Democrats Advance Misguided Workers’ Compensation Bills
Democrat lawmakers in the House Labor & Commerce Committee advanced two measures this week under the guise of workers’ compensation reform. However, neither bill will alleviate the high cost of workers’ compensation in Illinois and could actually result in additional court litigation for employers. Illinois has the eighth highest cost of workers’ compensation that negatively impacts the manufacturing sector.
The first measure, HB 4595 (Fine, D-Glenview), would use employer money to create a State Worker’ Compensation Fund to compete against private insurance companies. Illinois currently has a competitive insurance marketplace with more than three hundred companies selling policies. While more than a dozen states have State Funds, they are generally in states with only a small handful of private insurance carriers and therefore less competition.
Without changes to key cost drivers such as a causation standard, medical costs, indemnity benefits, and AMA standards, the State Fund would be forced to charge similarly high rates. Opponents of real reform are backing this measure because they prefer to try and shift blame rather than dealing with the true cost drivers in the system. Identical legislation passed the General Assembly last year and was vetoed by Governor Bruce Rauner.
The second bill, HB 4872 (Lang, D-Skokie) is an initiative of Advantage Capital, an investment group that once held interest in Marquis Medico. This medical provider is the subject of a $17 million lawsuit alleging more than three hundred cases of workers’ compensation fraud including billing for procedures and therapy that it did not perform along with billing at inflated rates.
Proponents are seeking to allow medical providers to sue employers and insurance companies in court to recoup interest payments on medical bills. As the IMA noted in testimony before the Labor Committee, the measure is poorly drafted and does not accomplish the stated goals. Employers should not be held liable in court for payments owed by insurance companies and they are provided no right of appeal. While HB 4872 passed out of Labor Committee on a partisan vote, Rep. Lou Lang promised to bring an amendment back to committee before the bill proceeds further.
Prevailing Wage Proposals in Springfield, Cook County
Members of the House Labor & Commerce Committee approved legislation (HB 813) this week that would require the prevailing wage be paid on all projects funded in whole or in part by Tax Increment Financing (TIF) funds. Private employers would be required to pay the prevailing wage even if TIF funds constitute only a very small percentage of the project’s cost. Additionally, the prevailing wage would be required on any project using revenue received under the County Economic Development Property Tax Allocation Act.
In Cook County, Democrat Commissioner Jeff Tobolski filed and advanced an ordinance out of the Finance Committee requiring all commercial property owners who receive a property tax incentive to pay prevailing wage to contractors. Additionally, the contractors must be union shops because the ordinance requires contractors to participate in U.S. Department of Labor apprenticeship programs.
More than three dozen members of the South Suburban Mayors and Managers Association along with many individual businesses and trade organizations expressed opposition to Commissioner Tobolski’s proposal because it will increase costs and hamper economic development.
Sales Tax Contingency Fee Audit Proposal Advances
Legislation opening up confidential tax information to third party contingency fee auditors passed the House Revenue & Finance Committee this week in an effort to pressure both sides to sit down and negotiate a compromise. The IMA, along with other members of the business community and the Illinois Department of Revenue, are opposed to this legislation initiated by Azavar to benefit their company’s practice.
HB 2717 (Welch, D-Westchester) would allow municipalities to share confidential tax information with third party contingency fee auditors. Disclosure of this tax information is now limited to mayors or chief county executives with penalties for unauthorized disclosure. These local governments currently receive information from the Illinois Department of Revenue that includes (1) business name, (2) business address, (3) the amount of state sales tax distributed to the local government from sales at that business, and (4) the amount of sales tax distributed to local government from any locally-imposed sales tax.
The IMA and other proponents have twice offered legislation in the last three years that would allow access to geolocation information because proponents claim that they just want to make sure that they are collecting tax from employers within their boundaries. However, Azavar and a coalition of local governments continually rejects this approach because they want third party auditors to have access to an employer’s books.
IMA members are encouraged to contact members of the House of Representatives to urge opposition to HB 2717. Private tax information should remain confidential.
R & D Tax Incentive Review Process
Legislation sponsored by Representative Sue Scherer (D-Decatur) narrowly passed the House Business Growth and Incentives Committee by a single vote this week after the IMA urged caution on an initiative that could lead to recommendations that harm manufacturers. The sponsor has publicly stated that the Research & Development Credit may no longer be needed in Illinois. This legislation could be used as a means to start the process of eliminating R & D and other valuable incentives.
As introduced, HB 5349 called for a short-sighted report to be done by the Department of Revenue (IDOR) on the impact that Research and Development (R&D) Tax Credits have on job creation and retention in the state. While its important to study effectiveness, the proposed legislation would not have take taken into account the fact that the R & D credit has expired five times in sixteen years, it has not been modernized, nor does it compare the Illinois incentive to other states.
The IMA met with Rep. Scherer and offered suggestions expanding the scope of the study to include the true impact of R&D tax credits including its complete history, the total number of R & D jobs and wages, product development and trademarks, exports, and the impact on research universities. While the sponsor acknowledged that these issues are important, she then added additional language requiring the Department of Commerce and Economic Development to include recommendations as to whether the credit should be repealed, modified, or extended.
This language is problematic because it will likely result in a biased report. For years, many state bureaucrats at IDOR have argued for the elimination of many incentives. The IMA believes that state agencies should simply provide a factual report that can be evaluated by legislators and stakeholders without implied bias. Unfortunately, Rep. Scherer noted that she and many other legislators largely ignore these reports.