Governor, Lawmakers Reach Agreement on Education Funding Reform
The four legislative leaders emerged from a meeting late this week and announced tentative agreement on a new education funding package that includes a new evidence-based formula for distributing general state aid along with a new tax credit for businesses and individuals who make donations supporting scholarships to private K-12 schools. The General Assembly will return to the State Capitol on Tuesday to consider this legislation that was negotiated over the course of several weeks.
As the IMA reported previously, the General Assembly passed a budget over Governor Bruce Rauner’s veto in July that includes billions of dollars for K-12 education. However, lawmakers inserted a provision in the budget bill that required education funds to be distributed through an “evidence-based” funding formula that does not currently exist in Illinois. Democrats had previously passed their version of education funding reform (SB 1) and thought it would put pressure on the Governor to sign the bill. However, Governor Rauner amendatorily vetoed SB 1 and included his specific recommendations setting off a crisis about whether schools would open on time. Ultimately, an agreement has been reached and will likely be amended on SB 1947.
Components of the K-12 education funding package include:
- Hold harmless provision to ensure that no school district will receive less money.
- All new education funding money will be distributed through a new 27-point evidence-based system using factors such as poverty rate, students with special needs, and regional cost differences.
- Creates a new tax credit for individuals and corporations that donate money to schools and organizations that provide scholarships for students attending private schools. Donors can receive a credit of 75 cents on the dollar with caps of $1 million (individual) and $2 million (corporation).
- Establishes charter school parity with public schools. Charter schools will receive between 97 – 103 percent of funding per student as received by the local public school.
- Illinois will pick up the employer’s share of the pension cost for Chicago Public Schools at a cost of $221 million annually.
- Increases the property tax levy for Chicago pension costs from 0.383 to 0.567 to generate additional tax money. The Chicago City Council would have to vote to approve the property tax hike on Chicago residents and businesses.
- Voters in school districts that are adequately funded can have a referendum to reduce the property tax levy by no more than 10 percent.
- Schools only have to provide physical education to students 3 times per week (now daily).
House Revenue Committee to Vote on Beverage Tax Prohibition
Members of the House Revenue & Finance Committee will meet next week to consider two bills that would repeal the recently enacted sweetened beverage tax in Cook County. For three years, the IMA and other stakeholders have successfully defeated a statewide beverage tax proposed in the General Assembly but a local one-cent per ounce tax was approved by a single vote in Cook County.
The Illinois Retail Merchants Association challenged the Cook County tax, championed by County Board President Toni Preckwinkle, with a judge granting a Temporary Restraining Order (TRO) that put the tax on hold temporarily. Weeks later, the TRO was overturned and the tax went into effect in early August creating chaos among distributors, retailers, and consumers.
The IMA’s subsidiary XPS commissioned a poll that found 87 percent of Cook County voters strongly opposed the sweetened beverage tax that adds $2.88 per case of soda. The tax also applies to other products such as sweetened teas, diet soda, lemonade, and other products and would have a harmful impact on the manufacturing supply chain.
Legislators in Springfield filed two bills (HB 4082, HB 4083) that would prohibit Cook County and home rule counties from imposing a tax on sweetened beverages that will be debated in committee on Tuesday. The Illinois Manufacturers’ Association and Illinois Retail Merchants Association who have spearheaded opposition to the Cook County tax will appear together on a panel supporting the rollback.
While the IMA supports HB 4082 and HB 4083, we believe this is just a start and is not a final solution because it does not prevent cities like Chicago from imposing a similar tax nor does it prevent cities or counties from imposing other taxes on weight and volume meaning they could conceivably tax candy, hamburgers, potato chips, or other items.
The IMA appreciates the dozens of legislators sponsoring these bills including chief sponsors Rep. Michelle Mussman (D-Schaumburg) and Rep. Mike McAuliffe (R-Chicago).
On September 13, the Cook County Board will also consider an ordinance repealing the Cook County sweetened beverage tax sponsored by Commissioners Morrison, Boykin, and Fritchey. The IMA is working to generate support for this repeal vote.
Cook County Pharmaceutical Ordinance Hearing Tuesday
Alderman Ed Burke, chair of the Finance Committee, will convene the second hearing on Tuesday to debate the proposed pharmaceutical drug ordinance that would require all pharmaceutical manufacturers disclose price hikes 90 days in advance if they sell product in Chicago. Burke held a hearing two weeks ago with proponents only and is attempting to force company CEO’s to testify next week. The IMA along with our partners at PhRMA, iBIO, and the Chicagoland Chamber of Commerce offered to testify but were rebuked by Chairman Burke. Opponents are working in concert to defeat this ordinance that will increase costs for consumers and harm businesses.
Entitled the “Chicago Drug Pricing Transparency Ordinance”, Ordinance 2017-4915 creates a Prescription Price Drug Review Board to review price trends and anomalies in the list price of medications, create an annual report on pricing trends in Chicago, promulgate public advisory opinions concerning specific drugs, and establish a “Price Watch Hotline” to accept information about price increases.
The Ordinance requires pharmaceutical manufacturers that legally sell products in Chicago to notify the City through the Department of Public Health in the following cases:
- Brand Name Drug
- Wholesale Acquisition Cost (WAC) of ten percent or more, or
- Twelve-month period WAC increase of $10,000 or more, or
- Introduction to market of a pharmaceutical that has a twelve-month WAC of $30,000 or more.
- Generic Drug
- Wholesale Acquisition Cost increase of 25 percent or more, or
- Twelve month period WAC increase of $300 or more, or
- Introduction to market of a pharmaceutical that has a twelve-month WAC of $3,000 or more.
Notices shall be provided in writing at least 90 days prior to the planned effective date of the increase or introduction and shall include a justification that shall include documents and information to substantiate the manufacturer’s selection of the launch price or price increase. It shall include but not be limited to research, materials, manufacturing, administrative expenses, life cycle management, market competition and context, manufacturer revenue and loss data, and estimated value and cost-effectiveness of the product.
Manufacturers that fail to comply shall be subject to a fine of up to $500 per day. The ordinance shall take effect 180 days after passage and approval.
Call Center Worker Act
At the behest of the Communication Workers of America labor union, Rep. Mike Halpin (D-Rock Island) introduced legislation that requires any employer that intends to relocate a call center out of Illinois to provide notice to the State Treasurer at least 120 days in advance. Employers who fail to give notice may be fined up to $10,000 per day and repay 100 percent of all grants, loans, or tax benefits that have been received.
HB 4081 broadly defines a “call center” as a business that employs 50 or more employees or 50 per more employee who in the aggregate work at least 1,500 per week for “the purpose of customer service or back-office operations.” Notification is required if the business intends to move at least 30 percent of the volume of work to another state or country. The State Treasurer shall compile a semiannual list of all employers that relocate a call center or one or more facilities or operating units and post it publicly every year.
Any employer that appears on the list shall remit the unamortized value of grant, guaranteed loans, tax benefits or other governmental support it has previously received to the Treasurer while that business will be ineligible for any direct or indirect state grants or loans for five years.
The IMA opposes this continual intrusion of government regulation on private employers. Companies make decisions about where to locate assets and capital every day based on business needs and should not be unfairly penalized by Illinois lawmakers.