General Assembly Passes Budget Before Deadline
For the first time in four years, Governor Rauner and state lawmakers reached accord on a state budget (HB 109) that will fund government for the fiscal year beginning on July 1. This year’s budget is balanced without additional tax increases but includes savings from pension reform and sale of the James R. Thompson Center in Chicago.
Under the FY19 spending plan, Illinois will spend $38.502 billion with estimated revenue totaling $38.520 billion.
The budget implementation bill (HB 3342) will reduce the state’s pension liability by $445 million by reducing teacher pension spiking from 6 percent to 3 percent, a buyout of vested Tier 1 pension members who are inactive, and buying out cost of living allowances.
The Governor and legislators agreed to a limited capital program that includes $2.5 billion for the Department of Transportation’s Road Program, $500 million for the University of Illinois Discovery Partners’ Institute in Chicago, and $53 million for a new Quincy Veterans’ Home.
Elementary and secondary education will see the promised $350 million in new money as a result of last year’s education funding reform law and an additional $50 million will be allocated for Early Childhood Education. Illinois public colleges and universities will receive a 2 percent across the board increase for operations. The state’s Monetary Assistance Program for low-income students is fully funded with a four-year pledge and an additional $25 million will create a new AIM HIGH program to help ensure that Illinois students remain in state for higher education.
HB 109 passed the Senate on a vote of 56-2-0 followed by approval in the House of Representatives by a 97-18-0 margin. The Governor has indicated that he will take action quickly.
Workers’ Compensation Insurance Companies, Captive Insurance Approved
After nearly two years of battles, the General Assembly finally passed legislation requiring the pre-approval of workers’ compensation insurance rates by the Illinois Department of Insurance. Under SB 1737, workers’ compensation insurance carriers will be required to pre-file rates. If a carrier intends to deviate from the filing with the National Commission on Compensation Insurance (NCCI), the company will be required to provide the justification for the deviation.
Beginning in 2019, if an insurance company plans to increase a premium in excess of 5 percent, they must notify the business in writing at least 30 days in advance of the expiration of the previous policy.
In addition to rate regulation, the legislation included the IMA’s language modernizing the captive insurance law in Illinois. Originally contained in SB 1286, lawmakers took the language and inserted it into SB 1737 with an amendment that reduces the tax rate from 3.5 percent to 0.5 percent for Illinois companies that utilize captive insurance to help manage risk. It also reduces fees and sets new limits for surplus and capitalization.
While the IMA’s language was non-controversial, the rate review provision created some opposition. The bill passed both chambers and moves to the Governor’s desk for action.
Workers’ Compensation Medical Costs to Court
A bipartisan group of lawmakers in the House and Senate approved legislation over objections of the IMA and business community that will allow doctors and other medical providers to sue employers and insurers in court to capture interest payments on workers’ compensation medical bills.
Under current law, undisputed medical bills are required to be paid within 30 days. However, a court case last year (Marquis Medico) found that health care providers did not have access to courts to recover interest for late payments. While the IMA acknowledges that this court case needs to be remedied, the actual bill goes far above and beyond the court case.
As passed by the Assembly, SB 904 will allow health care providers to sue in court without having to seek remedy at the Illinois Workers’ Compensation Commission (IWCC). It also requires payment when a bill (now claim) is sent, meaning that less information will be available to the employer or insurer making it more difficult to ascertain whether the injury is compensable by the employer. Self-insured employers who have contracted health care rates may be forced to pay a higher rate based on the medical fee schedule. Finally, in attempting to enforce electronic billing, the legislation imposes penalties of up to $1,000 per violation for failure to comply even if it’s a simple clerical error.
The IMA and business community offered an amendment to lawmakers and the medical community that would address their concerns regarding prompt payment and access to interest payments in court after first seeking a remedy at the IWCC. However, the sponsor and health care community rejected this amendment.
The bill now heads to the Governor’s desk and the IMA will be asking for an amendatory veto to address concerns.
House Democrats Voice Support for Graduated Income Tax
Illinois House Speaker Michael J. Madigan (D-Chicago) and four dozen of his Democratic colleagues sponsored a resolution in support of a graduated income tax in Illinois. After an extensive, largely partisan debate, HR 1025 passed on a roll call vote of 61-52. During the debate, House Majority Leader Barbara Currie (D-Chicago) consistently refused to answer questions about what the actual tax rates would be under a graduated tax rate.
The Illinois Constitution (Article IX, Section 3) currently provides that income taxes are levied at a non-graduated rate with a limitation that the corporate “rate cannot exceed the rate imposed on individuals by more than a ratio of 8 to 5.” The current flat tax is one of the few benefits of Illinois’ current tax system. If lawmakers were to actually amend the Constitution, it would require supermajorities in both the House of Representatives (71 votes) and Senate (36 votes) for passage. This week’s resolution was advisory in nature.
Democrat state representative Rob Martwick (D-Chicago) is the only lawmaker who has filed legislation with actual rates. Under his proposal, every individual in Illinois earning more than approximately $15,200 would pay higher income taxes. Under the terms of HB 3522, the tax rates would be:
0 – $7,500 4.0 percent
$7,501 to $15,000 5.84 percent
$15,001 to $225,000 6.27 percent
$225,001 and more 7.65 percent
The 2018 gubernatorial election will include a major focus on taxes with Democrat candidate JB Pritzker calling for a progressive, graduated income tax to support higher spending while current Republican Governor Bruce Rauner is calling for balancing the budget without raising taxes.
House Republican Leader Jim Durkin (R-Burr Ridge) spoke in opposition to the graduated income tax and chastised the majority party for refusing to call HR 975 that opposes the implementation of the graduated income tax. Many Republican lawmakers rose to oppose a graduated income tax noting that this will further stymie job growth and will drive wealthy Illinoisans and businesses out of state.
Volkswagen Settlement Funds Limited in Budget Negotiations
Over the past several months, the issue of how to distribute the $108 million that Illinois has been allocated as part of the Volkswagen Settlement has been debated in both chambers of the General Assembly. The IMA led the charge in supporting the Illinois EPA plan that provides the greatest reductions of NOx emissions in an efficient manner.
In the final days of session, the VW Settlement became subject to negotiations between Democrats and Governor Rauner’s Office. In the end, the General Assembly appropriated only $20 million of the $108 million settlement for FY 2019. This means that the Agency will have less than 20 percent of the funds to distribute in the coming fiscal year regardless of how many applications for funding they receive. Despite the limitations in funding for the next year, the Agency will now proceed with their Beneficial Mitigation Plan and will soon make applications available for those interested in applying for funding.
General Assembly Votes to Increase Age to Buy Tobacco
Legislation raising the age of purchase for tobacco products in Illinois from 18 to 21 advanced this week after failing in the first vote on the House floor. SB 2332 not only raises the age of purchase for tobacco products, but also decriminalizes the possession of tobacco. Therefore it would be illegal for persons between the ages of 18-21 to buy tobacco but there would be no penalties for possessing or using it.
Proponents argued that increasing the age of purchase would reduce tobacco usage and improve health. Opponents argued that younger consumers will simply buy the products elsewhere, resulting in less revenue for Illinois coffers and 18-year-olds can buy guns, join the military, or get married so they should be free to make the decision to buy tobacco.
On the first vote on the House floor the bill failed to acquire the necessary 60 votes; however, on its second attempt the bill passed 61-49-1 with seven legislators choosing not to vote. The bill now heads to Governor Rauner who could sign or veto the legislation.
Drone Legislation Heads to Governor’s Office
Legislation supported by the IMA that will pre-empt local governments from imposing local regulations on unmanned aircraft systems, also known as drones, passed the House overwhelmingly and will now head to the Governor’s Office for his signature.
Drones are widely used by manufacturers, insurance, agriculture, realtors, and other business sectors. While federal regulations govern the use of drones for both commercial and personal use, individual states have the ability to impose some additional requirements such as bans on flying over certain types of facilities or recording and surveillance. With SB 3291 regulations will be done at the state level as opposed to a patchwork of local regulations that is currently found across Illinois.
Equal Pay Bill Advances to the Governor’s Desk
Two pieces of legislation aimed at shrinking the gender wage gap by tackling the issue of wage and salary history advanced this week. First, HB 4163, which prohibits an employer from using wage or salary history when making hiring or promotional decisions, passed the Senate 31-16-1 and will head to the Governor’s Office. The IMA opposed the legislation because it allowed an employee to double dip by suing an employer in both state and federal court and it removed the ability of a company to offer an affirmative defense. Identical legislation passed the legislature last year but was vetoed by Governor Rauner.
Another equal pay bill, SB 3100 which also bans employers from asking a job candidate about their salary history, passed out of the Senate Labor Committee 13-1-2 before stalling on the Senate floor. SB 3100 was an attempt to take the politics found in HB 4163 out of the equation and was not opposed by the business community.
Wage Lien Fails to Pass
The House of Representatives stopped an attempt to quickly adjudicate wage claims against employers after advocates broke an agreement reached several weeks ago in the chamber. As originally proposed, HB 4324 allowed workers to slap liens on an employer and their property for up to six months before seeking a legal proceeding. The lien would take precedence over other liens and judgments including mortgages. The IMA and others in the business community objected to this approach but offered a path to speed up claims filed at the Department of Labor.
The Illinois Retail Merchants Association led negotiations that resulted in an agreement to shorten the average 18-month time frame. Under the agreement reached in the House of Representatives, the Department would have to adjudicate claims in 30 days in order to deal with unscrupulous companies. Employers could be required to post funds in escrow that would be refunded within 45 days if no violation was found. All parties agreed and the measure passed the House of Representatives.
In the Senate, the advocates of the original proposal reneged on their previous commitment and successfully initiated an amendment removing the 45-day period for employers to recover their escrow payment. The bill, as amended, narrowly passed the Senate.
Back in the House of Representatives, Labor Chairman Jay Hoffman and Rep. Chris Welch agreed that the measure did not represent the final agreement and a motion to non-concur was filed, thereby defeating the measure for the year.
Lawmakers overwhelmingly approved legislation (SB 2999) this week requiring an employer to reimburse an employee for all necessary expenditures or losses incurred by the employee directly related to services performed for the employer. Necessary expenses “include all reasonable expenditures or losses including, but not limited to, uniforms, equipment, vehicle expenses, electronic devices such as cell phones, tablets, and computers, and any other expenditures or losses an employer requires an employee to incur in direct consequence of the discharge of employment duties. An employer is not liable under this Section unless the employer knew or had reason to know that the employee incurred the expenditure or loss.
This legislation is consistent with federal law. SB 2999 passed the Senate by a vote of 50-2 and the House by a vote of 114-1 and heads to the Governor for his consideration.
Nursing Mother’s Act
Another human relations measure passing the General Assembly this year requires an employer to provide reasonable break time during the first year after the child’s birth each time the employee needs to express milk. The break time may run concurrently with any break time already provided to the employee. An employer may not reduce an employee’s compensation for time used for the purpose of expressing milk or nursing a baby. An employer shall provide reasonable break time as needed by the employee unless to do so would create an undue hardship as defined by the Illinois Human Rights Act.
HB 1595 passed the House by a vote of 104-0 and the Senate by a vote of 49-0. The legislation will be sent to the Governor for his signature.
U.S. Equal Rights Act Amendment Ratified by Legislature
The House of Representatives followed the Senate by voting to become the 37th state to ratify the Equal Rights Amendment to the United States Constitution. Originally passed by Congress decades ago, the Illinois vote may have come 36 years late according to legal experts. Two-thirds of the states, or 38 states, were required to ratify the amendment by 1982 so the Illinois vote could be largely symbolic.
Regardless of whether symbolic or not, SJRCA 4 stirred passionate debate between supporters and opponents. After passing the Senate by a vote of 43-12-0, the measure was approved by the House of Representatives on a vote of 72-45-0.
Assembly Extends Tax Credit for Coal, Mining, and Off Highway Equipment
The House and Senate overwhelmingly passed legislation (HB 4415) that extends the sales tax exemption for coal and aggregate exploration, mining, and off-highway equipment for an addition five years. Without this legislation, the tax incentive would have sunset on July 1, 2018.
The IMA appreciates Rep. Jerry Costello (D-Red Bud) and Senator Don Harmon (D-Oak Park) for their leadership.
E-Waste Legislation Passes
Another IMA-supported initiative tweaking lllinois’ e-waste law passed the General Assembly this week unanimously. HB 3248 is the e-waste trailer legislation that follows the passage of Public Act 100-433 last year creating the Illinois Consumer Electronics Recycling Act. This bill contains needed anti-trust language and sets the formula for the Manufacturer Clearinghouse that was established in CERA. It will govern the e-waste collection program starting in 2019. HB 3248 represents an agreement between the IMA, individual manufactures, recyclers, waste haulers and units of local government.
It is now essential, with deadlines for the Manufacturer Clearinghouse looming, that the Governor sign the bill before July 1st.
A second e-waste bill, SB 3550, allowing for residential collection of CEDs at drop-off locations, also passed the House and Senate unanimously.
IMA Education Foundation Apprenticeship Initiative Advances
Presenting his last bill as a legislator before he prepares to leave the General Assembly, Representative Bob Pritchard presented IMA Education Foundation initiative HB 5247. The bill requires the State Board of Education to initiate rulemaking to waive non-academic mandates that will allow those aged 16 or older to be hired by employers as apprentices. This legislation allows students to become apprentices at the same age as their global counterparts while assuring they complete the academic requirements for high school graduation. HB 5247 now advances to the Governor’s Office after unanimously passing both chambers.
Election & Veto Session
The House and Senate released the Fall Veto Session schedule. Both chambers will reconvene for two weeks following the November 6 general election. They will be in session for a total of six days on November 13-15 and November 27-29.