General Assembly Adjourns
The General Assembly adjourned on the evening of Wednesday, May 31 but their work is not done because of their abject failure to pass a state budget. Lawmakers plan to return to the Capitol sporadically during the month of June to try and finally resolve the historic impasse spanning more than 700 days.
Lawmakers Fail to Pass a State Budget, Bond Ratings Drop
For the third year in a row, the Democrat-led General Assembly failed to pass a balanced budget by the end of the spring legislative session. During the ongoing two-year budget impasse, Illinois’ backlog of bills has continued to spiral out of control and now exceeds $14 billion. Legislative leadership has indicated that negotiations will continue throughout June with legislators returning to the Capitol on occasion with the goal of passing a budget before the start of the state’s fiscal year on July 1. It will now take a supermajority three-fifths vote to pass legislation with an immediate effective date.
Reaction was swift from rating agencies. Both Moody’s and S & P Global Ratings cut Illinois’ bond rating with S & P noting that “severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations, now approaching the start of a third fiscal year. In our view, the unrelenting political brinksmanship now poses a threat to the timely payment of the state’s core priority payments.” Bonds from the Illinois Sports Facilities Authority and the Metropolitan Pier & Exposition Authority are now in junk status.
Senate President John Cullerton (D-Chicago) and the Senate Democrat caucus previously muscled through a $37.3 billion spending plan fueled by $5.4 billion in new tax revenue primarily coming from increased income and sales taxes along with new taxes on cable, streaming, and satellite television. This budget plan (SB 6, SB 9, SB 42) passed solely on the basis of Democrat votes but included little, if any, economic or fiscal reforms that would change Illinois’ current trajectory.
In the House of Representatives, Speaker Michael J. Madigan and the Democrat caucus met frequently behind closed doors but were unable to reach consensus on a balanced tax and spending plan. A number of tax increases were considered including an increase in the individual and corporate income tax rates, expansion of the sales tax on services, imposition of a new one percent tax on all health care claims, and a new $5,000 fee on all corporations for the privilege of doing business in Illinois. After failing to reach agreement, the House concluded its businesses without taking a budget vote.
Members of the Senate recognized the importance of the manufacturing sector and included permanent extensions of the Research & Development tax credit, Manufacturers Purchase Credit, and the Graphic Arts exemption in their revenue package. House Democrats ignored the industrial sector and its 570,000 workers by excluding these critical tax incentives from their discussions.
The Governor and state legislators need to pass a state budget that will restore stability and predictability. However, simply throwing more tax money without reform will not solve the underlying problems that include deficit spending, out of control pension costs, and a morose economic climate that discourages job creation and capital investment in Illinois.
General Assembly Passes $15 Minimum Wage Hike
In less than a week, Democrats in the General Assembly introduced and passed a massive 82 percent increase in the state’s minimum wage. Under SB 81 (Guzzardi/Lightford), Illinois’ current $8.25 wage will spike to $15 per hour over the next five years resulting in a substantial cost increase for businesses.
SB 81 narrowly passed the House of Representatives (61-53-2) and Senate (30-23-2) on the final day of session over the opposition of the Illinois Manufacturers’ Association and general business community. It will head to the Governor’s desk where it faces a likely veto. Governor Bruce Rauner has expressed a willingness to sign a wage hike only if coupled with other economic development reforms.
Under the plan, a new two-tiered system is created based on age and experience. Employees over the age of 18 years or younger employees who have worked at least 650 hours will receive a $15 wage while employees under the age of 18 who have worked less than 650 hours will receive a smaller $12 wage when fully phased in.
|18 years or older or 18 years and younger with more than 650 hours of work||Younger than 18 years with less than 650 hours of work|
|January 1, 2018||$9.00||$8.00|
|January 1, 2019||$10.00||$8.50|
|January 1, 2020||$11.25||$9.25|
|January 1, 2021||$13.00||$10.50|
|January 1, 2022||$15.00||$12.00|
The legislation also includes a complicated credit for small businesses with less than 50 employees. By including this provision, Democrats admitted publicly that increasing the minimum wage would have a cost impact on employers.
The IMA opposed SB 81 and will ask the Governor to veto the legislation.
Democrats Pass Sham Workers’ Compensation Bills
Illinois has the eighth highest cost of workers’ compensation in the United States that serves as a major impediment to manufacturing job growth and investment. The IMA hears from member companies on a regular basis that the crushing costs make Illinois less attractive and has led to companies leaving the state. Enacting real and meaningful reforms that will lower costs while continuing to protect legitimately injured workers is a top IMA priority.
Unfortunately, Democrat lawmakers continue protecting wealthy trial lawyers and labor union officials at the expense of middle class manufacturing jobs. Rather than working on real reforms, Democrats passed two bills that are little more than political cover for the coming election.
The first bill, HB 2525 (Hoffman/Raoul) codifies the “a cause” standard from the Sisbro court case into law, taking Illinois further away from any meaningful causation standard. Additionally, the bill creates a mandatory rate review provision for insurance companies and continues to make the last employer responsible for all costs in the event of repetitive motion injuries even if an employee has only been on the job for a brief period of time. Under the legislation, the last employer could technically try and subrogate the workers’ comp claims against previous employers, a costly and litigious process. Finally, it imposes new and costly penalties on employers for vexatious delays in treatment or payment.
HB 2525 has some very limited changes that are positive including rectifying the Will County Forest Preserve case to make sure that the shoulder is considered part of the arm and hip part of the leg. It also provides credits for some spinal injuries and creates a drug formulary to reign in costs of prescription drugs.
The bill does not include a primary cause standard, reduction in the Medical Fee Schedule, increased use of American Medical Association standards, or any reduction in benefits for injured workers despite being among the five most generous in the nation. Despite being used in pure form in nearly three-dozen states, Senator Kwame Raoul (D-Chicago) vociferously opposed changes in the use of AMA standards to protect a small cadre of trial lawyers.
The second bill (HB 2622) would take $10 million of employer money at the Illinois Workers’ Compensation Commission and use it to start a new State WC Fund to compete with the private sector. In states that have state funds, there are generally only a small handful of private insurers so competition may be needed. According to the Department of Insurance, Illinois has a competitive insurance marketplace with more than 325 companies selling workers’ compensation insurance. HB 2626 is an attempt to deflect from the real cost drivers by trying to install blame on the insurance sector.
Both HB 2525 and HB 2622 passed the General Assembly and are headed to Governor Rauner’s desk.
Five Days of Paid Leave Mandate One Step from Governor’s Desk
Legislation creating a five-day paid family leave program is one step from the Governor’s desk following approval in the Senate over the objections of the Illinois Manufacturers’ Association and business community. The House of Representatives previously approved the legislation and now simply needs to concur with technical changes made in the Senate.
Sponsored by Sen. Toi Hutchinson (D-Chicago Heights) and Rep. Christian Mitchell (D-Chicago), HB 2771 provides that all workers accrue one hour of paid sick time for every forty hours of work. Employees can earn and use up to 40 hours of time every 12 months calculated from the date of hire or subsequent anniversary date. Paid leave can be used by workers to deal with (1) health care for themselves or their family, (2) child care when school or day care has been closed due to weather, or (3) issues associated with domestic violence. An employer may require certification of an illness when an employee is out for more than three consecutive days.
Employees begin accruing time on their first day of work but must wait at least six months before leave can be used. Unused days shall carry over annually but employees cannot use more than five days in a 12-month period. Businesses are not required to pay workers for unused days when they separate from the company.
The Governor has not yet opined on whether he would sign or veto the legislation.
“Right to Know” Legislation Fails to Pass House
After narrowly passing the Senate on a 31-21-1 vote, the House of Representatives temporarily defeated a data collection-reporting mandate. Sponsored by Rep. Art Turner (D-Chicago), SB 1502 requires all businesses to tell consumers upon request what personal information has been collected and shared with whom. Businesses collect data for a variety of reasons including website visits, loyalty awards, and credit programs. This mandate would create a new cottage lawsuit industry.
The business community including the IMA and Illinois Retail Merchants Association remain opposed to this legislation. Rep. Turner has used a parliamentary procedure to keep the measure alive for a potential second vote.
After months of hearings and negotiations, the General Assembly overwhelmingly passed a telecommunications modernization bill (SB 1839) that will allow companies to invest in and upgrade to 21st century IT infrastructure. The IMA supported this legislation because manufacturers rely on new innovative technology to communicate globally with their employees and customers. Many manufacturing companies use modern technology to electronically monitor production, emissions, and other parts of their processes.
At the last minute, the bill was amended to extend 9-1-1 funding including fee increases to support 9-1-1 emergency call centers in Chicago and across the state. Chicago will be allowed to increase their monthly 9-1-1 fees from $3.50 to $5.00 per month while other telephone lines will see an increase from $0.87 to $1.50 per line.
The Governor’s office has expressed opposition to the fee increases, which is why lawmakers lumped it into the popular telecommunications modernization bill. SB 1839 passed with strong bipartisan votes in the House and Senate and awaits action from Governor Rauner.
Sierra Club Unveils Last Minute Environmental Proposal
In the final 48 hours of session, the Sierra Club unsuccessfully attempted to ram through legislation aimed at blocking any environmental law changes that may be made at the federal level by the Trump Administration. In addition, SB 1438 would allow individual citizens to file lawsuits alleging violations of the Environmental Protection Act, a power currently only afforded to the Attorney General or local States’ Attorneys. It would create a cottage industry because trial attorneys suing businesses would be able to recover attorney fees.
The legislation attempts to freeze current Obama Administration regulations that were in place on January 1, 2017, even if they are rolled back or changed by the current Trump Administration. It would create a stringent “floor” in Illinois to ensure that state laws are “stricter” than federal laws rather than being “equal” to these laws.
Rep. Julianna Stratton (D-Chicago) did not call amendment #1 to HB 1438 for a vote in the face of strong opposition from the IMA, business community, and organized labor. However, she has indicated a desire to try and advance the bill in June when the legislature returns for action.
E-Waste Bill Passes General Assembly
An IMA-led initiative to re-write Illinois’ Electronic Products Recycling and Reuse Act has cleared both chambers and will be sent to the Governor for consideration. Originally enacted in 2008, the residential electronic products extended producer responsibility law has not worked well in recent years for a variety of reasons including the reduced weight of products, declining commodity prices for recycled materials and inefficient public collection networks. To address these concerns, SB 1417 proposes moving from weight based-collection goals to a convenience standard. This is intended to ensure that residents continue to have convenient access to recycling programs and that programs won’t be closed prematurely simply because arbitrary collection goals have been met for the year.
The bill importantly creates a manufacturer clearinghouse to administer much of the program. Studies of e-waste collections in Illinois have shown that private manufacturer-run collection programs are responsible for 80 percent of all e-waste collected. They tend to be more efficient and cheaper than government-run collection sites. Oversight by an industry-led clearinghouse will allow manufacturers to bring those same efficiency and cost saving principals to county-run collections sites. It is projected that the move will enable manufacturers to recycle significantly more e-waste at a lower overall cost compared to the current program.
Although SB 1417 was approved by votes of 49-0 in the Senate and 80-23 in the House, the legislation still faces opposition from the Illinois Environmental Protection Agency and some industry groups. In an effort to alleviate those lingering concerns, negotiations have begun on a trailer bill to clear up outstanding issues with a goal of passing the changes during the extended legislative session. If the Governor signs the legislation, industry would establish the clearinghouse and develop the new program taking effect on January 1, 2019.
The IMA appreciates the efforts of Sen. Pam Althoff (R-McHenry), Rep. Mike Fortner (R-West Chicago) and Rep. Natalie Manley (D-Joliet) in sponsoring this legislation. We also appreciate the continued assistance of Illinois EPA Director Alec Messina and his staff in helping to develop this updated recycling approach.
Gender Equity Pay History Regulations
Legislators in both chambers approved legislation that on its face attempts to prevent employers from discriminating against employees based on gender and previous wage history. The IMA and general business community support anti-discrimination policies and oppose discrimination in any form including gender. Unfortunately HB 2462 goes far beyond reasonable protections for job applicants and creates unnecessary administrative and legal burdens for employers.
HB 2462, sponsored by Rep. Anna Moeller (D-Elgin) and Sen. Daniel Miss (D-Evanston) would prohibit an employer from screening a job applicant based on wage history, previous salary and benefits. Unfortunately the legislation goes on to eliminate the affirmative defenses that are provided in current law while exposing employers to compounding penalties. The legislation allows employers to double down by bringing action in both state and federal courts potentially doubling both wages and fines.
During negotiations, the IMA and business community offered an amendment based on Massachusetts law that would prohibit an employer for asking about wage history, prohibit a claimant from double dipping on state and federal claims, provide a five year statute of limitations (instead of the current three), and provide a self-evaluation affirmative defense. The amendment also creates common sense exemptions including situations where a previous salary is public record or an employee is applying for a new position within the same company.
The IMA is disappointed that legislators chose to ignore industry’s good faith efforts to improve the legislation in a way that protects the right of workers while avoiding unnecessary and unreasonable burdens on job creators.