House Approves Stopgap Budget Plan
Within a two-day period this week, Democrats in the House of Representatives filed and passed an $800 million stopgap budget designed to provide limited funding to higher education and human service programs. Governor Bruce Rauner and House Republican lawmakers opposed this measure because it does not balance the budget and “kicks the can down the road.”
Revenue for the new spending was allocated from an accumulation of income tax receipts in two special state funds (Education Assistance Fund and Human Services Assistance Fund).
Deemed a “lifeline,” the Democrat plan directs $559 million to higher education with an additional $258 million for human services. The monetary assistance program (MAP) will receive the lion’s share of funding – $287 million – to provide need-based assistance for college students. Community colleges receive $50 million for career and technical education and $36 million to offset operating expenses. The Golden Apple Scholar program is the beneficiary of $6.6 million in funding. Other educational programs receiving money are Lincoln’s Challenge, veteran’s grants, alternative schools, nursing career technical education, Illinois Math & Science Academy, and adult education and literacy.
Illinois’ public universities also receive more than $150 million in funding for their normal operational expenses and costs.
Many human service programs including domestic violence shelters, senior meals, homeless youth programs, autism diagnosis education, bullying prevention, cancer screenings, HIV/AIDs education, mental illness, addiction treatment, and immigrant services would all receive funding.
Sponsored by Democrat Greg Harris (D-Chicago), HB 109 passed on a vote of 64-45-1 and heads to the Senate where it’s future is uncertain. Senate President John Cullerton and Republican Leader Christine Radogno continue to work on a grand bargain that includes budget cuts, increased tax revenue, and economic development reforms.
House Approves Property Tax Shift to Employers
The House of Representatives overwhelmingly passed a massive property tax break for residential homeowners that will shift hundreds of millions of dollars onto commercial and industrial property taxpayers. Sponsored by Rep. Michelle Mussman (D-Schaumburg), this is an overtly political bill that gives special tax breaks to senior citizens and veterans while increasing the general homestead exemption to $8,000 for all homeowners. This represents a 14 percent increase in Cook County (currently $7,000) and 33 percent increase (currently $6,000) in all other counties.
Nearly every Democrat and Republican lawmaker voted for this legislation (HB 156) that passed the House of Representatives on a vote of 108-1-0. Many of them noted that this is a political gimmick but that they could not go on record as opposing property tax breaks for their voters, particularly senior citizens and veterans.
Governor Rauner has repeatedly called on lawmakers to freeze property taxes for both businesses and residents. Democrats have balked at his request and instead offered this property tax relief legislation.
According to a quick analysis completed by the Taxpayer’s Federation of Illinois (TFI), the change in the homestead exemption will reduce the value of the Equalized Assessed Value (EAV) of property by nearly $5.2 billion while the change in senior citizen exemptions will result in another shift of $800 million in EAV. While residents will receive a break, this will shift their tax burden to commercial and industrial taxpayers resulting in a nearly 2 percent hike in property tax bills for employers.
The IMA and other business groups opposed this legislation with TFI taking the lead in testimony. It faces an uncertain future in the Senate.
House Labor Committee Endorses Minimum Wage Hike
On a partisan vote, Democrat members of the House Labor & Commerce Committee approved a massive 82 percent spike in the minimum wage. If enacted into law, Illinois would have the highest minimum wage in the United States with the new $15 per hour minimum wage phased in through the year 2022.
The Illinois Manufacturers’ Association and general business community strongly opposed this government-mandated wage hike that imposes a one-size-fits-all approach on every business regardless of size or industry.
Democrat lawmakers acknowledged for the first time that mandated wage hikes have an economic impact on employers. In an effort to reduce this impact, the legislation includes a tax credit for small businesses with less than 50 employees. It also maintains a training wage and tip credit but does not pre-empt local governments from imposing a higher wage.
If passed into law, Illinois’ current $8.25 wage would increase as follows:
January 1, 2018 $9.00
January 1, 2019 $10.00
January 1, 2020 $11.25
January 1, 2021 $13.00
January 1, 2022 $15.00
The House Labor & Commerce committee approved HB 198 on a vote of 17-6-0.
The IMA appreciates lawmakers who opposed this legislation including Rep. Randy Frese (R-Quincy), Rep. Jeanne Ives (R-Wheaton), Rep. Steve Reick (R-Woodstock), Rep. Nick Sauer (R-Libertyville), Rep. Barb Wheeler (R-Crystal Lake), and Rep. Keith Wheeler (R-North Aurora).
IMA members are encouraged to contact their legislators to urge opposition to HB 198.
Senate Committee Approves Wrongful Discharge Act
Senator Pat McGuire (D-Joliet) successfully passed legislation out of the Senate Labor Committee only after pledging to work with the IMA and other stakeholders who opposed it. Dubbed the Wrongful Discharge from Employment Act, SB 1760 is an initiative from labor unions that seeks to make it more difficult for employers to terminate employees and significantly increase litigation risks.
Illinois and 41 other states are currently “at will” states meaning that employers can terminate an employee at any time for any reason without incurring legal liability. Similarly, an employee is equally free to quit, strike or otherwise stop work. Exceptions exist where an employer may not fire a worker if it would violate state or federal law.
This legislation provides that discharge from work is wrongful if it (1) was a constructive discharge, (2) was in retaliation for the employee’s refusal to violate public policy or for reporting a violation of public policy, (3) was not for good cause and the employee had completed the employer’s probationary period for employment, or (4) the employer violated the express provisions of it’s written personnel policy. Employers are banned from “blacklisting” discharged employees.
Employers must provide an employee with a written reason for discharge upon request. Failure to provide this written notification will result in penalties and punitive damages that could result in reinstatement to the job, lost wages with interest and benefits, and compensation for damages including attorney fees, expert witness fees, and all litigation costs.
The IMA opposes SB 1760 because it essentially creates a “good cause standard” for all terminations in Illinois and workers will challenge these causes in court. It creates both civil and criminal liability for employer violations of the Act.
IMA Opposes Clean Coal Facility
While the IMA supports an “all of the above” approach on energy that includes the use of coal, the Association opposed a special sweetheart deal this week for one company in downstate Illinois. Rep. Reggie Phillips (R-Effingham) filed an amendment to HB 1848 that would require the Illinois Power Authority to enter into “sourcing agreements” to procure power from a clean coal facility.
This legislation mandates that Illinois utilities and alternative retail electric suppliers (ARES) buy power from Sargas Inc. located in Mattoon. It would further Illinois’ goal of generating at least 25 percent of its electricity from clean coal facilities but potentially increase the cost of power for manufacturing companies.
New clean coal technology allows coal-fired generation to occur under current environmental regulations. However, the IMA continues to believe that a truly competitive energy marketplace is necessary to ensure low-cost and efficient energy for Illinois families and businesses. In 1997, Illinois passed electric deregulation that dropped the price of electricity in the state to among the ten lowest in the United States. It is an advantage for Illinois businesses and families.
The House Energy Committee assigned HB 1848 to a subcommittee after it received significant opposition and it will not be called for a vote.
More Gubernatorial Candidates Enter 2018 Race
The number of announced Democrat candidates looking to challenge incumbent Republican Governor Bruce Rauner grew to five this week with the entry of billionaire J.B. Pritzker into the race. He joins businessman and Kennedy family scion Chris Kennedy, State Senator Daniel Biss, Chicago Alderman Ameya Pawar and downstate school superintendent Bob Daiber.
Candidates cannot begin circulating petitions until later this fall for the March 20, 2018 primary election.
Gender Equity Bill Advances
Members of the House Economic Opportunity Committee amended the gender equity pay legislation this week but it did not remove opposition from the business community. The legislation (HB 2462) initiated by Rep. Anna Moeller (D-Chicago) seeks to prohibit an employer from screening job applicants based on wage or salary history or seeking the wage history. It eliminates affirmative defenses set forth in current law and exposes employers to compounding penalties.
Manufacturers do not support discrimination in any form including based on gender.
The IMA, along with the Retail Merchants Association and the Chamber of Commerce, offered amendments to both Rep. Moeller and Sen. Daniel Biss (D-Evanston) that would remove opposition while achieving the bill’s intent. The business community proposal that is based on a Massachusetts law would prohibit a claimant from double dipping on state and federal claims, provide a five-year statute of limitations (now three), and provide a self-evaluation affirmative defense. Additionally, it creates common sense exemptions to the prohibition on seeking wage history such as when the salary is public record or the prospective employee is applying for a position within the same company.
The IMA is disappointed that Rep. Moeller continues to oppose common sense changes to the legislation to address business community concerns.
IMA Meets with Treasurer Frerichs on Tax Haven Legislation
The IMA met with State Treasurer Mike Frerichs and his chief counsel separately this week to discuss their proposed legislation (HB 3419, SB 1798) defining 38 countries as tax havens (blacklisting) and then prohibiting companies deemed “expatriate corporations” from bidding on state procurement or receiving investment from state retirement systems.
The Illinois Manufacturers’ Association is strongly opposed to these bills and testified in committee noting that the list of “tax havens” is outdated and not even used by the original international group (Organization for Economic Cooperation and Development) that created it nearly two decades ago. OECD created the list to increase transparency and encourage information sharing but stopped using the list when all countries became compliant.
According to the Treasurer’s Office, they have not yet made a decision about the bill’s final form. They are looking at a Connecticut law (Conn. Gen. Stat. 12-218f) that would define a tax haven using five criteria while specifically exempting jurisdictions that have entered into a comprehensive income tax treaty with the United States that is deemed by the U.S. Treasury to meet the purposes of Section 1(h)(11)(C)(i)(II) of the Internal Revenue Code. A country would be deemed a tax haven if (1) have laws or practices that prevent the effective exchange of information for tax purposes, (2) lacks transparency, (3) facilitates the establishment of foreign-owned entities without the need for a local substantive presence or prohibits these entities from having any commercial impact on the local economy, (4) explicitly or implicitly excludes the jurisdiction’s resident taxpayers from taking advantage of the tax regime benefits or prohibits enterprises that benefit from the regime from operating in the domestic market, or (5) creates a tax regime that is favorable for tax avoidance based on an overall assessment of relevant factors.
In 2004, Illinois considered similar legislation but did not pass it instead preferring to adopt changes to the tax code that ensured that this income was taxed in Illinois. It negated the need to create a tax haven or blacklist.
The IMA, in concert with our member companies and two national trade associations, have discussed changes to the legislation that could alleviate our concerns. These concepts have been shared with the Treasurer’s Office and the IMA is awaiting a response.