District Consolidation in Larger Counties

• Permits Lake, Kane, DuPage, and Will Counties to dissolve drainage districts they appoint. All functions,
obligations, and taxing authority would be transferred to that county. Drainage districts located between
two of these counties could be dissolved by the county that appoints her drainage district consents with
an agreement.
 SB 4 – Bond Authorization

Authorizes the issuance of an additional $7 billion in State General Obligation Restructuring Bonds, to be paid back over
seven years, and used to pay down the backlog of bills incurred prior to July 1, 2017. This bill requires the bonds to be
issued by September 1, 2017

The total GO Bond change is from $49,917,925,743 to $56,971,925,743

The bonds are a fixed principal bond, with principal payments of $1 billion per year for seven years beginning in FY2019.

Permit the Illinois Finance Authority to issue $250 million in state pension obligation acceleration bonds to cover the
costs of retiring employees that opt for a 70% buyout being offered in a pension reform bill.

COGFA Analysis (analysis excludes pension bonds):

 COGF A estimates the following fiscal impact:
 Increase General Obligation principal by $7.0 billion
 Increase potential General Obligation debt b y $8.4 billion
 Annual debt service will range from $1.5 billion-$1.04 billion

Estimates that SB 4 would increase general obligation bond authorization by $7.0 billion. Using an interest rate of 4.0%
(based off of the Bond Buyers 10 year BAA rated GO Bonds on January 9, 2017), a 7-year maturity of payments
beginning in 2019, and level principal payments of 14.2857% ($1 billion), the bonds could increase total G.O. debt by
$8.4 billion with debt service payments ranging from $1.5 billion -$1.04 billion. The actual interest rate and debt service
payments would be dependent on tax status of the sale, interest rates and other variables in the market at the time of
sale.

Using COGFA's assumptions, total interest paid on these GO bonds would be roughly $1.4 billion.
 SB 5 – CPS Pension Pickup

Requires the State to make Chicago Teacher normal cost contributions to the Chicago Teachers Pension Fund going
forward. Makes the contributions a Continuing Appropriation, which in FY I 7 is $215 million. Specifically, the State is
required to make the following contributions:

 FYI 7 - $215,200,000
 FYI 8 - $221,300,000
 FY19 and thereafter, the State shall contribute an amount equal to the employer normal cost for that fiscal year.
 SB 6 – FY17 2H Appropriations

Appropriates a total of $4.5 billion in FYI 7 supplemental appropriations, including $4.14 billion in General Funds and
$411 in Other Funds. Funding is focused on higher education, human services, and agency operations

Higher Education
• $1.1 billion in general funds for higher education for FY17, including:
• $538.9 million for public universities. This brings universities to their FYI5 appropriation level.
• $212.6 million for communitycolleges.
• $372.3 million for MAPgrants.
• $2.5 million for IBHE and IMSA operations and grants.

Human Services
Appropriates $733.8 million in general funds in new appropriations and $26. 8 million in Other Funds in
reapprorpiations from the stop gap budget for human services grants and programs.

General Services and Agency Operations

Appropriates $698.8 million in general funds in new appropriations and $63 million in ral funds reappropriations for
state government operations.

Capital
• Includes limited capital appropriations for:
o Joliet Junior College for a project previously contained in a lump sum.
o DNR grants to eliminate hazards related to abandoned mines.
o DNR flood hazard mitigation.
o $500,000 for Rockford Charter Patriot Center, which was previously contained in the introduced
FYl6 and FYI 7 budget.
o $14.6 million to the Capital Development Board for Community Health Center construction.

Group Health Insurance

• Appropriates $1. 8 billion ORF for the State Employee Group Health Insurance Program (this represents
one year of general funds funding for the program)
• The Group Health program has not received an appropriation in FYl6 or FYI 7 and has a bill backlog in
excess of $4 billion.
 SB 7 – Casinos

 Creates the Chicago Casino Development Act. Creates a governing authority for the development, by
eminent domain, of a 4,000-gaming position land-based casino in the city of Chicago. Provides that the
Authority must choose a private-sector casino managing partner to manage the day-to-day operations
of the land-based casino. Provides that the managing partner must, as a condition of being granted a
Gaming Board license, be a labor union-friendly entity. Directs that the Casino Authority's operating
profits must be transferred to the city of Chicago and must be used by the City for pension payments.
 Amends the Illinois Horse Racing Act of 1975, the Riverboat Casino Act, and related Acts to authorize
land-based gaming at existing riverboat casinos, create five new riverboat casino licenses, and to
authorize casino operations at Illinois racetracks. The new riverboat casino licenses are granted to
Danville, Rockford, south suburban Cook County, southern Illinois, and the Waukegan area. Provides
that fee revenues from new gaming positions authorized under this amendatory Act must be used for
the payment of outstanding unpaid State debts.
 Amends the State Officials and Employees Ethics Act. Creates a sixth Executive Inspector General.
Provides that the new Inspector General shall specialize in gaming activities.

COGFA analysis

 The Commission on Government Forecasting and Accountability (COGF A) has analyzed SB 7 as introduced.
COGF A estimates that the measure would generate: (a) approximately $990.1 million in one-time gaming
position-fee revenues for the State, plus (b) approximately $25.6 million in annual recurring tax revenue to the
State in the form of taxes on additional casino operations
 Results in estimated AGR at the Chicago casino of $662 million upon full operation after three or four years:
 Of this amount, approximately $184 million is paid in tax revenues, including $39 million that would be returned
to the City of Chicago as the local government distribution;
 The remaining $478 million includes the amount that Chicago would pay to the casino operator. This
amount is unknown but would presumably be negotiated with the operator; and
 City revenues from the casino would be used for infrastructure and capital-related expenditures.”
 SB 8 - Procurement Reform

 Establishes a pilot program to utilize "Best Value Procurement" on heavy machinery purchases for IDOT, IDNR,
AG, and institutions of higher education (initiative of Caterpillar and the Illinois Chamber).
 Reduces the timeframe of the Procurement Policy Board (PPB) has to request information on a particular award
from 30 calendar days to 14 calendar days.
 Reinstates higher education exemptions that mistakenly sunset 2 years ago.
 Establishes ability to create a pre-qualified pool of vendors.
 Allows Illinois to enter into joint purchasing agreements with other governmental entities, including:
o federal General Service Administration (GSA)
o federal Higher Education Cooperative Act
o Midwestern Higher Education Cooperation Act (MHEC)
 Lessens burden of communication requirements allowing for questions about the solicitation or market
conditions, as long as a competitive advantage is not obtained.
 Creates a Special Committee on Procurement Efficiency, Minority, Female, and Veterans Contracting and Illinois
Preference in Purchasing.
 Makes the position of Procurement Compliance Monitors (PCMs) permissive and rolls their duties into the State
Purchasing Officer (SPO) position.
 Modifies multi-step bidding to all for a sealed bid instead of an invitation for bid (IFB).
 Moves date of submission for annual report on Veteran business and small business contracts.
 Allows for subcontracts to be included in the calculation for the I 0% set-aside for small businesses, rather than
just contracts.
 SB 9 – Revenue

 Removal of the soda tax and is replaced by the Business Opportunity Tax Act (see below). This tax is a tax
imposed on businesses based on the number of Illinois employees of the business. (pg 1)
 Raises corporate income tax rate to 7% and personal income tax rate to 4.99%.
o Amount of income tax revenue allocated back to municipalities will go from 8% to 6.02% of the
individuals, trusts, and estates taxes and from 9.14% to 6.86% of the corporate income taxes. (pg 286)
 Establishes the following service taxes; storage services (pg 4), amusements (pg 28), repair and maintenance
services, landscaping services, and laundry and dry-cleaning services. (pg 101)
 Establish a tax on cable television services and direct broadcast satellite services.
 Decouples from the Domestic Production Activities Deduction.
 Eliminates the unitary business noncombination rule.
 Makes the research and development credit permanent.
 Redefines manufacturing to include graphic arts production and includes items formerly included in the
manufacturers purchase credit in the manufacturing machinery and equipment exemption.
 Provides that False Claims Act cases may not be brought with respect to any taxes imposed, collected, or
administered by the State of Illinois.
 Repeals the Adult Entertainment Tax effective January 1, 2018.
 Modifies pollution control facilities valuation under the Property Tax Code.

The Business Opportunity Tax Act applies to foreign and domestic companies.
(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then annual tax is $225;
(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then
the annual tax is $750;
(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then
the annual tax is $3,750;
(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then
the annual tax is $7,500; and
(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax
is$15,000.

Estimated revenue generated:

 Personal income tax: $4.6b

 Corporate income tax: $577m
 Opportunity tax: $750m
 Service taxes: $413m
 SB 10 - Direct Payments from the Stat e to Municipal Lenders

Amends the Municipal Code to create a new "Assignment of Receipts" Division permitting home rule
municipalities to enter into agreements with their lenders to have the State directly transfer taxes, revenues,
and grant funds owed to local governments to their lenders.

 State entities transferring would be the Comptroller, Department of Revenue, and the Treasurer.
 Provides that the State shall not be interpreted as a guarantor of local government debts of these
assignment agreements.
 Preempts Home Rule under Section 6. Provides that all assignment agreements for the conveyance from
the state to the lenders of revenues, taxes, and grant funds must be in accordance with the new
Division.

Introduced to addresses the delayed payments of local government revenues by the State by permitting a
conveyance to local lenders of the revenues owed home rule municipalities, in particular Chicago. Position of
Department of Revenue unknown. Illinois Municipal League has been contacted for a position.
 SB 11 – Cullerton Pension Reform

Smoothing of increased state contribution due for changes in investment / actuarial assumptions for TRS, JRS, GARS,
SERS, SURS.
GARS will no longer accept new members.
Tier 1 employees in each of GARS, SURS, TRS, and CTPF are given two choices:
o Choice 1 (electing members):
 REDUCE COLA to the lessor of 3% OR ½ CPI, simple interest on the originally granted annuity.
 In Exchange:
 Electing members receive a one-time bonus payout = 10% of historical employee
contributions made by or on behalf of the employee (figure ~7.5% of salary for all
worked years)
 All future salary increases will count as pensionable salary
o Choice 2 (non-electing members)
 No changes to COLA; COLA remains at 3% fixed annually, compounded.
 In Exchange / the consequence:
 All future salary increases will definitively not count as pensionable salary.
 Create a defined contribution plan that only 5% of eligible non-electing (choice 2)
employees will be allowed into before this is shut off to remaining Choice 2 – 1st come
first serve

70% NPV payout option retired pre-annuity members of SERS, SURS, and TRS

 SURS, TRS, and SERS Will annually make an offer to eligible employees for a payout equal to 70% of the net
present value of his or her pension benefits (as determined by the pension system “using actuarial tables and
other assumptions adopted by the Board”) in lieu of receiving any pension benefit. SURS, TRS, and SERS boards
“shall adopt any rules necessary to implement this.”
 Each offer will expire when either a new offer is made, or 10% of eligible employees in the system have
accepted their offer that year.
 “Eligible persons” are those who
o have completed their service,
o have accrued sufficient service credit to be eligible for a pension annuity,
o have not received any payments yet, and are not participating in the system’s self-managed plan.
 All payouts must be rolled into another retirement plan qualified under the IRS Code.
 Total accelerated pension payments for all three plans may not “cause the Illinois Finance Authority to issue
more than the $250,000,000 of State Pension Obligation Acceleration Bonds.”
 SB 12 – Workers Comp Reform

Comprehensive reforms to Causation, Traveling Employee, Shoulder and Hip InjuriesNexatious Delay, Credits for
Prior Injuries, Medical Fee Schedule Reductions, Prescription Drug Closed Formulary, AMA Guidelines (agreed
language), Waiting Period for Temporary Total Disability (TTD") Benefits, Max Wage Freeze for Permanent
Partial Disability ("PPD") Benefits, Electronic Billing Rules, Arbitrator Rotation (agreed language), State Appeal
Bond (agreed language), Fraud (DOI language; concepts are agreed upon), Self-Insurance, Physical Medicine,
Professional Athlete Wage Differential Awards, WEAR Commission.
 SB 13 – Property Tax Freeze and Mandate Relief

Property Tax Freeze

For 2017 and 2018:
 CPS would be limited to increase its total tax levy by
 The lesser of 5% or CPI
 Or a larger rate of increase approved by voters through a referendum
 Special purpose extensions made for (1) debt payments (2) contributions to pension payments (except Chicago
Police and Fire pensions), payments for public safety purposes (detention, firefighting, police, or ambulance
services).
 The lesser of 5% or CPI
 Or a larger rate of increase approved by voters through a referendum
 All other property taxes including those levied for Chicago fire and police pensions:
 0%
 Or a larger rate of increase approved by voters through a referendum

2019 and onward:

 there is not tax limitation on home rule units
 Non home-rule units return to the current limits:
 The lesser of 5% or CPI
 Or a larger rate of increase approved by voters through a referendum

School Mandate Relief

 Removes the requirement that a school district must seek a waiver to offer driver's education through a
commercial driver training school.
 Provides that a school board may determine the schedule or frequency of physical education courses, provided
that a pupil engages in a course of physical education for a minimum of 3 days per week.
 A school board may, on a case-by-case basis, excuse pupils in grades 9 through 12 who participate in an
interscholastic or extracurricular athletic program from engaging in physical education courses.
 Removes the requirement that a third party must offer a comparable benefits package to its employees as a
school district offers its employees; instead requires comparable salaries or wages be offered.
 Provides that school districts may discharge unfunded mandates following a public hearing and a referendum in
which the majority of electors vote "yes."