compass: the institute's quarterly magazine [summer 2012 edition]

Fare warning

City governments are crushing entrepreneurs, and we’re fighting back

COMPASSTHE ILLINOIS POLICY INSTITUTE

Leading the way for liberty in Illinois

Changing policyDennis Collins is inspiring hope

Arthur BrooksFree enterprise is a moral imperative

Policy researchSolutions for the fiscal death spiral

Summer 2012

President Barack Obama recently said that a president’s proper role was to “make sure everyone gets a fair shot.” For a constitutional scholar and lecturer, Obama sure seems to misunderstand the fundamental nature of America’s founding

and the presidency’s role within it.

While we look to the Constitution for guidance to define the proper, limited role of government, we look to the Declaration of Independence to see what was the founders’ vision for America and what were the grievances that lead to the declaration. We timed this issue of Compass to arrive in mailboxes near what so many call the Fourth of July. But as a regular reader, you will know that I am on a personal crusade to return this national holiday to its proper nomenclature: Independence Day.

The president would do well to re-visit the declaration and think about Independence Day. It’s about unalienable rights. It’s not about ensuring that everyone gets a fair shot. After all, who is to define “fair” and who is to define a proper “shot?” Why, government, of course! The point of the Constitution is to ensure that, as governments change, the rights in the declara-tion remain sacred and protected, not changed to satisfy the new leader’s view of fairness.

That’s the essence of the founders’ vision. It did not focus on fairness; it focused on an individual’s right to pursue life, liberty and happiness as they defined it, not as defined by a government or a president. In other words, it is the individual who pursues, not government. Mr. Obama’s entire premise is that the government does the pursuing. We must reject that notion, yet to some ears it sounds, well, comforting.

As the American experiment unfolded and became the American miracle, the idea of liberty and happiness was transformed into an opportunity society. This is a society in which it doesn’t matter who you are or from where you came. It doesn’t matter what

The point of the Constitution is to ensure that, as governments change, the rights in the declaration remain sacred.”

John TillmanCEO, Illinois Policy Institute“

COMPASSinside

Why Independence Day is the best holiday3Letter from Springfield

5Donor profile:

Larry Framburg

6People changing

policy: Dennis Collins

7Outside

commentary: Arthur Brooks

8Cover story:

Fare warning

13Policy research

updates

14Local government

transparency project

15Impact report

update

19Events wrap-up

23New team

member: Lawrence J. McQuillan, PhD,

chief economist

About usThe Illinois Policy Institute inspires changes in hearts, minds and laws through its mission to promote personal freedom and prosperity in Illinois and America. As a leading independent, 501 (c)(3) research and education organization, the Institute generates positive and sustain-able policy solutions for citizens and lawmakers that help unleash talent and entrepreneurial ability.

190 S. LaSalle St., Suite 1630, Chicago, IL 60603312.346.5700

802 S. 2nd St., Springfield, IL 62704217.528.8800

letterfromtheCEO

2 Summer 2012 Illinoispolicy.org

John Tillman | chief executive officer

Mark Campbell Creative

Cover photo by iStock

See CEO, page 3

“ Kristina Rasmussenexecutive vice president, Illinois Policy Institute

The Institute’s call for local pension accountability has become a key feature of the pension reform debate.”

challenges you might face. You have a right to pursue life, liberty and happiness, not a right to fairness. It might not always be comfortable, but ironically, it has turned out to be the most effective way to create real fairness.

As you celebrate Independence Day, think about what our ancestors fought to be independent from. They fought not for a date; they fought for a state of being, of being independent and free. That is why we must never lose sight of what the fourth day in the month of July

means. It means that the best way to ensure everyone gets a fair shot at opportunity is by ensuring that every individual retains their personal liberty; that the Unit-ed States of America would be born and sustained to protect those rights.

Today, it is up to all of us to be the sustainers of liberty and to ensure that our constitution has a fair shot of be-ing followed in 2012 and beyond. Thank you for all you do to make our work possible in this great endeavor.

Happy Independence Day!

Liberty-producing wins letterfromspringfield Kristina Rasmussen | executive vice president

The spring legislative session will stretch into the summer, as lawmakers struggle to balance Illinois’ budget. There is still much to be done,

but it’s heartening to see the impact that the Illinois Policy Institute and free market principles are having on Springfield.

In February, Gov. Pat Quinn delivered a budget ad-dress focused on key issues that he previously had ignored. In fact, parts of his remarks read as if they’d been taken directly from the Institute’s publications! The subsequent spring session focused on finding savings within Medicaid and reforms for pensions.

The Institute took an aggressive role in reforming the state’s Medicaid program. Health care policy analyst Jonathan Ingram developed a 59-point plan to save the

state at least $2.7 billion, and our particular thanks go to Sen. Kyle McCarter, R-Highland, who took the lead in championing these bold changes.

In early March, the Institute released Budget Solu-tions 2013, and many of the ideas highlighted in the report were introduced in bill form. For example, the Institute’s call for local pension accountability has be-come a key feature of the pension reform debate. Senate President John Cullerton invited the Institute’s Collin Hitt to testify before the Senate Executive Committee on this important issue. Although the legislature ad-journed without inking a pension reform package, the Institute’s groundbreaking research will inform sum-mer negotiations.

Illinoispolicy.org Summer 2012 3

See Springfield, page 4

Continued from page 2

CEO

Mark Campbell Creative

Even in a challenging political environ-ment, the Institute secured noteworthy successes in other areas:

• Rep. Renée Kosel, R-Mokena, passed a resolution against a federal bailout of state debt, which was adapted from nationwide model legislation the Institute based on an initiative from U.S. Sen. Mark Kirk. It will be transmitted to Congress.

• After the Institute pointed out that the unfunded liability for state retiree health care had climbed to a staggering $54 bil-lion, legislation ending “free” coverage went to the governor’s desk. The Institute worked with Rep. Karen May, D-High-wood, to model options for reform imple-mentation.

• Sens. Martin Sandoval, D-Chicago, and Kirk Dillard, R-Westmont, kick-started a long-overdue conversation on better ac-countability for state grants, and the Insti-tute was there to help with best practices from other states.

• Three great bills passed the Senate and await action in the House: Sen. Pam Althoff, R-McHenry, carried legislation to require “price tags” for Medicaid bills, as called for in a July 2010 Institute study on fiscal notes. Sens. Dillard and Ron Sandack, R-Downers Grove, advanced the concept of a state “repealer office” to get rid of outdated and duplicative laws, which the Institute supported in a Feb-ruary 2011 report. Sen. Bill Brady, R-Bloomington, passed a bill requiring bet-ter personnel cost reporting based on the Institute’s August 2011 study on govern-ment employee pay.

• The Institute’s 10-Point Transparen-cy Checklist for local governments was turned into legislation by Sen. Dan Duffy, R-Barrington, who highlighted the mea-sure in the wake of the Dixon comptroller scandal.

• The online affiliate tax, commonly re-

ferred to as the “Amazon Tax,” was put on notice with repeal legislation from Rep. Dave Winters, R-Rockford. Just months later the measure was ruled unconstitu-tional.

• After Rep. JoAnn Osmond, R-Gurnee, put up a good fight, legislation enacting an ObamaCare health care insurance ex-change faltered. The Institute brought in national experts to stiffen resolve against the measure.

• A resolution to put a graduated income tax constitutional amendment on the 2012 ballot failed, and a “single-payer” health care act languished in the Senate.

• Reps. Darlene Senger, R-Naperville, and Joe Sosnowski, R-Belvidere, deserve plau-dits for their school choice work.

• Rep. Wayne Rosenthal, R-Litchfield, took on gas taxes, and Rep. Dwight Kay, R-Edwardsville, was a principled fighter on the House floor for sensible budget re-form.

Please take a moment to thank these legis-lators for their hard-fought efforts by call-ing 217.782.2000.

• • •

In the aftermath of spring session, head-lines carried news of how the General As-sembly has come up short. This is indeed true. But it is important to note that those headlines are also evidence of the Institute’s impact: a few short years ago, few would have expressed disappointment over a lack of progress on pension, Medicaid and budget reductions, but that’s because few were willing to admit to Illinois’ spending problems. That’s changed now.

The debate is taking place on favorable terms, and if that remains the case, trans-formational reforms will be on the near horizon. The Institute’s clarion call for liberty-based public policy rings loud and clear at the statehouse. Thank you for making this work possible.


Springfield Capitol gains

A look at some who made a difference during the spring session.

Rep. Renée Kosel

Sen. Kirk Dillard

Sen. Martin Sandoval

Sen. Pam Althoff

Sen. Dan Duffy

4 Summer 2012 Illinoispolicy.org “

Framburg attended Purdue Univer-sity and graduated with a bachelor’s degree in mechanical engineering. He joined the Army shortly thereafter. Drawn back home to the flat land and Lake Michigan, Framburg returned to Illinois upon his discharge in 1955. He then began his career at his grand-father’s company and settled into the suburbs with his parents. In 1967, while running his grandfather’s company with other family members, Framburg left the suburbs and moved to Chicago, where he still makes his home. In the mid-1990s, Framburg retired from the family business.

In 2010, Framburg received a mail-ing from the Illinois Policy Institute that caught his attention. This mailer led him to support the organization. It also raised his awareness of how closely

and personally public policy affects ev-eryone. Before this mailing, he did not have much of an interest in the political arena; however he since has become very passionate about what is happening in Il-linois. Among Framburg’s chief concerns is Illinois’ public pension crisis. His phi-losophy about government is “to prevent power that corrupts and prevents proper compensation to prevail.” To accomplish this, Framburg now focuses his energy on various political and charitable organiza-tions that relate to his vision for a better Illinois.

Framburg appreciates that the Illinois Policy Institute is a local organization concerned with the political issues that affect the state. He appreciates that the Institute uses common sense principles to achieve its goals. Framburg is a regu-lar guest at Institute events.


Roxane DeVos Tyssen | external relations associatedonorprofile

[Larry Framburg’s] philosophy about government is ‘to prevent power that corrupts and prevents proper compensation to prevail.’ ”

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Larry Framburg has a rich family history with strong com-munity roots in the Chicago area. His grandparents were immigrants from Norway and Sweden who came to Amer-

ica in the mid-1800s and settled in Illinois. In 1905, his grandfa-ther, Henry Alfred Framburg, founded H.A. Framburg & Co., which still is in Bellwood, Ill. Framburg’s grandfather converted a bicycle-making business into a lighting manufacturing company that specialized in chandeliers. As electricity became widely avail-able at the turn of the century, the company prospered.

Empowering Illinois residents to become difference makers

“


peoplechangingpolicy Kristina Rasmussen | executive vice president

WatCh this

You can view a short film about Dennis Collins’ success-ful cam-paign to stop a sales tax increase in Morgan County by visiting Illinois Policy.org/CSummer 12.

tell us about it

Do you know of another Illinois ac-tivist who deserves special recogni-tion for fighting the good fight? Drop me an email at kras mussen @illinois policy.org.

Dennis Collins: Reason for hope in Illinois

Meet Dennis Collins. He’s a fel-low Illinoisan and a dedicated dad.

He’s a humble guy who did something quite extraordinary. Earlier this year, Mor gan County, about 90 miles north of St. Louis, sought to increase its sales tax in a refer-endum. Collins decided to get involved. He organized an opposition committee and ran a clean and principled cam paign against the tax increase. And he won.

All too often, I hear people express dis-may about the future of Illinois politics and public policy. “Is there any chance for real change?” “Is the state too far gone?” People such as Dennis Collins are living proof that we have reason to be hopeful. Good people are working to make Illinois great again by championing the principles of economic freedom and personal re-

sponsibility.

Check out our short film about Collins’ victory. It was filmed and produced by the Institute’s own videographer, Charles Fritschner. It’s a “must watch” for all Illi-nois reformers. Be inspired.

p Dennis Collins successfully fought against a referendum to increase the sales tax in Morgan County.

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p Dennis Collins is living proof that Illinois resi-dents have reason to be hopeful about the future of politics and public policy in the state.

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outsidecommentary Arthur Brooks | president, American Enterprise Institute

Free enterprise: A moral imperative

Illinois is at a precipice, and the out-look is troubling. The state’s pension system is underbudgeted by more

than $80 billion, according to its own estimates. Springfield only balanced its budget last year through a staggering tax hike and what the Illinois Policy Institute has exposed as a great deal of financial sleight-of-hand. And census data show that six times an hour, every day between 1995 and 2009, someone got fed up and left the state for greener pastures.

Meanwhile, neighboring states such as Wisconsin and Indiana are paring regu-lations, trimming the public sector work force and focusing budgets on priority areas. Entrepreneurs in Illinois are stifled and frustrated. The state’s long-term eco-nomic outlook is not bright.

The work of free market advocates is criti-cal to shine a light on these depressing facts and suggest viable alternatives. We have the best policy ideas, but change means sacrifice and moving off the known path. We also need the best arguments for our policies if we want citizens to follow. And that means making the moral case for free enterprise.

As a movement, defenders of small gov-ernment and free enterprise haven’t done enough to make the case for free enterprise. We’ve made the material case, but that isn’t enough; we need to make the moral case.

What motivates me, as well as many oth-ers, to fight for free enterprise isn’t just that the free enterprise system is the best

way for creating wealth, reducing poverty and providing opportunity. We love free enterprise because it’s fair. It’s based on hard work and innovation, not political connection and influence. We love free enterprise because it gives us the space to lead meaningful lives. And, we love free enterprise because it’s the only way to re-ally help the poor.

This is the case we have to make for free enterprise. We have to explain to others why we love it, not just because it makes us better off, but because it makes us bet-ter. Free enterprise isn’t an economic al-ternative, it’s a moral imperative.

We have a lot of work ahead of us, both in Illinois and around the country. We have to rethink regulations and make it easier for entrepreneurs to start or expand busi-nesses, hire workers and create value for their customers and communities. We have to get government out of the business of picking winners and subsidizing losers, whether through targeted tax incentives or bailouts. We have to get serious about our public debt and unbudgeted obliga-tions. We have to get public sector spend-ing under control.

None of this will happen unless we help Americans understand that our economic issues are moral issues. We’ve spent years making arguments about the material su-periority of free enterprise. That’s simply not enough. We have to explain why free enterprise morally is superior as well.

about the author

Arthur C. Brooks is president of the American Enterprise Institute and the author of “The Road to Freedom: How to Win the Fight for Free En-terprise.”

He spoke on June 7 at the Institute.

Learn more about making the moral case for free enter-prise at arthur brooks.aei.org.

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J8 Summer 2012 Illinoispolicy.org

coverstory Jacob Huebert | associate counsel, Liberty Justice Center

Fare warningCity governments are crushing entrepreneurs, and we’re fighting backJulie Crowe just wants to serve her customers; however, the Bloom-ington, Ill., city government won’t let her.Crowe is a Marine Corps veteran, and she’s had suc-cessful careers as an artist and an entrepreneur. In recent years, she worked as a vehicle-for-hire driver in her hometown of Bloomington, safely taking Il-linois State University students to and from down-town bars at night.

While working for different companies in town, Crowe noticed that students preferred being driv-en in smaller vans rather than the standard “party buses,” where overcrowding, fights and vomiting are the norm. She also noticed that young women felt more comfortable with a female van driver who would make sure they arrived home safely. (Taxi driving is one of the most male-dominated occupations in the country; in Illinois, women ac-count for 5 percent of all taxi and limousine driv-ers.)

Crowe saw an opportunity, so she decided to do what so many entrepreneurial Americans have done: start her own business. As she started laying

the groundwork for her business, she bought a 15-passenger van and customized it so she could cater to her young female clientele.

Crowe also applied to the city for a certificate to operate her new service, as a local ordinance required. She expected the application process to be a formality. Instead, it became a deliber-ate, insurmountable obstacle to pursuing her dream.

In accordance with local law, the city held a public hearing about Crowe’s application. Owners of ex-isting vehicle services in Bloomington were invited to comment at the hearing about whether the city should allow Crowe to open her business. Their opinion was unsurprising: All agreed that there were enough vehicle-for-hire services, and they didn’t see a need for anyone new to enter the mar-ket.

See Fare warning, page 10


Illinois Policy Institute

While working as a vehicle-for-hire driver, Julie Crowe realized that young women preferred a female driver. However, when the Marine Corps veteran tried to start her own busi-ness, the city of Bloom-ington said no.

The next step in the process was for the Bloomington city manager to take the in-formation he heard at the hearing and de-cide whether a new vehicle service would be “desirable and in the public interest.” Crowe waited months for a decision. When it fi-nally came, the letter consisted of a single sentence: “The City of Bloomington has determined that there is not a need to have an additional Vehicle for Hire Shuttle, there [sic] your request has been denied.”

Now, the van Crowe spent thousands of dollars on prepping for her budding busi-ness sits locked in her garage, serving no one. Meanwhile, the downtown party-bus chaos continues unabated.

That would be the end of the story, ex-cept that the Liberty Justice Center, the

non-profit, public interest litigation cen-ter started by the Illinois Policy Institute, found out about Crowe’s case and is su-ing the city of Bloomington to uphold her right to earn a living.

ECOnOmiC prOtECtiOnismWhy would the city stop Crowe from opening her business? Here’s a reason: to protect established vehicle-for-hire com-panies from competition. There is no other explanation for a scheme that gives the ex-isting players in the field so much influence, gives an applicant such as Crowe so little opportunity to make her case and gives the city manager such unbridled discretion.

The city now claims that it had to keep Crowe out because having even one more van on the streets would “saturate the com-munity.” But government planners can no


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more determine the “right” number of vehicle ser-vices than they can determine the right number of supermarkets or restaurants. The only way to know how much of a service is needed, and what form that service should take, is to allow entrepreneurs to freely enter the market and let consumers decide who succeeds and who fails.

An unCOnstitutiOnAl sChEmE?Not only is this scheme economic nonsense; it also is unconstitutional. That’s why the Liberty Justice Center is asking the court to strike it down.

Due process of law, which both the U.S. Consti-tution and the Illinois Constitution guarantee, re-quires that every state and local law have a reason-able relationship to protecting the public’s health, safety or welfare. Bloomington’s scheme doesn’t protect the public; it protects a small special-inter-est group at everyone else’s expense.

Moreover, granting a single government official the power to grant or deny someone’s right to earn a liv-ing based on whether he finds it “desirable” violates the rule of law. In America, whether a person gets to exercise his rights shouldn’t depend on whether he can win a bureaucrat’s favor.

Finally, even if that wasn’t a problem, Blooming-ton’s scheme still would violate the constitutional right to due process of law because the sham hear-ings it holds on vehicle-for-hire applications are so unfairly slanted against the applicant.

lOCAl CAsE, nAtiOnAl prOblEmUnfortunately for entrepreneurs, Bloomington’s li-censing ordinance is not unique. Across the state and the country, vehicle-service companies have used political clout to crush competition.

For example, in New York City, taxicab companies successfully have suppressed competition for 75 years. There, one can operate a cab only if he has a city-issued “medallion.” Those medallions trade for as much as $1 million apiece, and therefore are out

of reach for an ordinary person who wants to drive his own cab. The only option for someone who can’t afford to buy a medallion is to rent one, for as much as $800 a week. The city of Chicago has a similar system, and recently its medallions have sold for as much as $325,000 each.

In nearby Milwaukee, entering the taxi business is exceptionally difficult because the city has capped the number of taxi permits at 321. Someone who wants to drive his own cab either can buy a permit for about $150,000 or rent one for $1,000 a week.

The city of Portland, Ore., limits the number of taxis. It also recently has limited competition from livery vehicles – limousines and “executive sedans” that resemble taxis but don’t pick up passengers off the street – by forcing them to charge higher prices than they would otherwise. Portland livery services are required to charge at least 35 percent more than the prevailing taxicab rate for any given route, and they’re required to charge at least $50 for trips from downtown Portland to the airport.

The anticompetitive laws in those last two examples are being challenged in the courts by our friends at the Institute for Justice, a free market law firm based in Washington, D.C. With our lawsuit in Bloom-ington, and others we’ll file soon, the Liberty Justice Center is bringing the fight for economic liberty to Illinois courts as well.



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ECOnOmiC hArmThe costs these laws impose on the econ-omy are immeasurable. No one knows how many jobs would have been created or what innovations would have been in-troduced by businesses that governments have stopped from opening.

What often happens is that consumers are forced to pay higher prices for inferior service. There’s also no telling how many businesses the government has stopped from opening, or how many would-be entrepreneurs never tried to start a busi-ness because they knew they would face a rigged system.

What we do know is that Illinois cities can’t afford to stifle entrepreneurship or harm its economy in this way because the state government’s policies already do enough damage. In fact, Illinois placed 48th out of 50 in a recent ALEC-Laffer survey rank-ing states’ economic performance and out-

look, and Illinoisans are fleeing to other states with better prospects at a rate of one person every 10 minutes.

rEstOring libErtyTo stop the flow of productive people out of Illinois and restore the state’s economy, we must have a judiciary that actively en-forces constitutional protections for eco-nomic liberty.

The Liberty Justice Center’s lawsuit to vindicate Crowe’s rights is a first step to-ward restoring a judicial climate in which individual rights trump the whims of po-litical planners.

By reminding judges of their responsibil-ity to uphold the Constitution, and by holding our government officials account-able in the courts when they overstep their boundaries, we can and will restore Bloomington, the state of Illinois and the nation to a place where people succeed or fail based on their ability to please con-sumers, not on their ability to please a bu-reaucrat.


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A taxi in New York City only can operate if it has been issued a “medallion” by the city. Medallions trade for as much as $1 million each, or rent for as much as $800 week.

If someone wishes to operate a taxi in Chicago, prospective entreprenu-ers must pony up as much as $325,000.

Just to the north, those who wish to start a taxi business in Milwaukee may buy a permit for about $150,000 or rent one for $1,000 a week. However, the Brew City caps the number of taxi permits at 321.

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policyresearchupdates

As lawmakers’ fondness for overpromising and overspending takes its toll on Illinois, the state has fallen deeper into an eco-

nomic death spiral.

Costs relating to pensions, retiree health care and Medicaid are eating away dollars meant for other state operations. Despite last year’s $7 billion tax hike, the state still has billions in unpaid bills. This year, Moody’s credit rating agency gave Illinois the worst rating in the nation for failure to manage its finances. Clearly, it’s time for Illinois to chart a new course.

That’s why this spring the Institute released its fourth annual alternative to the governor’s budget: Budget Solutions 2013: In novation for Illinois.

Budget Solutions 2013 demands a com plete reversal of course. It offers nine strategic reforms that, if execut-ed in conjunction with a repeal of the 2011 tax hike, would put the state back on course to economic growth and prosperity. Additionally, the Institute’s plan:

• significantly reduces the state’s backlog of bills;• allows the state to meet its pension obligations;• allows for a repeal of the 2011 tax hike; and • reforms education spending, Medicaid and public pensions.

The foundation to making these nine reforms mean-ingful and sustainable is two-fold. First, the state needs a real balanced budget requirement; one that doesn’t allow borrowing to fill Springfield’s spending addic-tion. This requirement cannot allow legislators to push unpaid bills into the next fiscal year.

Second, the state needs an honest spending limit to keep legislators in check. Spending growth that’s lim-ited to the annual increase in inflation plus population would go a long way toward reining in state spending.

Budget Solutions’ broad reform areas already have helped good lawmakers in Springfield argue for change:

• Accountability all-around: In de-manding more ac countability from our state and local politicians, the Le gislature is warming to the Insti-tute’s pro posal to stop paying local

school districts’ share of teacher pen sion costs. Illi-nois must end the practice of local school districts handing out end-of-career salary spikes and pen-sion sweeteners, only to have the state pick up the skyrocketing retirement costs. That practice has de-stroyed spending ac countability across the state.

• Sensible spending: Budget Solutions also is in-fluencing laws that bring on more sensible spend-ing and transparency. The Institute is working with a bipartisan group of legislators to demand better performance metrics and transparency in more than $1 billion of state grant money.

• Realignment with reality: Two out of four of the Institute’s proposals for more realistic state spending are being embraced: reforming retired state worker health care benefits and reducing overly generous cost of living adjustments for state retirees.

The Institute testified before the General Assembly on several key elements of Budget Solutions.

Institute health care analyst Jonathan Ingram pre-sented a $2.7 billion reform of Illinois’ Medicaid program to Gov. Pat Quinn’s Medicaid Working Group and, in a rare opportunity, again in a private meeting of the Senate Republican Caucus. Collin Hitt, the Institute’s senior director of government affairs, testified before the Senate Executive Com-mittee about local school district accountability for pension costs. The Institute hosted almost a dozen private breakfast and dinner meetings with legisla-tors to discuss its full budget platform.

Budget Solutions 2013 is a plan that reduces taxes by more than $6 billion and returns that money to hard-working Illinoisans and businesses. It reforms how we spend money so that we can improve out-comes at lower costs. And it begins to aggressively pay down the state’s unpaid bills.

The Institute’s vision allows for an Illinois that puts taxpayers first, restrains state

spending and puts the state back on the path to fiscal solvency. Check out the plan online at www.illinois policy.org/BudgetSolutions2013

Budget Solutions 2013: Innovation for Illinois


Ted Dabrowski | vice president of policy

Sensible Spending

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Accountability all-aro

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Reform cost of livingadjustments

Right sizestateemployeepay

Reformhumanservices

$7 billion

Transformschoolfunding

Local pensionaccountability

End non-transparentstate funding to local

governments

Reform stateretiree healthcare Introduce

CompetitiveGrantFunding

OverhaulMedicaid


Illinois long has been known for government corruption. In fact, a national public corrup-tion study by the University of Illinois at Chi-

cago ranked the northern district of Illinois as the most corrupt area in the nation.

Examples of public corruption have dominated the headlines of Illinois newspapers for years. Most re-cently, news broke that the city comptroller in Dix-on, Ill., allegedly stole $53 million from city coffers. Hanover Township Welfare Director Aurea Pica-sso was sentenced to six years in prison for stealing more than $100,000 in taxpayer money intended to go public aid recipients.

However, reform-minded officials in Dixon and Hanover Township have turned to the Illinois Policy Institute to improve their government trans-parency so these unfortunate incidents won’t hap-pen again. Through the Institute’s Local Transpar-ency Project and 10-Point Transparency Checklist, these governments are striving to provide proactive online transparency of government financial infor-mation and restore trust and accountability in gov-ernment from their citizens and taxpayers.

Shortly after news broke about the thefts of public money in Hanover Township, the Institute conducted an audit of the township’s website. The township scored 12.9 out of a possible 100 points on the Institute’s check-list. After reaching out to all elected officials there, the Institute closely began working with Township Super-visor Brian McGuire to improve online transparency.

Not only was McGuire instrumental in alerting the authorities to the alleged Picasso corruption, but he also led the charge for the township to dramatically improve its online transparency. In accordance with the Institute’s 10-Point Transparency Checklist, Ha-nover Township has added annual budgets, financial reports, employee salaries, bidding, lobbying and a check register of all payments to their website.

“We appreciated working with the Illinois Policy Institute to assist us in becoming a more transpar-ent government for our residents,” McGuire said.

Now with a score of 96.5 percent, Hanover Town-

ship is the first township-level government entity in the state to earn an “A” grade on the Illinois Policy Institute’s Local Transparency Project and one of the state’s top ranking entities overall.

On April 17, FBI agents arrested Rita Crundwell, the city of Dixon’s comptroller, on charges that she stole almost $30 million. Later, federal authorities increased the alleged theft amount to $53 million.

That same day, the Illinois Policy Institute performed a transparency audit of Dixon’s website. The city re-ceived a failing grade, scoring 18.1 out of 100 possible points. The city was lacking in many key corruption fighting transparency measures, such as posting annual budgets, audits, check registers and tax information.

The Institute immediately reached out to elected of-ficials and senior administrators in Dixon to help de-vise a transparency plan to stop this type of corruption from happening again and to restore accountability and public trust in the city of Dixon government.

At a subsequent board meeting, the city of Dixon adopted the Illinois Policy Institute’s 10-Point Transparency Checklist requiring the city to “in-clude annual audits, budgets, revenue, expenditures, salary and benefit information, collective bargaining contracts, and other relevant information regarding the City of Dixon” by Nov. 1 of this year.

Also, in the wake of the Dixon corruption scandal, the Institute worked with Sen. Dan Duffy, R-Bar-rington, to reintroduce local government transpar-ency legislation to deter this kind of fraud from happening elsewhere. Duffy’s legislation, House Bill 3895, would require all local government agen-cies in Illinois to post financial budgets, audits, rev-enues and expenditures online.

Citizens and elected officials across Illinois shouldn’t wait until legislation is passed in Spring-field or a corruption scandal hits their town before they start becoming more transparent. With more than 140 local government agencies graded by the Illinois Policy Institute, we will continue to identify opportunities to work with elected officials and ad-ministrators on the local level all across the state.

localgovernmenttransparencyproject

Dixon, Hanover Township seek help with reformBrian Costin | director of government reform

impactreportupdate


Gov. Pat Quinn instructed lawmakers in February to “reduce ex-penditures” in Illinois’ Medicaid program by $2.7 billion for fiscal year 2013. But neither Quinn nor lawmakers proposed

a plan that did so.

Writing a prescription to rescue Medicaid in Illinois

Instead, a plan surfaced that would cut reimburse-ment rates to hospitals, implement ObamaCare two years ahead of schedule in Cook County and extract more money from taxpayers in the form of higher tobacco taxes. The Institute quickly sprung into action, compiling a menu of 59 reforms that would cut $2.7 billion from Medicaid.

The Institute released its alternative Medicaid plan at a joint Statehouse news conference with state Sen. Kyle McCarter, R-Highland. Sens. Darin La-Hood, R-Dunlap, and Sam McCann, R-Carlinville, also attended the news conference, during which they spoke favorably about the Institute’s plan.

After the news conference, the Institute’s Medicaid plan was featured in the news more than 36 times. Illinois Radio Network carried a story that was broadcast across the state. Every central Illinois TV

station attended the conference, stations in Spring-field, Decatur, Champaign and Peoria carried sto-ries about the Institute’s Medicaid plan more than 18 times. In Chicago, Crain’s political writer Greg Hinz penned a favorable piece about the plan, not-ing: “The Illinois Policy Institute says the state can begin to bring Medicaid into balance without cut-ting reimbursement rates for hospitals and without imposing a $1-a-pack cigarette hike. … Some of the ideas clearly make sense, such as better price transparency, worth $185 million a year.”

The General Assembly incorporated some, but not all, of the Institute’s recommendations in its own $1.6 billion savings plan. It is the Institute’s goal to continually pursue more reforms from its 59-point plan that will balance the state’s Medicaid budget.

See Impact Report Update, page 16

Clipart.com

rEining in rEtirEE hEAlth CArEIllinois state government owes more than $83 billion to its pension plans. Much less publicized is the $54 billion in addi-tional obligations the state has taken on to provide health insurance to government pensioners. Most retired state or public university workers pay little to nothing toward the cost of their health insurance, a perk that almost is unheard of in the pri-vate sector.

The Illinois Policy Institute was the first to report that the unbudgeted health care obligations had climbed to $54 billion. The Chicago Tribune editorial page broke the news in a Sunday piece headlined:

“Surprise, Illinois! You owe another $54 billion”

The Institute proposed government retir-ees pay about half of the cost of their re-tiree health insurance. Health care policy analyst Jonathan Ingram developed a plan that would save taxpayers almost $500 million in the first year of implementation and more than $45 billion during the next 30 years. The unbudgeted liability for re-tiree health insurance would be cut by al-most 40 percent, reducing the $54 billion debt hole by upwards of $21 billion.

The Institute met with dozens of legisla-tors on the need to reform health insur-ance benefits for state employees. Of note, the Institute met on multiple occasions with members of Quinn’s legislative task force on pension reform. Additionally, the Institute worked closely with state Rep. Karen May, D-Highwood, to develop model legislation that would reform in-

surance benefits and save taxpayers bil-lions of dollars over the coming years.

lOCAl pEnsiOn ACCOuntAbilityFor decades, the state has paid the “em-ployer” share of K-12 pension costs on be-half of school districts. And in two-thirds of Illinois school districts, the districts pay some or the entire “employee” share of teachers’ pension contributions and many teachers contribute nothing to their own retirement.

This shell game has destroyed spending accountability across the state. If Illinois is to enact meaningful pension reform, it must include local pension accountabil-ity. The true employer of teachers, local school districts, must pay the “employer” portion of teachers’ pensions. School dis-tricts also must end the practice of picking


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Impact Report Update

p Illinois owes $54 billion in unbudget-ed health insurance to government pensioners.

Most state retirees pay little to nothing for their health insurance.

An Institute plan that calls for state government and public university retirees to pay for about half of their in sur ance would save about $500 million in the first year alone.See Impact Report Update, page 17 “

up the teachers’ share of retirement.

A report released in May, “Playing favor ites,” made the case for local pension accountability by show-ing how state pen sion spending favored wealthy, suburban schools. Opponents of local pension ac-countability threatened doomsday scenarios, but the Insti tute’s research found these claims to be greatly exag gerated. In covering the “normal cost” of pensions, school districts would on average see total expenses increase by just 3.7 percent. That’s hardly catastrophic. In fact, 482 out of 866 school districts actually would see savings if they stopped paying the teachers’ share of pension costs and started pay-ing the employer’s share.

ABC-7 Chicago broke news of the Institute’s re-port on reporter Chuck Goudie’s nightly “I-Team” segment. After Goudie’s story aired, the unions and their allies, including the press arm of the TRS, launched an all-out counterattack. In a memo to teachers, the head of the Illinois Education Asso-ciation described their efforts to keep our report out of the news and intimidate those who covered it. Meanwhile, the TRS reached out to ABC-7 and asked for rebuttal time. Goudie did a follow up the next evening in which John Tillman appeared and TRS’ spokesman shared “his side of the story.”

Meanwhile, an Illinois Statehouse News story about the study’s findings was published across the state in The Southern Illinoisan and other news-papers. The Rockford Register Star editorialized

in favor of the Institute’s report, stating: “We know the report will be controversial in the education community and in the General Assembly. Howev-er, we think it has merit. We urge lawmakers to give serious consideration to its findings as they wrestle with this issue.”

The Institute’s senior director of government affairs, Collin Hitt, testified before the Senate Executive Committee on the findings of the report. Part of a lengthy and contentious debate, Hitt’s testimony highlighted the need for this reform and demon-strated how retirement costs have undermined the state’s financing of public education.

AmAzOn tAx struCk dOwnThe Illinois Policy Institute scored a major victory when a Cook County circuit judge struck down Quinn’s job-killing online affiliate tax law. This is a triumph for thousands of Internet entrepreneurs and for liberty in Illinois.

As a result of the law, many of the estimated 9,000 Illinois-based online affiliates either have been forced out of business or have moved across the bor-der to more business-friendly neighboring states.

This law is one of many that seriously has dam-aged Illinois’ competitive advantage. The Institute closely worked with the Performance Marketing Association and others to fight this tax for more than a year. Institute experts were featured in the Chicago Tribune, Chicago Daily Law Bulletin and on WBBM radio to discuss the online affiliate tax.




See Impact Report Update, page 18

Our point is the state is broke, and it’s time for the teachers to start paying their share instead of the local taxpayers paying for it.”“ John Tillman

CEO, Illinois Policy Institute


grAnt trAnspArEnC yIn fiscal year 2011, the state handed out more than $1.1 billion to nonprofit organizations across the state in the form of 1,636 grants. While taxpayers can access online how much money was spent on these grants, it’s difficult for them to find out what the grants were for and whether the grants achieved their goals.

Transparency is an essential tool to prevent waste, fraud and abuse, and the public has the right to know how tax dollars are being spent. Shining a spotlight on Illinois’ grant spending will strengthen public trust, improve how government operates and save tax dollars.

The Institute partnered with state Sen. Martin San-doval, D-Chicago, to develop legislation that would create an online grant transparency database over-seen by the governor’s office. The legislation was given special consideration at the end of session and passed out of the Senate Executive Commit-tee. The sponsor has committed to working with the Institute and the governor’s office to develop a solution that will provide taxpayers unprecedented access on how their money is being spent when awarded as grants to nongovernment entities.

unChArtErEd tErritOryIn May, the Institute released a report that high-lighted the lack of school choice to suburban and downstate students. Outside the city of Chicago, a mere 14 charter schools serve as alternatives to traditional public schools, and only 3,600 students attend these charters. Meanwhile, 1 out of every 8 students in Chicago attends a charter school. If downstate students attended charters at the same rate as Chicago students, more than 200,000 stu-dents would be enrolled in suburban and down-state choice schools.

The Institute’s report concluded that when fami-lies have access to school choice, demand will fol-low. Therefore, Illinois must abolish its arbitrary cap on charter schools. Charters are driving the process of reform and they’re bringing better re-sults.

In 2011, legislation was signed by Quinn to cre-ate the Illinois Charter School Commission, which will create the opportunity for charter schools out-side Chicago to open and flourish. In 2012, the Institute supported legislative initiatives to further strengthen and clarify charter school law. Moreover, the Institute has consulted with a number of local activists and school officials interested in creating charter schools.



Transparency is an essential tool to prevent waste, fraud and abuse, and the public has the right to know how tax dollars are being spent. Shining a spotlight on Illinois’ grant spending will strengthen public trust, improve how government operates and save tax dollars.

eventswrap-up

déjà vu dEAl: thE FOlly OF CEntrAl gOvErnmEnt plAnning thEn And nOw – FEb. 23

On Feb. 23, the Institute hosted C.J. Maloney, au-thor of “Back to the Land: Arthurdale, FDR’s New Deal, and the Costs of Economic Planning.” Malo-ney told the story of Arthurdale, W.Va. a pet proj-ect of the Roosevelts that was designed as a “human

laboratory” for testing progressive theories of gov-ernment, and how the policies implemented there shaped the America we know today.

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See Events wrap-up, page 20

Events wrap-up

On March. 8, the Liberty Justice Center hosted a fo-rum for Illinois Supreme Court candidates. Justices Joy Cunningham, Aurelia Pucinski, John Riley and Thomas Flannigan shared their views and judicial philosophy on property rights, economic freedom and the constitutional bounds of government ac-tion in the economy. Professor Todd Henderson of the University of Chicago Law School and Joseph A. Morris, a Chicago attorney and former U.S. as-sistant attorney general, served as panelists. Patrick Hughes, adviser to Liberty Justice Center, moder-ated the debate.

juAn williAms: A tAlE OF twO missiOns – April 5On April 5, the Institute hosted FOX News com-mentator and journalist Juan Williams and Educa-

tion Action Group’s Kyle Olson. They spoke about the two competing cultures in public education: one which seeks to find new and innovative ways to educate, and one which works to protect the sta-tus quo. Event attendees were treated with a spe-cial screening of “A Tale of Two Missions,” a film featuring Williams that documents the struggle for school choice.


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illinOis suprEmE COurt CAndidAtE FOrum – mArCh 8



Wisconsin Gov. Scott Walker visited the Institute on April 20, to discuss how he repaired his state budget without tax in-creases and by reining in the power of special interests. These policies dramatically have improved the state’s finances, from local school districts to the state capitol, and have improved the lives of Wisconsinites. More than 130 people attended the luncheon, which also received significant news media at-tention in Chicago, Wisconsin and national outlets.

Arthur brOOks: thE rOAd tO FrEEdOm – junE 7On June 7, the Institute hosted American Enterprise In-stitute President Arthur Brooks to discuss how lovers of liberty can make the moral case for free markets. Brooks argued that humans inherently are moral beings and that the free enterprise system, more than any other system, aligns with the morals and values all of us hold dear.

gOv. sCOtt wAlkEr tAlks AbOut “thE prOspErOus pAth” – April 20


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Events wrap-upContinued from page 20


upCOming EvEntsOn July 19, the Institute will host economist John Blundell in Chi-cago as part of the Liberty Speakers Series.

On July 31, the Institute will host a breakfast in Chicago cel-ebrating Milton Friedman’s birthday.

On Aug. 1, the Institute will host author and political scientist Charles Murray in Chicago as part of our Liberty Speakers Series.

On Aug. 1, the Institute and Sen. Dave Syverson will host a lun-cheon featuring Syverson, Charles Murray and senior fellow Dan Proft in Rockford, Ill.

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Events wrap-upContinued from page 21

Lawrence J. McQuillan, PhD, comes to the Illinois Policy In-stitute with impressive credentials. He was a research fellow at the Hoover Institution at Stanford Univer-sity and the director of business and economic studies at the Pacific Research Institute. McQuillan also was appointed to Gov. Arnold Schwarz-enegger’s task force to draft a con-stitutional spending limit for California.

newteammember

Q: whAt typEs OF prOjECts hAvE yOu wOrkEd On in thE pAst?A: For four years, I was a research fellow at the Hoover Institution at Stanford Uni-versity. There, I specialized in international economics, and writing books and magazine articles primarily on the International Mon-etary Fund. After leaving Hoover, I was di-rector of business and economic studies for more than 10 years at the Pacific Research Institute in San Francisco and Sacramento. While at PRI, I did studies, wrote opinion pieces and performed legislative outreach on tax, budget, regulation, workers’ compensa-tion, lawsuit abuse and other key policy issues in California and nationally.

Q: why dOEs thE illinOis pOliCy in-stitutE nEEd A libErty-mindEd ChiEF ECOnOmist FrOm CAliFOrniA?A: Having lived and worked in California for 15 years, I’ve seen the future if Illinois continues down the path of ever-bigger government. California is the canary in the coal mine. It has been struggling for years with the same economic problems that Il-

linois now confronts. So I’ve worked on most of the same issues in California and know the complexities of the issues and the economic analyses.

Allow me to give two examples: From 2002 to 2004, I wrote some of the first pieces in California exposing the state’s next big financial crisis: workers’ compensa-tion costs and abuse. I developed a reform plan and worked with key legislators to get about 75 to 80 percent of the recommen-dations enacted into law. These reforms have saved businesses in California more than $50 billion and cut workers’ comp insurance premiums up to 60 percent.

I was also appointed to Gov. Arnold Schwarzenegger’s task force to draft a constitutional spending limit for Cali-fornia. This is another reform that would help Illinois. So I’ve already fought many of the fights that now face Illinois, and I bring a free market economist’s perspec-tive to these complex policy issues along with persuadable solutions.

Q: whAt prOjECts ArE yOu wOrking On At thE institutE?A: My first major project is to explain to the public, media and legislators why Il-linois should not enact a progressive state income tax. Illinois has failed to make structural spending reforms in recent years, and lawmakers may soon seek new sources of revenue. The progressive tax is a likely place for them to look, but Califor-nia proves that a progressive income tax is anti-growth, destroys jobs, creates deficits and makes responsible budgeting impos-sible. A progressive income tax would be disastrous for Illinois, so I want to educate lawmakers and the public as to why.


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Q&A with Lawrence J. McQuillan, PhD, the Institute’s Chief Economist

u

Moving forward, don’t stop nowAs we transition into lazy, for some, summer days, the Institute is poised to work harder than ever. The heat wave of liberty continues in the Midwest where Gov. Scott Walker’s policy reforms received a second en-dorsement vote in Wisconsin and where governors in Michigan, Ohio, Indiana and Iowa continue to advance better policies as well.

Illinois, of course, remains an outlier. Elected officials of both parties continue to choose the status quo of policy failures. But there is good news. The groundwork for the reforms we are seeing around the Midwest began long before now. And that is exactly what we are doing, in-vesting in steadily moving the policy and cultural nar-rative from the failures of the past to the solutions of the future – solutions we are pioneering at the Institute. Keep your eye on our site, our emails, our blog and our policy recommendations, for these all are leading policy indicators of the solutions that are coming to Illinois.

None of this forward progress is possible without the generous support of our donors. If you have been sup-porting us, thank you! If you are in a position to make a contribution to this great mission of reforming Illinois but have not done so, I’d like to talk with you today! Please give me a call at 312-346-5700, ext. 203!

Join us as we move forward, we’re just getting started!

Sincerely,

John TillmanCEO

Policy changes lives.Visit our website at www.illinoispolicy.org.

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compass: the institute's quarterly magazine [summer 2012 edition]

Documents

marine corps

mark campbell

senate executive

prevents proper

progressive

retiree health

liberty speakers

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