Brian Costin
Director of Government Reform

The Illinois House voted by an 85-30 margin to raise the state’s speed limits today. Previously, the bill was approved in the Senate by a 41-6 margin.

If Gov. Pat Quinn signs this legislation, the speed limit on tollways and interstates would be raised to 70 mph, up from 65 mph. The maximum speed limit on other highways, roads and streets would be increased to 65 mph, up from 55 mph.

Quinn has been noncommittal on raising the speed limit.

Currently, Illinois has one of the lowest speed rates in the country.

Jonathan Ingram
Senior Fellow, Health Policy and Pension Reform

Back in January, Ralph Martire of the union-backed Center for Tax and Budget Accountability proposed what he called a “solution” for Illinois' pension crisis. This plan has been getting more attention lately. But before embracing it, lawmakers should ask: does this plan really solve the problem?

After all, Martire's plan is to leave the broken pension system untouched – the only change is how we pay for pensions. Here's how he described it:

Simply re-amortizing $85 billion of the unfunded liability into flat, annual debt payments of around $6.9 billion each through 2057 does the trick.

There's a lot going on here, so let's break it down piece by piece.

First, he wants to extend the repayment schedule, also known as the amortization period, to 2057. But, according to the Governmental Accounting Standards Board, “the maximum acceptable amortization period is 30 years.” Extending the repayment schedule to nearly 45 years would obviously violate standard accounting practices. The actuaries of all five state pension systems explain that the current repayment schedule, which only lasts through 2045, falls outside generally accepted actuarial standards. Illinois' state actuary plainly agrees, concluding that “under generally accepted actuarial standards, the funding method should be based as a minimum on achieving 100 percent funding within 30 years.” Indeed, the 30-year repayment schedule is at the outer range of acceptable repayment schedules. Moody's Investors Service new accounting rules, for example, shorten the repayment schedule to 20 years for purposes of measuring state and local governments' credit risks.

Second, even after extending the repayment schedule, Martire's plan only pays down $85 billion of the state's $97 billion unfunded liability. This, too, violates generally accepted actuarial standards. Under standard accounting practices, the funding target would be 100 percent. The state actuary, the actuaries of all five pension systems and the Governmental Accounting Standards Board all recommend a 100 percent funding target.

Third, Martire's contribution math is off. He says he wants to make “flat, annual debt payments of around $6.9 billion.” But the state's annual pension costs include more than just debt repayment. Those costs also include the “normal cost” of workers accruing new benefits. When you add the state's annual normal cost to Martire's $6.9 billion debt repayment contribution, the state would be on the hook for more than $8.6 billion in fiscal year 2014. For comparison, the state's pension contribution was nearly $5.9 billion in fiscal year 2013. Pumping more money into a broken pension system isn't a “solution.”

Finally, Martire's plan would keep in place the broken defined benefit system, meaning that the unfunded pension liability will continue to spiral out of control even if the state were able to afford his proposed payments. The majority of the state's pension debt comes from problems of the defined benefit structure, like missed investment targets, mistaken actuarial assumptions and benefit increases. His plan does nothing to shield taxpayers from these risks. So even if it were reasonable to extend the repayment schedule, pay down just $85 billion of the state's $97 billion unfunded liability and hike the state's annual pension contribution by billions of dollars, his plan would only work if the pension systems were perfect. We know that they are not.

That's not to say that the idea of paying down the debt on a level-dollar basis is a bad one. That's how most of us pay off our mortgages. It also prevents the reckless “pension ramp” that increases the state's costs year after year. That's why our plan to get Illinois out of the pension crisis pays down the remaining unfunded liability on a level-dollar basis.

But we couple this with real, substantive reforms. We get politicians out of the pension business altogether, giving government workers real control over their retirement dollars for all future work. Our plan cuts the unfunded liability in half and gets the systems fully funded in about 30 years. And our annual contribution is reduced $4.7 billion, about the same as we paid in fiscal year 2012.

We need real reforms, not just a new repayment plan.

Paul Kersey
Director of Labor Policy

National Review Reporter Andrew Stiles recently pointed out another group that may have had a hand in using federal tax law to persecute conservative and free market groups – the National Treasury Employees Union, or NTEU. This group represents Internal Revenue Service employees, and has strong partisan preferences. Stiles wrote:

The union endorsed Obama in both of his presidential runs and operates a political-action committee (PAC) that has donated $1.63 million to federal candidates and committees since 2008, more than 96 percent of it to help elect Democrats. During that period, IRS employees have contributed more than $67,000 to the PAC.

Colleen Kelley, the NTEU’s president, is a formidable person in her own right. She was appointed to the Federal Salary Council that sets wages throughout the federal government, and has a tendency to take political fights over the size of government personally: “This is the worst political climate for federal workers in decades … You see these current attacks, they’re nonstop. Literally everyday there’s a new one aimed at federal employees.”

The NTEU represents IRS employees and is in a position to protect them from internal disciplinary processes. And like nearly all government unions, it has a strong interest in the expansion of government. NTEU in particular stands to benefit from the complex tax laws created by ObamaCare. Among the many things that Congress should investigate over the coming weeks is whether or not the NTEU encouraged IRS employees to delay paperwork for conservative and free market oriented groups. They certainly had both the means and the motive to do so.

image credit: Erin Scott

Ben VanMetre
Senior Budget and Tax Policy Analyst

Contrary to what some groups would have you believe, Illinois had record levels of revenue in 2012:

The Wall Street Journal reported that “revenue from income taxes in Illinois was up almost 40% last year. That’s because state legislators approved a massive tax hike in 2011 to ease Illinois’ budget woes.”

Between 1994 and 2012, revenue from personal and corporate income taxes alone increased by 104 percent after adjusting for inflation. Even before the Great Recession and the subsequent record tax hike, Illinois’ income tax revenue had grown by 46 percent since 1994 after adjusting for inflation.

So where did all that money go?

Illinois’ total spending (the technical term for this is “Total Appropriated Funds Expenditures”) totaled $67.9 billion in 2012, according to data from the Illinois comptroller. This includes all monies received from state and federal sources. The state has direct control over some of these funds, while others are earmarked for specific purposes by state or federal laws.

In fiscal year 2012, the lion’s share of the total appropriated funds was spent on health care and social services (36.7 percent), and education (22.2 percent). Other spending drivers included general government (14.2 percent) and transportation (8.3 percent). Embedded in these spending numbers are Illinois’ fiscal year 2012 pension contributions and pension obligation bonds totaling nearly $7 billion.

Here is a breakdown of some of the biggest spenders:

• The agency that spent the most from the appropriated funds budget was the Department of Healthcare and Family Services with expenditures of $17 billion.

• Spending by the Department of Human Services was $5.3 billion. Of this total, $4.1 billion was spent for various grant programs.
  

• The agency that spent the second-largest amount was the State Board of Education with $8.8 billion; $4.4 billion was for payments to local school districts.
  

• Expenditures by higher education agencies were $3.6 billion; $985 million of the total was by the State Universities Retirement System.
  

• Expenditures by the Department of Revenue totaled $6.3 billion. Included in this total:

• $2.2 billion for refunds
• $1.2 billion for payments to local governments from the Local Government Distributive Fund
  
• $1.3 billion from the Personal Property Tax Replacement Fund

• Spending by the Department of Transportation was $5.6 billion; $2.8 billion of this total was for highway construction.
  

• The state treasurer spent $4.9 billion, nearly all of which went to debt service.
  

• Other agencies that had spending in excess of $1 billion include:
  

• State Employees Retirement System: $2.6 billion
  
• Teachers’ Retirement System: $2.5 billion
  
• Department of Corrections: $1.3 billion
  
• Department of Children and Family Services: $1.2 billion
  
• Department of Commerce and Economic Opportunity: $1 billion
  
• Department of Central Management Services: $1 billion
  

• The larger increases in spending from the previous year were:
  

• $2.2 billion by the Teachers’ Retirement System
• $918 million by the Universities Retirement System
• $663 million by the Department of State Lottery
• $592 million by the state treasurer.
  

Even with record revenues, Illinois is suffering – the state has a massive backlog of unpaid bills, the worst-funded pension system in the nation, the second-highest unemployment rate and the nation’s worst credit rating. These problems will take structural reforms, not more revenue.

The Illinois Policy Institute has laid out a plan to reform and modernize the way the state of Illinois budgets and spends taxpayer resources. These changes will certainly be difficult, but Illinois is worth fighting for.

QUOTE OF THE DAY

Chicago Tribune: Let DuPage pluck off useless government

There's a bill heading to Gov. Pat Quinn's desk that would make DuPage County a laboratory for efficient local government. It might even produce a magic trick: Watch this taxing body disappear!

The bill would let the DuPage County Board dissolve some government units by simply passing an ordinance. No, the board members couldn't go crazy. The law would require an audit and a six-month public review. Voters could seek a referendum to block the county board and save the local government.

It all creates a reasonable process that could mean: Presto! One of the 6,969 units of government in Illinois would be no more.

DuPage County Board Chairman Dan Cronin pushed this legislation after he ran into enormous obstacles in trying to eliminate one example of what he calls zombie governments.

The Timberlake Estates Sanitary District had handed all its responsibilities to another agency three decades ago but still showed up on property-tax bills. In April, 2011, Cronin's staff began an arcane process of mailings, door-to-door solicitations, public notices and legal submissions. In March — nearly two years after the process started — a judge finally signed off on eliminating the sanitary district.

Illinois has, by far, more local governments than any other state. DuPage County alone has more than 400 governments.

The bill approved by the House and Senate is narrowly drawn. It would provide DuPage County — and only DuPage County — with the authority to dissolve outdated or defunct agencies that are managed by governing boards appointed by the county. The bill could impact 13 entities, such as the Century Hill Street Lighting District, the Salt Creek Sanitary District and the Wheaton Mosquito Abatement District.

Would the world miss the Century Hill Street Lighting District, which has three trustees in charge of approving an annual levy of about $15,000 to pay for lights in a subdivision in unincorporated Naperville?

This is a modest, well-targeted bill, but it does help to draw attention to how much Illinois taxpayers get dinged for those 6,696 local governments.

Don't even get us started on townships ...

Removing unneeded layers of local government would help to deliver essential public services in a more efficient and cost-effective manner. It would help to eliminate the little fiefdoms that make it difficult for the region to plan and execute broadly on strategies for economic growth.

It would give taxpayers some relief. Have you looked at your property tax bill lately? You'll find a lot of claims on your money.

We encourage Quinn to sign the bill. We encourage Dan Cronin to keep pushing so this movement stretches beyond DuPage.

Politico: Senate investigators claim Apple sheltered $44 billion from taxes

Senate investigators accuse Apple of wiring together a complicated system to shield billions of dollars in international profits from both U.S. and foreign tax collectors.

A report released ahead of Apple CEO Tim Cook’s inaugural Capitol Hill appearance Tuesday alleges the tech giant took advantage of numerous U.S. tax loopholes and avoided U.S. taxes on $44 billion in offshore, taxable income between 2009 and 2012 — a characterization Apple flatly rejects.

The bipartisan Senate probe also charges for the first time that Apple’s long established foreign entities, based in Ireland, don’t actually have tax-resident status there or anywhere else. The company conducts most of its international business in the European country to take advantage of lower tax rates, according to the congressional report.

Despite the findings, lawmakers behind the inquiry did not describe Apple’s tax conduct as illegal — but they sharply rebuked the Cupertino, California-based tech heavyweight on Monday for its tactics.

Apple, meanwhile, emphasized it has contributed more than its fair share of jobs to the U.S. economy — and plenty of big bucks to the U.S. treasury, too. Its prepared testimony, also released Monday, said the company “pays all its required taxes, both in this country and abroad.” And Apple stressed it does not use “tax gimmicks.”

Washington Post: Rand Paul unloads on ‘bullying, berating and badgering’ of Apple

This much is clear from the first hour of the Senate Permanent Subcommittee on Investigations hearing on Apple’s steps to avoid paying billions in U.S. corporate income tax: It will be primarily an exercise in righteous indignation for the senators present; and there will be at least one lawmaker with a quite different take.

“Frankly, I’m offended by the tone and tenor of this hearing,” said Sen. Rand Paul (R-Ky) in his opening statement. “I’m offended by a $4 trillion government bullying, berating and badgering one of America’s greatest success stories.”

“If anyone should be on trial here, it should be Congress,” Paul continued. “I frankly think the committee should apologize to Apple. The Congress should be on trial here for creating a Byzantine and bizarre tax code.”

Paul aside, the bipartisan tone was one of assailing Apple for using Ireland-based shell companies to avoid U.S. corporate income tax. Said Sen. Carl Levin (D-Mich.), chairman of the subcommittee: “The offshore tax-avoidance tactics spotlighted by the subcommittee do real harm. They disadvantage domestic U.S. companies that aren’t in a position to reduce their tax bills using offshore tax gimmicks. They offload Apple’s tax burden onto other taxpayers – in particular, onto working families and small businesses. The lost tax revenue feeds a budget deficit that has reached troubling proportions, and has helped lead to round after round of budget slashing and the ill-advised sequestration now threatening our economic recovery.”

And ranking member John McCain (R-Ariz.) added, “Apple’s corporate tax strategy reflects a flawed corporate tax system that allows large multinational corporations to shift profits offshore to low-tax jurisdictions. For years, Apple has opted to forgo fully contributing to the U.S. treasury and to American society by shifting profits and circumventing U.S. taxes. In the last four years alone, Apple has avoided paying taxes on $44 billion in income.”

CNET: Cook hits back at tax critics, says Apple pays its fair share

After stewing in silence for a couple of hours as a parade of Senators and professional experts took turns portraying his company as a tax freeloader, CEO Tim Cook offered an impassioned defense of Apple as a solid corporate citizen.

Apple has become the largest corporate income tax payer in America," said Cook, adding that the company paid almost $6 billion in cash to the U.S. Treasury, or more than $16 million per day.

He said Apple pays "the taxes it owes. Every single dollar."

Cook also denied that Apple uses tax gimmicks. "We don't stash money on some Caribbean island," he said.

That was a pointed rebuttal to some of the comments made by several people earlier in the hearing, which kicked off with both Democrats and Republicans sharply criticizing Apple's tax avoidance policies.

New York Times: Before Tumblr, Founder Made Mom Proud. He Quit School

When David Karp was 14, he was clearly a bright teenager. Quiet, somewhat reclusive, bored with his classes at the Bronx High School of Science. He spent most of his free time in his bedroom, glued to his computer.

But instead of trying to pry him away from his machine or coaxing him outside to get some fresh air, his mother, Barbara Ackerman, had another solution: she suggested that he drop out of high school to be home-schooled.

“I saw him at school all day and absorbed all night into his computer,” said Ms. Ackerman, reached by phone Monday afternoon. “It became very clear that David needed the space to live his passion. Which was computers. All things computers.”

Clearly.

Now 26 years old, Mr. Karp never finished high school or enrolled in college. Instead, he played a significant role in several technology start-ups before founding Tumblr, the popular blogging service that agreed to be sold to Yahoo for $1.1 billion this week. With an expected $250 million from the deal, Mr. Karp joins a tiny circle of 20-something entrepreneurs, hoodie-wearing characters like Facebook’s Mark Zuckerberg and Foursquare’s Dennis Crowley, who have struck it rich before turning 30.

“When I first met David he was 20 years old and wearing sneakers and jeans,” said Bijan Sabet, a general partner at Spark Capital, who was one of the first people to invest in Tumblr. “But I knew he was one of these rare entrepreneurs that grew up on the Web and who could come up with an idea, build it himself, and then ship it that night.”

Since founding Tumblr six years ago, Mr. Karp has been admired for his programming skills and Web site design acumen but at times has been a polarizing figure in New York tech circles because he so often blogged about his personal life and party-hopping. He has popped up in the New York Post’s Page Six Magazine, and has been a recurring target for the gossip Web site Gawker, where he was labeled a “fameball,” a derogatory term for someone who has an unquenchable desire for fame.

Tall and willowy, with a mop of brown hair and piercing blue eyes, Mr. Karp typically dresses in jeans, a T-shirt and sneakers. He speaks at a rapid clip and, often, for minutes without stopping. Technically, he never graduated from high school, which he cracked in an interview is “hopefully not a condition of Yahoo employment.”

After dropping out and working for a time in small New York tech outfits, Mr. Karp made his way to Tokyo, where he worked for several months for a start-up. He returned to the United States and became the chief technology officer for UrbanBaby, an Internet message board for parents. CNET Networks bought UrbanBaby in 2006, and Mr. Karp took the several hundred thousand dollars he made from the sale to start his own company, called Davidville. One of Davidville’s projects was a simple blogging service called Tumblr.

Fast Company: Judge Rules Airbnb Violates NYC Hotel Law

Officials in New York have determined that Airbnb is illegal, despite efforts by the online firm to persuade the city otherwise. The law violated is the illegal hotel law, which prevents residents from renting out their property for less than 29 days. According to CNET, the law originally meant to prevent landlords from turning residential properties into hotels.

The ruling doesn't necessarily mean all Airbnb hosts will be cracked down on, as the city only enforces the rule when a complaint is filed. Airbnb responded with the following statement:

"This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes. There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in--they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law."

The case in question originally made a $7,000 demand on Airbnb host Nigel Warren, and originally included building and zoning code issues. Administrative Law Judge Clive Morrick, however, threw these latter issues out, and has fined Warren $2,400 for violating the illegal hotel law. "While breach of the condominium rules is not of itself a ground for sustaining this (notice), respondent was in breach (through Warren's acts) and the existence of the rule against rental for transient, hotel, or motel purposes is evidence that the unit owners were to restrict their use to permanent occupation," the judge wrote.

Airbnb intervened in Warren's case, arguing that allowing people to rent out rooms occasionally "supports the city's desire to preserve living accommodations because it allows tenant the ability to bolster their income and pay rent." The move could prove a headache for the firm's CEO, Brian Chesky, who has already dealt with enough anxiety since he came up with the idea for the website.

In June 2012 Fast Company's technology editor Chris Dannen wrote about being served a restraining order after his landlord realized Dannen was using Airbnb to rent out his apartment and make some extra cash ($20,000, to be accurate). "My landlord had caught on. When I delivered my rent at the beginning of the next month, I found the management company’s office under construction. It's now a hotel. The 'loft-style' rooms are now listed on Airbnb for $169 a night."

Will we see Airbnb, which doubled its listings in 2012, now lobbying for a change in the law? Probably.

Bloomberg: Illinois Pension Fix Seen in Best Rally Since 2011

Illinois debt is rallying the most since 2011 as investors bet lawmakers will end two decades of inaction and pass a measure to fix the worst-funded U.S. state pension system.

With 11 days left in the budget session, each legislative chamber has approved a pension-overhaul bill. The house plan will save $150 billion over 30 years, while the senate version, endorsed by public-employee unions, would cut the shortfall by about $50 billion. Passing either may halt downgrades that have made Illinois the lowest-rated state.

Illinois would join states such as New York and Rhode Island that have moved to reduce pension costs. States and localities faced more than $2 trillion in unfunded public-employee retirement obligations in 2010, according to Moody’s Investors Service.

“I would think they get a compromise this time -- the market will be pretty disappointed if they don’t,” said Tim McGregor, who oversees about $30 billion as director of municipal fixed-income at Northern Trust Corp. in Chicago. “Spreads have rallied in on the news, and they could widen pretty quickly if they don’t come to terms with anything.”

2011 Level

Taxable Illinois pension-obligation bonds maturing in June 2033 yielded 2.29 percentage points more than benchmark Treasuries May 13, four days after the Senate bill was approved, data compiled by Bloomberg show. That’s the smallest penalty since August 2011, when Standard & Poor’s rated the state two steps higher than its current A- grade.

Governor Pat Quinn, a 64-year-old Democrat, said in January that the pension challenge “has confounded legislatures and governors for 70 years.” The degree of underfunding accelerated in the past two decades as the state skipped required annual payments and issued general obligations starting in 2003 to cover pension costs. In March, the state settled with the U.S. Securities and Exchange Commission over charges it misled investors from 2005 to 2009 about retirement shortfalls.

The state’s public-employee retirement systems had about 43 percent of the assets needed to pay for pension obligations as of 2011, compared with the national median of about 72 percent, Bloomberg data show. The state faces a $97 billion retirement liability that’s crowding out other spending. Lawmakers are trying to resolve the squeeze by May 31, when the budget session is scheduled to end.

WSJ: The IRS and the Drive to Stop Free Speech

The unfolding IRS scandal is a symptom, not the disease.For decades, campaign-finance reform zealots have sought to limit core political speech through spending limits and disclosure requirements. More recently, they have claimed that it is wrong and dangerous for tax-exempt entities to engage in political speech.

The Obama administration shares these views, especially when conservative, small-government organizations are involved, and the IRS clearly got the message. While the agency must be investigated and reformed, the ultimate cure for these abuses is to unshackle political speech by all groups, including tax-exempt ones, from arbitrary and unconstitutional government regulation.

Beginning in March 2010, the IRS engaged in an unprecedented campaign of harassment against conservative groups, either through denials or delays in approving their tax-exempt-status applications, or through endless and burdensome audits.

In notable contrast, liberal and "progressive" organizations got approvals with remarkable speed. The most conspicuous example involves the Barack H. Obama Foundation, which was approved as tax exempt within a month by the then-head of the IRS tax-exempt branch, Lois Lerner. From media reports and firsthand accounts, we also know that the IRS disproportionately audited donors to conservative causes and leaked confidential tax information concerning conservative groups in violation of federal law.

This IRS politicization is not an isolated problem. It is an inevitable result of the broader efforts to regulate and, in fact, suppress political speech.

The IRS crackdown on tax-exemption approvals for conservative groups was directed at nonprofit social-welfare groups, often called 501(c)(4)s after the Internal Revenue Code section granting them tax-exempt status. Such groups do not have to disclose their donors and are exempt from most taxation, although donations to them generally aren't tax deductible.

Social-welfare organizations are permitted to engage in a range of political activities promoting their causes or beliefs, so long as these activities aren't their "primary purpose." This has been generally understood to mean that they must spend less than 50% of their total resources on political activities.

The IRS had little interest in 501(c)(4) political activities until the 2002 McCain-Feingold campaign-finance reform. That law barred dedicated political-advocacy groups from soliciting and spending soft money—funds that aren't subject to tight federal campaign-contribution limits and are used for issue advocacy and party-building.

This IRS restraint was doubtless reinforced by the fact that virtually all politically active (c)(4)s, mostly labor and environmental groups, were ideologically liberal and their activities were not attacked in the mainstream media or by the political establishment. Meanwhile, Republicans financed their political activities largely through candidate-specific campaigns and party and congressional committees.

CARTOON OF THE DAY

Jonathan Ingram
Senior Fellow, Health Policy and Pension Reform

Senate Bill 26 passed out of the House Human Services Committee and will head to House for consideration. But the Medicaid expansion this bill proposes is not right for Illinois.

First, Illinois is under no obligation to expand Medicaid eligibility. Federal law permits, but does not require, states to expand eligibility levels for Medicaid. Across the nation, state lawmakers are taking a very cautious approach and are not rushing into this decision. A majority of states, led by both Democratic and Republican governors, have now either rejected the Medicaid expansion or are leaning that way. In fact, of Illinois' neighbors, only Kentucky has announced its intent to expand Medicaid eligibility.

Second, there are no reliable estimates of the cost of SB 26. No fiscal note has been filed. Even the estimates produced by the Department of Healthcare and Family Services contain major methodological flaws. The department's assumptions contradict research published by the U.S. Department of Health and Human Services, the outcomes in other states that have expanded Medicaid eligibility to this group and even Illinois' own troubled history of Medicaid expansions.

Third, this bill takes away federal subsidies to buy private health insurance. More than a third of the people that this bill would dump into Medicaid are currently eligible to buy private health insurance with federal subsidies. Many others currently purchase private health insurance through their employer or on the individual market. But by making these people eligible for Medicaid, this bill takes away federal subsidies, forcing them into a broken Medicaid program through which they will have poor access to necessary care and experience worse health outcomes.

Fourth, the federal government is unlikely to fulfill its commitment to Illinois. Federal Medicaid spending already represents one-fourth of the federal deficit and is expected to more than double in the next decade. This explains why President Barack Obama's last three budgets have proposed shifting more of these costs to state governments and why he has included these cost-shift proposals in debt ceiling and fiscal cliff negotiations. One of the two trustees Obama appointed to oversee Medicare warned states that it was a “near certainty” that federal support for Medicaid will be cut in future years.

Fifth, this bill includes a “trigger” to back out of the expansion in case the federal government reduces the enhanced matching rate, but the trigger is unlikely to be effective. Although the U.S. Supreme Court held that the federal government could not require states to opt into the Medicaid expansion, it did not hold that federal requirements on maintaining eligibility would not apply after a state agrees to expand Medicaid. Federal law classifies the expansion population as a new “mandatory population” for states that opt into the expansion, which brings with it the authority of the federal government to take away all federal Medicaid funds if the state were to ever try to roll back eligibility for that group.

Finally, this bill overloads a program that is already on the brink of collapse. More than one-third of Illinois doctors have stopped taking new Medicaid patients altogether; and when they can get care at all, Medicaid patients frequently suffer worse outcomes than privately insured patients and even the uninsured. SB 26 would dump hundreds of thousands of able-bodied, childless adults into a program that isn't working, crowding out resources for those most vulnerable who are currently on Medicaid. This means that resources for children, the elderly and the disabled will instead be spent largely on young, able-bodied adults without children.

Instead of expanding Medicaid, Illinois lawmakers need to refocus their efforts on improving the quality of the current program, rather than overloading a system already on the brink of collapse.

Jonathan Ingram
Senior Fellow, Health Policy and Pension Reform

Proponents of ObamaCare's Medicaid expansion insist that the expansion is necessary to keep people out of emergency rooms for preventable conditions such as hypertension, asthma and chronic obstructive pulmonary disease.

The only problem? Medicaid patients are more likely than the uninsured to use emergency rooms, especially for preventable conditions.

In 2010, medical researchers at the University of California went through a decade of emergency room visit data provided by the National Center for Health Statistics. They broke up this data by type and seriousness of conditions, wait times, age, sex, race, ethnicity, insurance status and various hospital characteristics.

So, what did they find? They found that Medicaid patients were seven times as likely as privately insured patients to use emergency rooms for preventable conditions. In fact, Medicaid patients were nearly three times as likely as the uninsured to use emergency rooms for preventable conditions. During the study period, the odds of using emergency rooms for preventable conditions went down by 10 to 15 percent for both privately insured and uninsured patients, but went up by more than 25 percent for Medicaid patients.

This should surprise no one, given the fact that more than 35 percent of Illinois doctors won't accept a single new Medicaid patient. Even those who are accepting new Medicaid patients are putting limits on how many they'll take. If that weren't bad enough, Medicaid patients are denied appointments with specialists two-thirds of the time. And even when they can see a doctor, they often have to wait longer for care. Children with juvenile diabetes, for example, must wait an average of 103 days just to see an endocrinologist.

The simple fact is that expanding Medicaid eligibility won't reduce unnecessary emergency room visits. It will simply overload a system already on the brink of collapse. Maybe the General Assembly should spend their time working to improve the current system before they vote to trap hundreds of thousands of new people into a failing program.

Josh Dwyer
Director of Education Reform

According to a 2009 study conducted by Stanford University’s Center for Research on Education Outcomes, 42 percent of Michigan’s charter schools outperformed traditional public schools in math and 35 percent outperformed them in reading. Only 6 percent underperformed relative to their traditional public school counterparts in math and only 2 percent did so in reading.

Results were even more impressive in Detroit. The typical Detroit charter school student made annual gains worth about three additional months of learning in both reading and math compared with their peers in nearby traditional public schools.

A recent op-ed penned by Michael Van Beek – Director of Education Policy at the Mackinac Center for Public Policy – in The Wall Street Journal helps explain why Michigan charter schools are succeeding.

He cites three specific reasons:

1. Michigan allows a variety of public entities to authorize charter schools. By allowing more charter schools than most states, Michigan has developed a fully functioning charter school market.

2. Michigan’s charter schools aren’t subject to teacher tenure laws and have the flexibility to retain or release teachers based on performance.

3. Michigan has several strong networks of education-management companies that run charter schools. These perform better than charter schools run by nonprofit boards.
   

Illinois does have many high-functioning charter schools, as shown in a report we released last year. But it still has a long way to go to create an education atmosphere like Michigan – a place where innovation is encouraged.

Other than school districts – which are notoriously stingy in approving charter school applications because they fear competition – Illinois only has one independent authorizer, the Illinois State Charter Commission. And even that body is under increasing pressure by anti-charter school forces – specifically, those that oppose creating a virtual charter school in the Fox River Valley.

There is a lot to be learned from Michigan. The Illinois General Assembly should follow that state’s lead and institute reforms that increase the number of charter school authorizers, retain charter schools’ flexibility to hire and fire teachers, and allow for-profit companies to directly run charter schools.

QUOTE OF THE DAY

Daily Caller: Big government means permanent scandals

Despite my youthful appearance, I am old enough to remember when Jonathan Alter proclaimed the “Obama miracle” was a White House free of scandal.

President Barack Obama, Alter wrote, “has one asset that hasn’t received much attention: He’s honest.”

Maybe that sterling character assessment will survive the myriad scandals now engulfing the White House. Perhaps none of them will ever reach the president, who may just have the misfortune of an administration and civil service staffed with uncontrollable rogues.

What did the low-level IRS employees in Cincinnati know and when did they know it?

Conservatives are rightly skeptical of this, noting that from the IRS and EPA FOIA scandals to the AP eavesdropping business, every bit of misconduct seems to have cut in the president’s favor. Many attribute this to rough-and-tumble “Chicago-style politics,” where sometimes to make an omelet you have to break a few eggs (or laws).

Despite his goo-goo reputation, Obama’s climb up the political ladder was abetted by associations with machine pols and other unsavory characters from the Windy City. And ultimately, Harry Truman was right: the buck stops with the president, who gave the country such gifts as Attorney General Eric Holder and Secretary of State Hillary Clinton to begin with.

But there is also some truth to David Axelrod’s much-ridiculed observation: “Part of being president is there’s so much beneath you that you can’t know because the government is so vast.”

In other words, the government is too damn big. Not even community organizers can get a handle on it.

ABC News: Report Says Poor Are Moving to Nation's Suburbs

More poor people live in the nation's suburbs than in urban cities because of affordable housing, service-sector jobs and the increased use of housing vouchers, according to a study released Monday.

The number of those in poverty living in suburbs jumped 67 percent between 2000 and 2011, a much larger increase than in cities, researchers for the Brookings Institution said. Suburbs, however, still have a smaller percentage of the poor than cities do.

The report notes that poor people were pulled to the suburbs by more affordable homes and followed jobs that were often low paying. But those who moved to the suburbs also saw manufacturing jobs disappear and housing prices plummet following the economic recession.

"The myth of suburban prosperity has been a stubborn one," Christopher Niedt, academic director of the National Center for Suburban Studies at Hofstra University, told the Los Angeles Times ( http://lat.ms/12FKPNm ). Even as suburban poverty emerged, "many poorer communities were so segregated from the wealthy in suburbs that many people were able to ignore it."

Suburban cities have been ill equipped to handle the surge. In Irvine, the nonprofit Families Forward use to hand groceries to about 25 families every week; now it's more than 160. The estimated number of poor people in Irvine rose from more than 12,000 to nearly 21,000 in a decade, Brookings found.

"Everything is nicely maintained. Things look good on the surface," said Margie Wakeham, executive director of Families Forward. "But the need has just skyrocketed."

The newspaper said poverty shifted to the suburbs earlier in Los Angeles than nationwide. About half of the poor in Los Angeles, Long Beach, Santa Ana and their outskirts have lived in suburbia for decades, according to Brookings' analysis. That percentage rose to 53.4 in 2011.

The report also shows a slight increase in New York City suburban poverty.

Miami Herald: Gov. Scott vetoes hundreds of millions from state budget

Florida Gov. Rick Scott vetoed $368 million in spending from the state’s budget on Monday, using his line-item authority to strike out scores of projects ranging from a $50 million coast-to-coast bike trail to tens of millions in college and university tuition.

Scott’s extensive veto list is more than twice as large as his list last year, and his largest since his first year in office. It slashed state spending from $74.5 billion to $74.1 billion.

Even with the vetoes, the 2013-2014 budget is still the largest on record, and includes $480 million for teacher pay raises, $8.5 billion for transportation projects, $151.8 million for Everglades restoration and $273 million for ports.

Scott talked about signing the budget — and the vetoes — during a news conference at the state’s Department of Emergency Management in Tallahassee. He said crafting the budget, and deciding what to veto, largely hinged on two things: jobs and education.

He stood by his decision to veto $368 million in local projects, saying they did not meet his formula for effective state spending.

“My filter was this: One, is it going to help our families get more jobs?” he said. “Two, will it help improve our education system in our state? And three, will it help make government more efficient.”

Scott vetoed more than $25 million in local water projects, millions in spending for education programs and school construction, museums, re-entry programs and other social services. Many lawmakers hoping to include so-called “turkey” in the budget during the first year of a surplus in years will be disappointed as their hometown projects were axed by Scott.

Times Union: Gillibrand proposes student loan refinance plan

U.S. Sen. Kirsten Gillibrand is hoping to relieve the debt burden of millions of students who have borrowed to pay for their education — especially New Yorkers, who average nearly $30,000 in student debt.

The New York Democrat announced Sunday the Federal Student Loan Refinancing Act, a bill that would lower interest rates for many student borrowers currently repaying their federal student loans.

"More city graduates and middle class families are burdened by student loans than ever before and are struggling to repay a higher amount of debt than ever before," Gillibrand said in a statement. "Our young people should be able to refinance in the same way that our businesses and homeowners do."

The refinancing bill would enable students and graduates who have an interest rate above 4 percent to refinance their federal loans at a lower, fixed rate of 4 percent. Gillibrand said she will introduce the bill in the Senate this week.

Most federal student debt is set at an interest rate higher than 6 percent, Gillibrand said. There are 2.7 million borrowers in New York and 37 million nationwide.

Gillibrand said her bill would lower interest rates for nearly nine in 10 federal student loans nationwide.

There is an estimated $1 trillion in student debt nationwide.

Reuters: Taxes on some wealthy French top 100 pct of income

More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echos reported on Saturday, citing Finance Ministry data.

The newspaper said that the exceptionally high level of taxation was due to a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million).

President Francois Hollande's Socialist government imposed the tax surcharge last year, shortly after taking office, to offset the impact of a rebate scheme created by its conservative predecessor to cap an individual's overall taxation at 50 percent of income.

The government has been forced to redraft a proposed bill to levy a temporary 75 percent tax on earnings over 1 million euros, which had been one of Hollande's campaign pledges.

The Constitutional Council has judged such a high rate of taxation to be unfair, leaving the government to rehash it to hit companies rather than individuals.

Since then, a top administrative court has determined that a marginal tax rate higher than 66.66 percent on a single household risked being considered as confiscatory by the council.

Les Echos reported that nearly 12,000 households paid taxes last year worth more than 75 percent of their 2011 revenues due to the exceptional levy. ($1 = 0.7798 euros)

WSJ: Red Tape Record Breakers

A new study puts the cost of regulation at $14,768 per household.

President Obama is opposing a bill passed by the House last week that would require the Securities and Exchange Commission to better measure the costs and benefits of new regulations. That's no surprise considering that the latest annual index of federal rules shows that Team Obama is now the red tape record holder.

For two decades, Wayne Crews of the Competitive Enterprise Institute has tracked the growth of new federal regulations. In his 20th anniversary edition this week, he'll report that pages in the Code of Federal Regulations hit an all-time high of 174,545 in 2012, an increase of more than 21% during the last decade.

Relying largely on government data, Mr. Crews estimates that in 2012 the cost of federal rules exceeded $1.8 trillion, roughly equal to the GDP of Canada. These costs are embedded in nearly everything Americans buy. Mr. Crews calculates these costs at $14,768 per household, meaning that red tape is now the second largest item in the typical family budget after housing.

Last year 4,062 regulations were at various stages of implementation inside the Beltway. The government completed work on 1,172, an increase of 16% over the 1,010 that the feds imposed in 2011, which was a 40% increase over 722 in 2010.

Another way to measure the regulatory burden is by pages in the Federal Register, which includes new rules as well as proposed rules and supporting documents. By that measure the Obama Administration did not break the all-time record of 81,405 pages it set in 2010. But the 78,961 pages it churned out in 2012 mean that the President has posted three of the four greatest paperwork years on record.

And to be fair, if Mr. Obama were ever to acknowledge that this is a problem, he could reasonably blame George W. Bush for setting a lousy example. Despite the Obama myth that the Bush years were an era of deregulation, the Bush Administration routinely generated more than 70,000 pages a year in the Federal Register.

When it comes to "economically significant" rules, which are those estimated by the feds to cost at least $100 million each, Mr. Crews notes that the current Administration is "in a class by itself." The bureaucracy finished up 57 such rules in 2012 and another 167 are in the pipeline.

These are largely the progeny of the Affordable Care Act, Dodd-Frank and the EPA's effort to use regulation to impose an anti-carbon-fuels agenda that even a Democratic Senate won't pass. Since Mr. Obama doesn't want to accurately assess the costs of these rules, we'll rely on Mr. Crews.

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