Illinois debt rating downgraded again; procurement reform passes

Another debt downgrade for Illinois
Before adjourning the spring session without a budget agreement in place, state officials were warned by the major credit rating agencies that the state would face another downgrade if no action was taken. Just hours after adjournment, Moody’s and Standard & Poor’s moved Illinois to the brink of junk bond status.  The ratings (Moody’s went to “Baa3” and S&P to “BBB-“) came with a “negative outlook,” which amounts to a formal warning by both firms that yet another demotion of Illinois’ status to non-investment-grade is dangerously close.

If Illinois’ debt is further demoted to below investment-grade status, the effect would be felt in ways beyond just the higher interest costs to taxpayers. For example, pension funds are partially or totally barred from taking positions in non-investment-grade securities.  The state might find itself increasingly unable to sell debt at all, something which is already affecting the non-investment-grade bonds issued by Chicago Public Schools. Furthermore, economic experts warn that a reduction which puts Illinois below investment grade would be a signal to potential investors and job creators that Illinois is diminishing its commitment to policies that make the state an acceptable place to invest money and create jobs.

House approves procurement reform
A few bills made it through the process and passed both the House and Senate before adjournment last week. One of them was Senate Bill 8, a reform of the state’s procurement system, which is the process the state must follow to purchase goods and services.

Senate Bill 8 is a comprehensive reform that affects many facets of the Illinois public sector, including state universities. The bill frees up many of the state’s purchasing officers from several outdated provisions of the existing law that increase the cost of obtaining goods and services required by state government for its operations. For example, current law forbids the use of an all-electronic process to put out bids and procure goods.  SB 8 authorizes the use of electronic procurements.

The overall model followed by many of the provisions of SB 8 is that of a centralized agency procurement process overseen by an executive chief procurement officer (CPO).  The CPO is given power to determine, in many purchasing environments, what is in the state’s best interest after receiving recommendations from the agencies.  This follows the procurement model used by many larger firms within the private sector. The reforms have the potential to save the state money by streamlining the process of purchasing.

9-1-1 program extended
The 9-1-1 program, which authorizes and supervises the work of the various 9-1-1 emergency response service centers around the state, is scheduled to expire on July 1, 2017. SB 1839 would extend the life of this program until December 31, 2020.  It would increase the monthly 9-1-1 surcharge paid by telecom customers from 87 cents per month to $1.50, effective in January 2018. 9-1-1 centers say the surcharge hike is necessary to cover the increased costs of upgrading technology and running the centers.

This legislation also contains language intended to enable providers that are in the process of moving away from landline technology to continue to provide voice service for home-based phones. Large telephone firms will be required to continue to provide services that will contain all of the applicable functionalities for voice telephone services that are included in current telecom standards.

Young doctors pursuing residency outside of Illinois
New doctors must choose a location that provides the best match between their medical specialty and their place of residency. Resident physicians are the backbone of much of the hands-on medical care of the United States. They have just graduated from medical school, so their training has been carried out in full compliance with the most recent advances in medical science.  At the same time, they are completing their training and have not yet been fully certified by the specialist boards that control the type of medicine they will practice. This means that in a hospital or large clinic, they are the doctors who spend the largest percentage of their time in face-to-face contact with patients.

A recent study carried out by Crain’s Chicago Business indicates that for many 2017 Illinois medical schools the percentage of medical school graduates who chose to start out in residency practice within Illinois is dropping significantly. The University of Illinois College of Medicine reports that only 28% of this year’s graduates are staying to practice in Illinois, down from almost 37% last year. The SIU School of Medicine in Springfield, which was established for the specific purpose of encouraging young doctors to set up practice in underserved regions of the state, reports only 21% of its graduates will stay in Illinois, a decline from 30% last year.

Illinois public-sector medical schools report that their student life and ability to encourage medical students to match with Illinois hospitals has declined severely in line with overall cuts in public-sector higher education. While medical schools get large percentages of their funding from teaching hospital health care reimbursements and the federal government, the absence of a state budget which appropriates funds for their work is reported to have made Illinois look like an unattractive place to commence the practice of medicine.

Next session day yet to be determined
The House adopted an adjournment resolution which placed it in a state of “continuous session” beginning in June, with the specific date to be set by the Speaker of the House and then announced to members and the public. While a House appropriations committee held a hearing in Chicago on Thursday, as of this writing no word had been received about when we could expect to be called back into session to finish our work. The threat of further downgrades and the continuing damage to state-funded entities make it clear that this needs to happen as soon as possible.

Did You Know?
While the U.S. Census Bureau conducts its formal count of the population every ten years, it also issues population estimates on July 1 of each year. So we will have some updated numbers in a few weeks. The Census Bureau estimates that the July 1, 2016, population of Illinois was 12,801,539 and the total for the United States was 323,127,513. The next official Census count will be in 2020.