Auditing the Auditor General

calculator-1180740_1280.jpg“Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for the profit, honor, or private interest of any man, family or class of men.” John Adams.

Our Founding Fathers knew human nature, especially how easily government power can corrupt those entrusted with it. Serving in public office is supposed to be service, not a profit-making enterprise. But for some, the perks and the money blind them to this purpose.

The people of Illinois have seen more than their fair share of corrupt politicians, who bend and often break the rules to pad their wallets. Governors Blagojevich and Ryan are the most prominent recent examples, but we’ve also suffered a flood of legislators, aldermen, and other local officials who have been corrupted by public “service.”

We’ve got a new scandal brewing in Springfield. This one involves the state’s Auditor General, Frank Mautino—the public official whose entire job is ensuring honest, transparent, and effective operation of Illinois government. Our state constitution created the office of Auditor General, in large part to protect the people’s tax dollars from theft, misdirection, and waste.

Prior to becoming Auditor General, Mautino was a state representative for 24 years, rising to Deputy Majority Leader and acting as one of Speaker Mike Madigan’s chief lieutenants. But shortly after becoming Auditor General in January, numerous irregularities in Mautino’s campaign funds were uncovered by watchdogs and good government groups.

It turns out, Mautino made payments averaging over $20,000 per year, for 11 years, to a local gas station owned by a city alderman, for alleged “gas” and “repairs” to his automobile. At the same time, Mautino received tens of thousands of dollars in travel reimbursements from the taxpayers of the State of Illinois.

He also averaged almost $400 per month on “campaign meals,” including roughly $33,000 spread over 500 trips to his wife’s restaurant, Alfano’s Little Sicily. There are many other suspicious items on his spending reports, but the real kicker is over $250,000 in alleged campaign payments to his local bank, when the campaign loans reported from the bank only amounted to $26,000.

When you see all this spending by a representative, you’d expect to see some pretty tough re-election campaigns. Except Mautino was either unopposed or very lightly opposed for most of his elections over the last decade.

After months of trying to get answers from Mautino and his lawyers privately, this past week, I joined 20 members of the General Assembly to publicly demand a full explanation and all documents related to these irregular spending items. You see, Mautino has hired a skilled criminal defense attorney—a former federal prosecutor, who served as the U.S. Attorney for Springfield—to defend against our inquiry and another public inquiry by the State Board of Elections. There is also speculation that the FBI and IRS may be looking into this spending, and Mautino’s spokesman has refused to answer reporters’ questions about whether federal investigations are pending.

At this point, we don’t know whether the campaign dollars went to enrich family members and political cronies, or were given in exchange for some political or other favors, or whether some funds were skimmed off the top for personal use—or if all the expenditures, however suspicious-looking, were legitimate campaign items. Without all the documents and a full explanation, we just don’t know.

People often ask me whether we’ll be able to clean up Illinois. It’s disheartening when the Auditor General, the constitutional officer charged with auditing Illinois government, can’t even explain his own records promptly and forthrightly. The only way forward is to seek out every single instance of corruption and self-dealing, and to shine a bright spotlight on every dark corner of Illinois politics.

Fighting Job Killing Bills

Cracks in the Walls of Madiganistan

wall-1179614_1280.jpgLast Thursday evening, on the House floor, we witnessed something that shocked even veteran members of the Illinois General Assembly. Speaker Madigan lost control of the Democrat caucus.

The House was in session Thursday night, but business came to a screeching halt, as rank and file Democrats huddled in various groups, scattered across the floor. Over here, a faction of the Black Caucus met, over there were city and near-north-suburban liberals, and other groups formed organically without any noticeable defining characteristic.

Mike Madigan has kept the House Democrats in line for 30-plus years, with differences of opinion or dissent quickly quashed—and certainly never put on public display. Such a level of power is unique in American politics, but it’s understandable when you consider that Speaker Madigan is personally responsible for electing many, if not most, of the House Democrats.

The Madigan campaign program is legend: he often plucks a person out of obscurity who could never be elected to the General Assembly on their own. (Sometimes these individuals are even registered Republicans, but no matter, they switch parties in order to be part of “the program.”) Then Madigan provides them with millions in campaign cash, along with paid staff members and “volunteers.” For some of these candidates, work as a General Assembly member is the best employment they’ll ever have—it’s a steady paycheck with benefits, and folks deferentially call you “Representative” and spontaneously and instantly hold doors open for you.

However, when that person wins a seat in the Illinois House, they understand that the price of the seat is predicated on absolute loyalty to Speaker Madigan. If you cross him, (poof!) you’re out. Just this past year, Chicago Democrat Rep. Ken Dunkin—a 13-year veteran of the House—went against the Speaker on a small number of votes. The Speaker then found an opponent to run against Dunkin in the Democrat primary, and Madigan showered the opponent with millions of dollars in campaign donations. Madigan took a “scorched earth” approach to the election, repeatedly and personally tarring Dunkin. Madigan beat Dunkin in that very ugly primary election last month, destroying Dunkin’s public reputation in the process. That’s the Madigan program.

But last week, the reality of the past 30-plus years was suspended, due to intense pressure on Democrat representatives from the impact of the budget crisis on higher education. Chicago State said it would shut down on May 1, which is the same day students must make their college choices. Many feared that high school seniors would reject Illinois public institutions altogether because those institutions could not guarantee they’d be open and fully operational in the fall, due to lack of funding.

As a result, downstate and Black Caucus Democrats abruptly broke with Madigan to negotiate with Republicans, and together, we reached a compromise on emergency funding for state universities, community colleges, and Monetary Assistance Plan grants for poor students. Unlike the prior “spending plans” put forward and passed by Mike Madigan, which either had no funding or grossly insufficient funding, this emergency plan was fully funded, with state dollars from a special fund for education. For that reason, the governor gave the plan his approval and signed it first thing this past Monday morning.

Was this display of bipartisanship a one-time thing, or a sign of momentum? Will Speaker Madigan come around to embrace compromise, or continue to dig in his heels? Will Madigan snap his members back into line, or will he continue to lose them?

In the end, this crack in the walls of “Madiganistan” may be just the opportunity to get us where we need to go as a state: substantial reforms, proper government services, and a balanced budget to pay for them.

Rep. Breen Bills to Clean Up Government Advance to the Senate

Capitol_Shot.jpgFriday, April 23, was the deadline for getting all House bills out of the House chamber and over to the Senate. That date serves as an unofficial end of the first half of the legislative session. Rep. Breen worked a number of House bills this term and won passage of three of them, with two focused on government reform and transparency.

When the disgraced former president of the College of DuPage was awarded a contract extension behind closed doors in 2011, the COD Board violated the Open Meetings Act. It wasn’t until 2015 that the IL Attorney General’s office confirmed that a violation had occurred and reprimanded the board. The Open Meetings Act allows citizens a brief 60 days to go to court to get relief, but unlike most other laws, the time clock here starts at the time of the actual violation, instead of after the decision is issued by the Attorney General’s office. Because of this, the citizen who filed the complaint with the Attorney General about the sweetheart contract deal at COD never had her day in court. HB 5683 will close this loophole and start the clock for a lawsuit only after the Attorney General’s office has issued its decision. "We can't afford a weak or ineffective Open Meetings Act, especially in light of the corruption we've lived through in Illinois," stated Rep. Breen. HB 5683 passed 114-0 and is now in the Senate.

During the last hour of the last day of the "first half," the final bill considered was Rep Breen's legislation to make end-of-career pension spiking in municipal government a thing of the past. HB 5684 garnered a diverse bipartisan group of cosponsors, and the measure passed 100-3. "Across the state, taxpayers are suffering because of this practice, which occurs when longtime public employees with large accrued balances of sick time and vacation time are allowed to transfer those days into pre-retirement cash payments that are made outside the usual 90-day look-back period," Breen said. HB 5684 will require local municipal boards to hold an open meeting with full disclosure to the public of exactly how a retiring employee’s salary would be affected, before any pension spiking can even be considered. "This sort of public notice and shaming in some cases will hopefully put an end this practice, saving municipalities and taxpayers substantial amounts of money."

In the Trenches

war-1182365_1280.jpgIt’s deadline month for the General Assembly, that time of year where pending bills must meet the various time limits set for consideration. We spent most of last week in committee hearings on the thousands of bills filed this year. This week, we will negotiate amendments for bills that need additional work, with a few more bills reaching agreement and advancing, while the rest are deemed dead for this session. We’ll also begin House floor consideration of bills that are in final form. This is the regular cycle of the House: committee, amendments, floor, passage.

The budget and larger debates over the future of the state hang like a fog over the legislature, but this “regular order” is still observed. There are still many laws to tweak, add to, or subtract from in our Illinois code, just as in other years. Amidst a deeply divided General Assembly—and deeply divided Illinois—the fact that we can find enough common ground to advance mundane legislation may be an indication we’ll be able to work together on the bigger issues facing the state down the road.

Even so, I hear from the old-time legislators that the current acrimony is the worst they’ve seen. One even compared the current situation in the General Assembly to the trench warfare in World War I: combatants on both sides pinned down in their respective trenches, with no easy means of obtaining more than a couple of feet of ground.

The sides are pretty well fixed: Speaker Michael Madigan wants to spend $36 billion this year, but the state will bring in $32 billion in tax revenue—so he needs a tax hike—but he doesn’t want his Democratic caucus to be seen as responsible for that tax increase. Governor Bruce Rauner wants government and business reforms, and he sees his election in 2014 as a mandate for those reforms. The business community wants to see some progress to prove that Illinois is truly turning around, whether that means changing the way legislative districts are drawn (by an independent commission instead of by whichever party is in power), or term limits for legislators, or substantial regulatory and tax reform. For young people just starting out and for those who have lost jobs, they want to see Illinois return to being the economic engine that it should be. For seniors, they want the brakes put on property taxes and other government taxes and fees, so they aren’t forced to move out of state and away from friends and family. The people of the state generally just want the whole mess fixed, so they can go about their lives.

And, while everyone believes that the end must be coming soon, no one is quite sure when or how that end will look. Without stretching the analogy too far, the tide of the “Great War” was turned and won through the addition of an overwhelming outside force: the United States military. If you had to guess where that new “outside force” would come from in Illinois, a safe bet would be some type of crisis. The lack of funding for social services and higher education have added pressure, but not enough to force a resolution. Soon enough, we’re going to see larger crises, such as the insolvency of the Chicago Public Schools (or of the City of Chicago itself). It’s tough to imagine this dispute continuing much past a crisis of that magnitude.

But until then, regular order in the House continues, and we remain “in the trenches.”

Will Taxpayers Drown in Pension Uncertainties?

river-730485_1280.jpg“Do not cross a river if it is on average four feet deep.” – Ancient proverb

Crossing a river is no small task: a mistake can mean catastrophe. Rivers are murky. Rivers flow quickly. River beds are uneven.

Illinois’ public pension funds share similar risks, including an assumption that these funds will steadily gain an expected “rate of return” each year, for the indefinite future. Currently, the expected rate of return for our state pension funds is set at 7.5%. Pensions are always supposed to be 100% funded, so the contributions made in the year of work should, decades later, be sufficient to pay the promised benefits. A higher rate of return means the money will grow faster, so you can put in less now, while a lower rate of return means more money must be deposited up front to get the same benefits down the road.

Just like a river bed, the rate of return on a pension fund can fluctuate wildly. That four-foot-deep river bed may be two feet deep across two-thirds of the river—but it’s the eight-foot-deep drop that will drown you. But on average, the river bed is still four feet.

Here’s where the analogy breaks down: rivers are fixed and can be measured with some precision. But there’s no way to measure the actual rate of return of a pension fund. An expected rate of return is a prediction of the future, a prediction of future returns in highly volatile financial markets.

This uncertainty is a primary reason that most private employers no longer offer guaranteed pensions. And many private plans have gone insolvent, paying pennies on the dollar to retirees who had been counting on those funds. The Teamsters’ Central States Pension Fund recently announced a bid to cut payments to current retirees in half (or worse) starting in July, to avoid the collapse of that fund.

Now, you may say, that 7.5% expected rate of return doesn’t sound unreasonable, so what’s the big deal? Well, up until 2014, the experts had set the expected rate at 8%. But in 2014, the pension funds lowered the rate to 7.5%. With that 0.5% reduction in expected growth of the funds, the math changed, meaning that we had not put in enough money up front, so our unfunded liability went up by billions of dollars. And the annual pension payments were immediately increased by hundreds of millions to make up the shortfall.

And, unlike a mutual fund or stock portfolio, pensions are supposed to be safe. The bankruptcy courts recently forced the City of Detroit to lower its estimated rate of return to 6.75%. The federal government requires private plans to use a 6.2% estimated rate of return. And Moody’s Investment Services relies on the safe, guaranteed nature of pensions in using a 4% estimated rate of return when calculating pension debt.

If the true future rate of return earned in the financial markets by our pension funds turns out to be closer to 6.75%, much less 4%, the consequences for your tax bill will be grave.

Right now, roughly 25% of general revenue tax dollars go to pay pensions, a large majority of it to pay off the back pension debt earned for prior years’ work, and a smaller portion to make the annual contributions for this year’s work. A majority of the debt was incurred year after year because state politicians refused to annually set aside the estimated amounts necessary to cover the pension benefits earned for each year.

But a substantial part of our pension debt is due to overly optimistic estimated rates of return. It’s a little-known fact that, even if pensions were funded at the estimated levels, we would still be tens of billions short of what we will need to pay our pension obligations. Going forward, if reality proves the “experts” wrong, and their estimated rates of return are too high, taxpayers will be on the hook for their mistakes, to the tune of billions and billions of dollars.

Everyone should have a sound retirement fund, but the question is how to get there. Should taxpayers bear the risk of guaranteeing against the swings of the private financial markets? Or should each family bear the burden of putting together a large enough amount in mutual funds, stocks, bonds, and other investments to ensure for retirement? The answers may not be easy or simple, but we won’t solve these big problems without honestly and seriously asking questions like these. The risks of drowning in the uncertainties of the future are way too high.

Regardless of Election Results: IL Government is Out of Touch & Costs too Much

dollar-1294424_1280.jpgLife is different this morning across Illinois. You may not notice driving to work or the supermarket, but yesterday marked the crescendo of several multi-million-dollar political fights waged throughout the state. Today, either Speaker Michael Madigan or Governor Bruce Rauner will be declared the "winner" or "loser" of these primary election contests. The impact will be felt for the remainder of the legislative session in Springfield, with the "winner" emboldened and the "loser" left wondering how or whether to change course.

Whatever the election results, the problems with state government remain clear: crushing debt, a culture of corruption and over-regulation, and a refusal to live within our means. If your political leaders are trying to fix these issues, they’re on the right track. If not, they’re on the wrong track—and for decades, we’ve been on the wrong track.

Over the past 20 years, our state politicians have increased spending well beyond the rate of inflation and population growth. State tax revenues have increased modestly over that rate of growth, such that we should have an extra $2 billion in surplus this year. Instead, we’re being told that every spending item is “critical,” no reforms are necessary, and taxes must be raised to cover a $4 billion shortfall—in all, a total of $6 billion more in spending than our historical level.

Illinoisans are generous people. But we’re already bearing the 2nd worst property tax burden in the country, the worst sales tax burden, and a substantial income tax burden.

Illinois government is out of touch and costs too much.

"Gotcha" Government

dollar-499481_1280.jpgImagine you’re at the shopping mall on a Saturday afternoon. You fought through the crowds, eventually found a few nice things to buy, and you’re headed back to your car. As you approach, you see something under your windshield wiper.

Maybe another pizza coupon? An ad for driveway sealing? No, it’s a $50 city ticket! You’re a law-abiding citizen, but you missed the deadline to renew your license plates, because the state government didn’t mail you a renewal notice. Since Springfield pols can’t balance the budget, you’re out another fifty bucks.

This isn’t a fairy tale. The Village of Schaumburg recently decided to take advantage of the lack of renewal notices to make extra money off folks shopping at Woodfield Mall. Schaumburg staff attacked the parking lots of that private shopping mall, ticketing cars with reckless abandon. And they made a ton of money doing it: monthly fines from tickets are up 25%, 50%, or more.

Not to pick on the good people of Schaumburg, but theirs is the same municipal government that put a red light camera at the main entrance to Woodfield Mall, even though there was no indication that the intersection was unsafe. They made millions, but boycotts of the mall ensued, eventually shaming village officials into removing the camera.

Why do we see so many examples of this kind of “gotcha!” government?

The news is full of stories about how government is breaking down across the state, from social services to universities to pension funds. Instead of tightening their belts to match programs to the funds available to pay for them, governments turn to increasingly outrageous cash grabs. Springfield doesn’t help matters: the majority party in the House and Senate won’t even consider a balanced budget, much less the sorts of reforms that could help school districts, municipalities, and other units of government lower their costs.

For instance, did you know that the state requires universities to use soybean-based ink in all their printing? That requirement alone adds millions to the cost of our children’s educations, but it doesn’t do a thing to help those kids get good-paying jobs or become better citizens. (However, it does keep the soybean lobby checks flowing to the politicians!)

I get a lot of special interests demanding that I vote to raise taxes. But recent studies have shown that, accounting for inflation and population growth, Illinoisans pay a lot more in taxes than we did 15 years ago. In other words, even though more money goes into the system today than it has before, we’re more broke than we’ve ever been.

More money isn’t the answer, but reform. We can have the government we want and need, but we have to focus on delivering effective services to taxpayers, not on propping up bureaucracies and special interests.

Rep. Breen Questions Sponsor of AFSCME No-Strike Legislation

On Tuesday, February 16, 2016, Rep. Peter Breen vigorously questioned the sponsor of Illinois House Bill 580, Rep. Chris Welch. The bill is commonly known as the AFSCME no-strike bill, and it is almost identical to last year's Senate Bill 1229, which was vetoed by Governor Rauner. If this bill were to become law, it would take the governor out the contract negotiation process and replace him with unelected arbitrators. Click on the youtube video to watch the floor debate. 

Better Politics?

A_New_Way_Image.pngPresident Obama gave an address to the General Assembly this past Wednesday, nine years to the day in 2007 he announced his candidacy for president, on the steps of the Old State Capitol in Springfield. The speech was what some called the beginning of his “farewell tour,” and his tone was much different than we’re used to hearing from him.

After the president finished, I turned to one of my colleagues and said, “I could’ve given 90% of that speech.” Apart from a brief recounting of specific policy prescriptions, the speech was about the corrupting influence of special interests in our political life: how the establishment negotiates sweetheart deals for itself, deals that we all know about but feel powerless to stop. The disparate treatment of the politically connected, without anchor in anything but raw power, has hardened our positions and stripped away the ground for compromise. If neither side stands for anything of substance, there’s no place to “meet in the middle,” because there is no “middle.”

Across the country, this feeling is causing a divide within and throughout our existing political party structure. The dividing is less about philosophical labels like “conservative” versus “liberal” and more about the basic concepts of establishment versus reform.

For the rest of the day on Wednesday, my Democratic colleagues were positively glowing—there was hope in the air, even joy. We were going to have a “new kind of politics” in Springfield .… then came Thursday.

On Thursday morning, House Speaker Mike Madigan jammed a highly controversial bill through committee. If passed, the bill would result in billions in salary increases for state workers, without any regard for how to pay for them. Our state workers are the best paid in the nation, and with the incredible pressures on families in Illinois—and with no state budget—it’s not time to be talking about massive raises.

This isn’t a new bill, either: it is a refiling of the most heavily contested bill we faced last year. Floor debate on that bill went on for hours, and it was vicious. The Governor vetoed the bill before, and there’s no reason to think he won’t veto it again. The timing was odd, unless you’re following the politics. We’re coming up on the March 15 Primary Election, and Speaker Madigan wants that bill voted on in time to influence a number of key primaries across the state—both Democrat and Republican.

I happened to be in the committee where the bill was considered. With President Obama’s speech fresh in mind, I vigorously questioned the lobbyist presenting the bill. Despite the flowery language he used to describe the measure, the whole thing was a clear power grab. Click here to listen to the audio of our exchange.

We’re facing a budget crisis, a jobs crisis, and at heart, a leadership crisis. In political life, you always ask whether something is a “70% or 80% approval issue”–in other words, if put to a vote of the public at large, would 70 or 80% or more support the policy? In this seemingly intractable political crisis, maybe the key to finding the “70% or 80%” way forward can be found by asking a different question: not which policy gives a “win” in the traditional Republican versus Democrat framework, but does the policy promote reform, or the stagnant, stale, and corrupt status quo?

PS—You’re seeing a microcosm of the reform versus establishment debate locally, at the College of DuPage. Congratulations to David Olsen, who was chosen to fill the vacant 7th trustee position on the COD board. David will bring a fresh perspective and a proven commitment to open, transparent government to the College. At only 27 years old, David is already Deputy Mayor of Downers Grove, and while in school at U of I, he was student body president, so he’ll connect well with the students at COD. He’s a great pick to break the logjam and protect taxpayers.