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Government Affairs Reports

  

July 7, 2017

This Week In Springfield

The House kicked things off over the long holiday weekend by first approving the revenue increase bill (SB 9), the fiscal year 18 budget proposal (SB 6), and the budget implementation bill (SB 42) on Sunday.  Most notably 15 Republican representatives voted in favor of the tax increase.

The Senate then came in two days later on July 4th to concur with the Senate’s motion on the three bills, prompting Gov. Rauner to immediately veto all three bills in their entirety.  With remarkable efficiency we rarely see in Springfield, the Senate then promptly overrode the Governor’s veto in under an hour.

As many of you are well aware, the Illinois House then came in yesterday to override the governor’s total veto on the three pieces of legislation.  However, this time several Republican representatives switched their votes on the revenue proposal from yes to no.  Republican representatives that switched their votes include Reps. Cavaletto, Davidsmeyer, Meier and Reis.  This prompted Democrats, who previously voted against the increase to vote in favor.  Democratic reps who flipped include Reps. Halpin, Manely, Mayfield, and Scherer.

As much as the Chamber wanted to see a resolution to the impasse, the Chamber ended up opposing the package as numerous problems existed in each proposal.  Most notably, there are no economic reforms.  No workers’ compensation reforms, no property tax relief and no small business investment incentives.  The state’s $15 billion bill backlog appears to get lip service, but not much else.  Fund sweeps and interagency borrowing provide only $1.5 billion to throw at the backlog, assuming that the budget is balanced.

The budget doesn’t look balanced.  It relies on dubious savings and accounting maneuvers (some of which have been endorsed by Republicans in the past).  As we have seen, authorizing spending is not the same thing as actually having the funds to pay the bills.  Other aspects of the package unnecessarily burden specific industries including transportation, agriculture, petroleum and insurance.  Not to mention, the Senate left town with out taking any action on extending the EDGE tax credit proposal as laid out in HB 162.

There are certainly positives to the pending budget package.  The long impasse is finally at an end, granting a temporary reprieve from national embarrassment.  Avoiding junk bond status.  Higher education and others can finally get in line to be paid.  The Chamber also accomplished some important policy goals.  As the most prominent opponent of the service tax, we are gratified it was dropped.  We quickly killed the stunningly bad “Jobs Tax” and it never came back, nor did a 20% gross receipts tax on financial transactions.  A few important tax savings provisions were included in the tax increase legislation.

However, the outlines of another major battle are already forming.  Baked into the budget package is a poison pill  in the appropriation for K-12 education.  The appropriation for schools  is authorized only if the Governor signs one of two bills that change the way education is funded in Illinois.  The only bill that has passed the legislature on the issue is one the Governor has threatened to veto, which would set up another veto showdown in the coming weeks.  More on this issue later, as its implications become clearer.

So what were exactly included in these bills that are now law of the land in Illinois?  Below you will find a brief synopsis of the package of bills.  These do not include every aspect (keep in mind these bills are several hundred pages long), but do provide a snapshot of each proposal.

 

REVENUE OMNIBUS DETAILS

Below are are some pertinent highlights of what is law and what was left out in the revenue portion of the package laid out under SB 9:

  • Service taxes, soda taxes, satellite or streaming taxes as proposed in earlier versions were removed;
  • Income taxes are permanently increased for individuals to 4.95% (from 3.75) and 7% for corporations (from 5.25) beginning July 1, 2017;
  • A complete rewrite of the state’s unclaimed property law, which we oppose;
  • Graphic arts machinery and equipment exemption is restored;
  • The expansion of the manufacturing machinery and equipment exemption to include production-related tangible personal property formerly covered by the expired manufacturers’ purchase credit was removed from the final version of SB 9;
  • The R&D credit is restored retroactively;
  • Illinois Income Tax Act is decoupled from the federal Domestic Production Activities Deduction;
  • Unitary business non-combination rule is repealed;
  • The definition of the United States is amended to include areas of U.S jurisdiction for the purposes of natural resource exploration;
  • Earned income tax credit and education expense credits are increased;
  • Gasohol will subject to sales tax at 100% of selling price – currently taxed at 80% of selling price; and,
  • Creates the Uniform State Tax Lien Registration Act.

It should also be noted that the tax rate increase mandated by SB 9 will require employers to change the rate of income tax withholding for their employers immediately.

BUDGET BILL DETAILS

The budget bill, SB 6, spends roughly $36 billion.  Most notably it would provide the first full year funding appropriation in two years.  Major highlights are below:

  • Provides for a full-year appropriation for state universities and community colleges;
  • Increases MAP grants;
  • Funds Medicaid;
  • Funds pension and group health;
  • $19 million in Job Training Grants;
  • $3.2 million increase for agricultural education;
  • $10 million increase to Cooperative Extension Services, County Fair and Agricultural Societies;
  • Funds both federal and state LIHEAP; and,
  • Funds various social services.

 

BUDGET IMPLEMENTATION BILL (BIMP)

The budget implementation bill (aka BIMP), SB 42, is what makes the budget work.  Or in other words, the paperwork in order to implement the spending.  Nothing major to note in this proposal, but here are a few major highlights:

  • Authorizes up to $8 billion in payments for the bill backlog;
  • Implements a Tier 3 defined benefits plan for Tier 2 members; and,
  • Provides the AMTRAK operating subsidy.

 

RSVP TODAY FOR OUR CYBERSECURITY CONFERENCE 

Cybersecurity is an issue that impacts all of us, regardless of who we are or what we do.  The Illinois Chamber of Commerce and the U.S. Chamber of Commerce are hosting the 2nd annual Cybersecurity Conference to bring together public and private entities to discuss policy and best practices in cybersecurity to help businesses be prepared for whatever the future brings.  Collaboration and communication between government entities and the private sector is essential to our success combating cyber threats.

Featured components of the conference include a panel discussion on cyber security and the energy sector; keynote address by Michael Papay, Vice President and Chief Information Security Office, Northrop Grumman; and a panel discussion on federal agencies role in cyber security featuring the FBI, Secret Service and Homeland Security.

For more information, the full agenda, and to RSVP, visit the conference webpage.

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