Windhorst Weekly – June 6, 2020

Dear Friend,

This week’s Windhorst Weekly provides a detailed update on two major issues that made news this week. I’ve got lots of new information from the Illinois Department of Public Health and the Illinois State Board of Education on summer school and in-person learning. I also provide a ‘deep-dive’ look at the State of Illinois’ current financial picture. As always, thank you for your continued calls and messages. Stay tuned next week for information on a summer reading program my office will be sponsoring.

As always, thank you for reading!

IDPH, ISBE Release Summer School and In-Person Learning Guidance

In conjunction with the Illinois Department of Public Health (IDPH), the Illinois State Board of Education (ISBE) has released new guidance focusing on activities allowed in Phase 3 of the Restore Illinois plan, including summer school.

ISBE says the guidance is a result of collaborative efforts between educators, superintendents, social workers, nurses, and other stakeholders.

See below for a small sampling of information released by IDPH and ISBE this week. You can view the entire 29-page guidance booklet by clicking this link

“All public and private schools must follow IDPH requirements in Phase 3, which:

  • Prohibit more than 10 individuals from gathering in one space;
  • Require social distancing policies; and, 
  • Require use of appropriate personal protective equipment (PPE).

Decisions regarding whether to conduct allowable activities during Phase 3 will remain at the discretion of local school authorities, in consultation with local public health departments. Schools should ensure individuals wear face coverings and other PPE appropriate to their duties and risk of exposure, wash hands frequently, conduct symptom and temperature checks before entering the school building, regularly clean and sanitize buildings and equipment, restrict the borrowing or sharing of items, and limit capacity in any space to 10 or fewer people. Individuals who show any signs or symptoms of illness should stay home. 

The guidance outlines what to do if someone appears ill at school and further considerations for specific areas of the school, such as restrooms, classrooms, water fountains, playgrounds, hallways, administrative offices, and cafeterias. The guidance also contains considerations for specific activities, such as physical education, behind-the-wheel driver’s education, transportation, and music courses. Schools should clearly communicate safety protocols and expectations to students, staff, and families in advance — in the family’s native language — and via multiple modes, including signage around the school.

Activities allowed in Phase 3 include:

  • Behind-the-Wheel Instruction — Students may participate in behind-the-wheel instruction. Vehicles must be cleaned and sanitized between each use and only two students and one instructor may be in a vehicle at a time.
  • Child Find — Districts may conduct activities pertaining to the legal requirement that schools find all children who have disabilities and who may be entitled to special education services.
  • Early Childhood, Special Education, and English Learner Screenings — Schools and districts may conduct in-person early childhood, special education, and English Learner screenings.
  • Extended School Year — Districts may offer extended school year services, as appropriate, to students whose Individualized Education Programs (IEPs) require the service. 
  • Host Summer Camps and Other Programs — Schools and districts may allow buildings to be used for summer camps and other programs sponsored by third parties. Playgrounds may not be used.
  • Individualized Education Program Meetings — Districts may conduct IEP meetings for families who have been unable to engage in virtual IEP meetings. These meetings should still be held virtually, to the greatest extent possible.
  • Mediation and Due Process Hearings — Mediations and due process hearings may take place in person. However, it is recommended that mediation and due process hearings still be conducted virtually, if all parties agree to do so.
  • School Registration — Staff may provide in-person registration for students and families, when necessary. Schools and districts should also provide remote registration opportunities.
  • Special Education Evaluations — Districts may conduct evaluations that could not be completed virtually. Evaluations should still be held virtually, to the greatest extent possible.
  • Staff Meetings and Professional Development — Districts may convene staff members for any appropriate training, planning, and professional development purposes.
  • Summer Meals Distribution — ISBE highly encourages school districts to evaluate the needs of their students and community as they transition into the different phases of opening the state and continue to provide meals through the summer to meet the needs of their communities. The required Summer Food Service trainings can be conducted virtually. The U.S. Department of Agriculture recently extended several key flexibilities through Aug. 31, 2020, to allow school districts to continue to provide non-congregate meals to meet the needs of their communities. Further, Public Act 096-0734 requires every public school in which at least 50 percent of the students were eligible for free and reduced-price lunches and has a summer school program must provide a summer breakfast and/or lunch to the students in the summer school and children in that community. 
  • Summer School — Schools and districts may conduct in-person summer school. Special populations, which may include students with IEPs, English Learners, and students who received incompletes during remote instruction, should receive priority consideration for services. 
  • Testing Centers — Schools may serve as testing sites for students.”

You can read the entire press release from ISBE by clicking here.

State Financial Update

As you may remember, I voted NO on the majority party’s partisan, unbalanced FY 21 State budget.

I argued that Illinois was in no position to increase spending, but that’s exactly what House and Senate Democrats did when they passed a record spending budget. I argued that Illinois should not balance its budget on the hopes of borrowing billions from a Federal government program that doesn’t even exist yet, but that is the path that House and Senate Democrats chose. I also argued that the proposed budget (now law) gives too much power to Governor Pritzker to manage how money gets moved around.

This week, the Commission on Government Forecasting and Accountability (CGFA) issued its monthly report this week covering State revenues, including general revenues, for May 2020. 

The report reflects many effects from another full-month-long shutdown of Illinois economic activities.  The COVID-19 pandemic has had a serious effect upon the State of Illinois’ tax receipts and budget picture, and analysts from CGFA are advising the General Assembly on how these effects will continue to operate with respect to state spending and taxes.

In particular, sales tax receipts from levies on retail transactions were hit hard by the stay-at-home order.  Receipts from sales taxes dropped $182 million in May 2020 as opposed to May 2019, a decline of almost 25% in this key revenue stream.  While Illinois continued to collect sales taxes from “essential” brick-and-mortar retailers and from many Internet retailers, this could not make up for the lost revenue.  Many of the “essential” goods that Illinoisans continued to buy in May 2020 were groceries and pharmaceuticals, many of which are not taxed at the State level.  At grocery stores, Illinois charges the full sales tax rate on sweet goods such as soft drinks and candy, and local governments charge a tiny sales tax on other foodstuffs.

The serious decline in May 2020 tax revenues indicates that Illinois will close fiscal year 2020 (ends June 30, 2020) in a position of serious deficit.  This will, in turn, force the State to either cut its expenditures significantly or borrow a significant sum to make up the deficit, or both.  One reason for the Illinois House Republicans’ unanimous decision not to support the majority party’s budget and spending proposals in the May 2020 special session was the existence of unanswered questions concerning both possible budget strategies.

  • Governor’s Office of Management and Budget (GOMB) announces that Illinois will soon owe a significant debt to the U.S. Federal Reserve.  The ability to borrow $1.2 billion from the federal central bank for one year is a response to the collapsing revenue picture tracked by CGFA.  State general revenues began to collapse in March 2020 due the effects of COVID-19, coupled with the delay of the State’s income tax filing deadline by three months from April 15, 2020 to July 15, 2020.  However, at the same time, all of the State’s existing debts and obligations continued or increased.  The significant new GOMB/Federal Reserve debt, owed by Illinois taxpayers, raises the funds necessary to meet the immediate cash-flow needs of the State.  GOMB, a State agency that is part of the Office of the Governor under the direct leadership of Gov. Pritzker, made the borrowing announcement on Wednesday, June 3.   

The $1.2 billion federal debt note is not scheduled to be the end of the debt cycle to be owed by Illinois.  Democrats enacted legislation in the May 2020 special session, SB 2099, that authorizes the State to borrow up to $5.0 billion from the Federal Reserve.  Existing Illinois law had not authorized the Governor to borrow emergency money from the federal government.  The changes enacted in May 2020 enabled the recently announced $1.2 billion in emergency short-term borrowing through the Federal Reserve.  It also authorized up to $5 billion in future borrowing through the newly created federal Municipal Liquidity Facility.  Illinois House Republicans unanimously voted against this legislation because it did not contain any sort of plan for paying back the borrowed money.  In addition, the borrowed money would fund a budget that had not been the subject of legislative discussion or debate and which contained no input from the House Republican Caucus, and would arguably constitute a violation of the State’s constitutional balanced-budget requirement.   

As borrowers of the debt, the GOMB agreed with observers of the U.S. debt market that the $1.2 billion debt announcement on June 3 was a response to the higher yields demanded by private-sector lenders to the State.  These higher yields could be attributed to the State of Illinois’ overall deteriorating financial picture and its precarious budget.  The State of Illinois could have tried to sell $1.2 billion in short-term debt in the global debt marketplace, but the interest rates demanded by financiers willing to lend to Illinois are now so high that this was not seen as an optimal move to make.  In its most recent private-sector bond sale, Illinois was forced to offer interest rates of more than 4.8% – well more than 300 basis points higher than the interest rates paid by high-quality triple-A (AAA) debtors.  

The U.S. Federal Reserve lending was made available in spring 2020 through the enactment by Congress of legislation creating the Municipal Liquidity Facility (MLF), an emergency COVID-19-related lending window designed for U.S. state and local governments.  $500 billion in total loan capital has been allocated to the Federal Reserve to lend through the MLF window.  

  • Standard & Poor’s: Illinois’ budget “precariously balanced.”  The negative review this week from one of the world’s largest fiscal-monitoring firms served as a continued signal that that the credit rating of the State of Illinois is hovering close to junk-bond level.  This week, Standard & Poor’s renewed its rating of Illinois general-obligation debt at BBB- with a negative outlook.  BBB- is the S & P’s closest approach to a “junk bond” rating.  So-called junk bonds, rated at BB or less, are debt obligations that are not seen as secure investments.  Many investment funds, particularly funds that are bound by rules of prudence that govern the oversight of funds saved for purposes of pension funding and retirement savings, are contractually banned from investing in non-investment-grade junk-bond securities.

In its review, Standard & Poor’s stated that the State of Illinois’ pro forma FY21 “balanced budget” depends on up to $5 billion in borrowing from the federal government.  The fiscal monitor labeled this dependence as an additional risk factor facing the State and its taxpayers.  In particular, S & P pointed to a feature of SB 2099, the majority party’s FY21 borrowing-authorization bill, which authorizes the Governor to borrow money from the U.S. Federal Reserve’s Municipal Liquidity Facility lending window for a period of up to 10 years.  This 10-year Illinois-federal debt was authorized in SB 2099 even though the Municipal Liquidity Facility was created and authorized by federal law with a time limit of no more than 36 months.  The conclusion of S & P’s analysts was that the State of Illinois’ ability to implement its current borrowing plan is a “precarious assumption.”

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