Full Text of SB1030 101st General Assembly
SB1030sam001 101ST GENERAL ASSEMBLY | Sen. Sue Rezin Filed: 4/3/2019
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| 1 | | AMENDMENT TO SENATE BILL 1030
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1030 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 1. Short title. This Act may be cited as the Local | 5 | | Government Protection Authority Act. | 6 | | Section 5. Findings and purpose. | 7 | | (a) The General Assembly finds that: | 8 | | (1) The State and units of local government are in | 9 | | financial distress, evidenced by reductions in government | 10 | | services. These reductions have been spurred by the | 11 | | escalating costs of promised services, salaries, | 12 | | retirement annuities, and healthcare benefits.
| 13 | | (2) Certain goods, services, pensions, and retiree | 14 | | health care costs are expected to grow at a faster rate of | 15 | | inflation in the coming years. | 16 | | (3) Illinois taxpayers have supported tax caps in the |
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| 1 | | past, compelling units of local government to manage within | 2 | | existing tax and revenue limitations. | 3 | | (4) If sufficient revenue is not raised to pay for | 4 | | services and costs or, in the case of pensions, irrevocably | 5 | | set aside and prudently invested, a unit of local | 6 | | government's unfunded liabilities including pension and | 7 | | other post-employment benefit obligations continue to grow | 8 | | at a staggering rate; | 9 | | (5) As a matter of law, demands from retirees for both | 10 | | pension and other post-employment benefit payments have | 11 | | the same priority for payment as those of ordinary | 12 | | suppliers of goods and services, employees necessary for | 13 | | normal operations, and perhaps many bondholders. | 14 | | (6) A cooperative effort between the State and a | 15 | | financially challenged unit of local government that | 16 | | involves local elected officials and local governmental | 17 | | bodies and taxpayers, workers, and business entities | 18 | | developing a plan of financial recovery is the best way to | 19 | | find a permanent solution to current financial challenges. | 20 | | (b) Therefore, the purpose of this Act is to: | 21 | | (1) provide voluntary resolution and assist units of | 22 | | local government to find affordable solutions so that basic | 23 | | services can be provided on a long term basis; | 24 | | (2) aid in achieving solutions to the problems set | 25 | | forth in this Section and aid units of local government to | 26 | | fully fund essential government services and make |
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| 1 | | sustainable contributions to pensions and other | 2 | | post-employment benefit obligations to maintain the | 3 | | credibility of units of local government; | 4 | | (3) provide a forum in which taxpayers, elected | 5 | | officials, public employers, and employees can address | 6 | | issues relating to essential government services, | 7 | | financial difficulties relating to costs, judgments, | 8 | | liabilities and post-employment benefit rates, and payment | 9 | | structures and provide transparency to the public as to the | 10 | | affordability and sustainability of these services and | 11 | | benefits; and | 12 | | (4) offer an alternative to bankruptcy.
| 13 | | Section 10. When used in this Act: | 14 | | "Significant Past Due Creditor" means a creditor that has | 15 | | not been paid on a liquidated debt obligation (unpaid for 6 | 16 | | months or more) of $5,000,000 or 10% of the annual revenues of | 17 | | the unit of local government, whichever is greater. | 18 | | "Uniform Calculation Method" means the funding ratio for | 19 | | pension plans determined based on uniform actuarial | 20 | | methodology, including assumptions based on comparable returns | 21 | | on investment (such as the discount rate) from information | 22 | | annually required to be provided to the Authority. | 23 | | "Unit of local government" means all units of local | 24 | | government with funding responsibilities for operating costs, | 25 | | such as contract costs for goods and services, labor, and the |
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| 1 | | pensions and other benefits for their employees. | 2 | | Section 15. Creation. The Local Government Protection | 3 | | Authority is created for the purposes set forth in Section 5 of | 4 | | this Act. | 5 | | Section 20. Board of Trustees. The Authority shall consist | 6 | | of a 9-member board of trustees, who shall be appointed as | 7 | | follows: | 8 | | (1) Four trustees representing the Illinois Municipal | 9 | | League, appointed by the Governor. | 10 | | (2) One trustee shall be appointed by the Governor. | 11 | | (3) One trustee shall be appointed by the Speaker of the | 12 | | House of Representatives. | 13 | | (4) One trustee shall be appointed by the President of the | 14 | | Senate. | 15 | | (5) One trustee shall be appointed by the Minority Leader | 16 | | of the House of Representatives. | 17 | | (6) One trustee shall be appointed by the Minority Leader | 18 | | of the Senate. | 19 | | After the first appointment of trustees under this Act, the | 20 | | trustees shall determine, by lot, 2 trustees to serve for terms | 21 | | of 2 years, 2 trustees to serve for terms of 4 years, and 3 | 22 | | trustees to serve for terms of 6 years. Thereafter, all | 23 | | trustees appointed under this Act shall serve for 6-year terms | 24 | | and until their respective successors are appointed and |
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| 1 | | qualified.
| 2 | | Section 25. Funding; fees. The Authority shall accept and | 3 | | expend appropriations for the purposes set forth in this Act. | 4 | | The Authority shall establish and implement a fee schedule that | 5 | | shall be paid by participating units of local government. The | 6 | | Authority may alter the fee schedule at any time. The State | 7 | | Comptroller's Office shall collect unit of local government | 8 | | reports required by the Authority and provide administrative | 9 | | and operational support for Authority and its functions. | 10 | | Section 30. Duties. The Authority shall provide a | 11 | | supervised forum to assist with the determination of the | 12 | | following issues resulting from underfunded government | 13 | | services and unaffordable costs and liabilities for units of | 14 | | local government: | 15 | | (1) what essential government services and post-employment | 16 | | benefits are affordable and sustainable; | 17 | | (2) what cost-cutting measures are necessary to achieve | 18 | | affordable services and benefits; | 19 | | (3) whether a tax increase is necessary to provide | 20 | | additional funding; | 21 | | (4) what contribution increases, by both public employers | 22 | | and employees, are necessary to maintain the viability of | 23 | | pensions or other employee benefit programs; | 24 | | (5) what amount of State revenue is necessary to pay for |
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| 1 | | required services, indebtedness, and benefits so that | 2 | | essential governmental services can be provided and the unit of | 3 | | local government can maintain access to the unit of local | 4 | | government's debt market at relatively low cost; | 5 | | (6) whether the unit of local government should engage in | 6 | | voluntary or mandatory arbitration regarding contractual or | 7 | | labor disputes; | 8 | | (7) whether services or costs of the unit of local | 9 | | government should be transferred to other governmental bodies; | 10 | | (8) whether certain services should be consolidated with | 11 | | other governmental bodies or transferred to a regional or | 12 | | multi-jurisdictional authority; | 13 | | (9) whether the unit of local government should be | 14 | | authorized to file for Chapter 9 proceedings under the United | 15 | | States Bankruptcy Code; | 16 | | (10) whether, given the findings of Authority, the unit of | 17 | | local government's plan of a debt adjustment can be prepackaged | 18 | | or pre-negotiated; | 19 | | (11) whether consolidation with other governmental bodies | 20 | | by public-private partnerships or by leasing, sale of assets, | 21 | | or granting the rights to provide the services within defined | 22 | | parameters of costs and services is an effective option to cut | 23 | | costs; and | 24 | | (12) whether popular solutions from private industry to | 25 | | solve post-employment benefit funding problems may have some | 26 | | applicability to situations facing units of local government, |
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| 1 | | including: | 2 | | (A) changing retirement promises for new hires from | 3 | | defined benefit plans to reduced defined benefit plans, | 4 | | cash balance plans, or defined contribution plans and | 5 | | variations thereto, whereby the public employer's | 6 | | contribution is fixed and the employee's contribution can | 7 | | vary based on the benefit desired by the employee subject | 8 | | to State and federal law; | 9 | | (B) transferring other post-employment benefit | 10 | | obligations from employers to trusts administered by | 11 | | employees, funded with a one-time employer contribution | 12 | | and ongoing employee contributions or transfer retirees to | 13 | | an exchange created under the Affordable Care Act; and | 14 | | (C) requiring representatives of public employees and | 15 | | employers negotiate affordable cost reductions to existing | 16 | | plans. | 17 | | In addition, the Authority shall develop criteria for | 18 | | measuring the financial health of units of local government and | 19 | | make public comment on whether costs of operation, including | 20 | | services, labor, and pension and Other Post Employment Benefits | 21 | | obligations, can be paid from reasonably available sources | 22 | | without impairing a unit of local government's primary mission | 23 | | of providing essential services.
| 24 | | Section 35. Powers. The Authority shall have the power to: | 25 | | (a) Provide recommendations consistent with the purposes |
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| 1 | | of funding and enforcing reasonable and affordable government | 2 | | services and costs of operation, labor and post-employment | 3 | | benefits for employees of a unit of local government. | 4 | | (b) Obtain information required under this Section and | 5 | | Section 45 from all participating units of local government. | 6 | | (c) Create a funding target and set an acceptable level of | 7 | | essential governmental services and increasing percentage | 8 | | targets for an appropriate level of annual funding for pension | 9 | | funds so that by a specified date, full or appropriate funding | 10 | | is realized by the participating funds. | 11 | | (d) Encourage units of local government that fail to meet | 12 | | the Authority's annual funding targets to enter into cost | 13 | | reduction negotiations between public employers and their | 14 | | employees. The Authority shall provide assistance with these | 15 | | cost reduction efforts, including employer-employee benefit | 16 | | adjustment discussions. | 17 | | (e) Mediate discussions regarding appropriate levels of | 18 | | local government services, costs, taxes, pension funding, and | 19 | | benefits to ensure that they are within an acceptable range of | 20 | | the funding target. | 21 | | (f) Make findings regarding affordable levels of services | 22 | | and costs, including labor costs and employee benefits, that | 23 | | allow adequate funding for essential governmental services. | 24 | | (g) Approve settlements. | 25 | | (h) Recommend a tax increase that requires a vote by the | 26 | | unit of local government on the tax increase. Home rule units |
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| 1 | | of local government shall have their representative body vote | 2 | | on the recommended tax increase. The Authority may require a | 3 | | referendum regarding the tax increase for non-home rule units | 4 | | of local government. | 5 | | (i) Recommend a diversion of State revenues in order to | 6 | | fund specified costs of operation, labor, and post-retirement | 7 | | benefits. | 8 | | (j) Recommend voluntary mediation. | 9 | | (k) Require annual work plans, along with quarterly | 10 | | progress reports, from units of local government that have not | 11 | | met the cost reductions or pension funding target. | 12 | | (l) Require participating units of local government that | 13 | | have individual budgets that are not affordable or specific | 14 | | pension plans with funded ratios below a level determined by | 15 | | Authority and have not met the funding target for 2 consecutive | 16 | | years to submit an explanation to their electors. The | 17 | | affordability of the budget and acceptable levels for essential | 18 | | governmental services shall be determined by standards | 19 | | established by General Assembly based on recommendations by | 20 | | Authority. The funding ratio for pension plans shall be | 21 | | determined according to the Uniform Calculation Method. The | 22 | | required explanation to the electors shall include a Statement | 23 | | of the impact of the underfunding of obligations and pensions | 24 | | on the provision of essential governmental services and shall | 25 | | be published in a newspaper of general circulation. The | 26 | | Authority shall establish rules and guidelines for the |
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| 1 | | reporting and publication by units of local government. | 2 | | (m) Consider and make recommendations to the General | 3 | | Assembly legislation regarding an economic safety net whereby | 4 | | the State shall provide a set of fallback post-employment | 5 | | benefits for employees if a public employer has not resolved | 6 | | the underfunding of its pension plan and thereafter is unable | 7 | | to pay its retirees. The program shall use the federal Pension | 8 | | Benefit Guaranty Corporation as its model. Contractual | 9 | | benefits would have to meet affordability tests prior to being | 10 | | approved for safety net funding. The outcomes of the | 11 | | affordability tests may result in smaller benefit payments than | 12 | | were initially promised to the employees by the defaulted | 13 | | employer.
| 14 | | Section 40. Petition and criteria. | 15 | | (a) The Authority may exercise its authority over a unit of | 16 | | local government under this Act if the Authority is petitioned | 17 | | and the Authority accepts the participation of the unit of | 18 | | local government identified in the petition. The Authority has | 19 | | absolute discretion regarding acceptance or denial of any | 20 | | petition and participation of a unit of local government. The | 21 | | Authority shall create rules regarding the petition, | 22 | | procedure, format, and required documentation. | 23 | | (b) The following parties may petition the Authority: | 24 | | (1) the Illinois Comptroller; | 25 | | (2) a unit of local government; |
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| 1 | | (3) a significant past due creditor; or | 2 | | (4) a pension fund. | 3 | | If the Illinois Comptroller, a significant past due | 4 | | creditor, or a pension fund petitions the Authority, their | 5 | | petition shall include documentation of the unit of local | 6 | | government's approval of the petition and participation. | 7 | | (c) The Authority may seek declaratory and injunctive | 8 | | relief regarding the exercise of its powers and implementation | 9 | | of its findings and recommendations. | 10 | | (d) The Authority may consider any of the following | 11 | | criteria regarding the unit of local government or its | 12 | | individual pension plan in its determination to accept or deny | 13 | | the party's petition: | 14 | | (1) past due debt obligations or judgments of more than | 15 | | a specified percentage of the annual revenues of the unit | 16 | | of local government that have been unpaid for more than 6 | 17 | | months without an agreement by the creditors to forbear or | 18 | | standstill as to prosecution of the claims; | 19 | | (2) failure to make statutory or Annual Required | 20 | | Contributions (or a suitable similar substitute concept) | 21 | | to pension funds from existing operating revenues for 2 | 22 | | consecutive years; | 23 | | (3) funded ratio for an individual pension plan falls | 24 | | below a threshold set by Authority; | 25 | | (4) failure to pass a budget by a date established by | 26 | | Authority after the start of the fiscal year;
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| 1 | | (5) bills of a specified percentage of annual current | 2 | | revenues are left unpaid for a period greater than 180 | 3 | | days, as defined by a payment period; | 4 | | (6) failure to maintain at least 30 days cash on hand | 5 | | in the General Fund at end of the fiscal year for 2 | 6 | | consecutive years; | 7 | | (7) debts or judgments that are past due for more than | 8 | | 6 months or pension liabilities exceed a given percent of | 9 | | the fair market value of taxable real property in the | 10 | | taxing district; | 11 | | (8) financial statements are not published within 6 | 12 | | months of the close of the fiscal year;
| 13 | | (9) the unit of local government has defaulted on debt | 14 | | securities; | 15 | | (10) the sum of the Annual Required Contributions and | 16 | | the annual debt service on any outstanding pension | 17 | | obligation bonds has exceeded a thresholds set by the | 18 | | Authority for the last 3 consecutive years; and | 19 | | (11) any other criteria that the Authority determines | 20 | | is necessary to accomplish its mission.
| 21 | | The Authority shall develop standards for interpreting | 22 | | these criteria and how it shall grant participation to a unit | 23 | | of local government.
| 24 | | Section 45. Participation requirements. If a unit of local | 25 | | government is selected, it must fully cooperate with the |
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| 1 | | requests of the Authority, including, but not limited to: (1) | 2 | | submitting any documents required under Section 35; (2) | 3 | | providing information regarding its budget, revenue sources, | 4 | | and liabilities, including pension funds; (3) annually filing | 5 | | information with the Authority demonstrating their budgets, | 6 | | revenues, costs, liabilities, and funding level for their | 7 | | actuarially determined pension and other post employment | 8 | | benefit liabilities; and (d) providing access to the records of | 9 | | the pension funds for each participating unit of local | 10 | | government for the purpose of confirming this information.".
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