COGFA: February Revenue Freefall in Economic Report
The Illinois Commission on Government Forecasting and Accountability (COGFA) released startling new data this week that only worsens Illinois’ financial situation. According to COGFA, “overall base revenues fell $423 million in February” with total tax receipts falling more than one half billion dollars below last year. As the IMA has reported previously, Illinois’ economic recovery has been the weakest recovery in the post-WWII period. Illinois’ fiscal picture is dire despite increased consumer optimism, improved labor markets, and a rising stock market.
COGFA’s latest economic report echoes the IMA’s call for renewed focus on the manufacturing sector due to the loss of good, high-paying manufacturing jobs. The report notes that “the pattern of Illinois’ manufacturing employment is in sharp contrast to the improvement seen in surrounding states in the Midwest rust belt.” As the IMA has consistently pointed out, Illinois has lost 1,600 manufacturing jobs since the end of the recession in June 2009 while all of our neighboring states have added tens of thousands of jobs.
In a committee hearing, the Commission stated “the weakness in Illinois employment has centered in the manufacturing area.” COGFA’s presentation is a clear signal that the Governor and lawmakers need to start addressing Illinois’ jobs climate and begin adopting the IMA’s Middle Class Manufacturing agenda that includes (1) restoring fiscal discipline, (2) tax reform, (3) reducing the high cost of property taxes, (4) job creation reforms including workers’ compensation, and (5) strengthening the education and workforce development system.
Testifying before a joint hearing of the Senate Revenue Committee and Appropriations Committee, COGFA noted that Illinois’ economy only grew an anemic 1.6 percent in 2016, a significant drop from growth of 2.5 percent (2015) and 2.4 percent (2014). Illinois exports have continued on a downward trend since March 2014.
Nearly all of Illinois’ major revenue sources experienced reductions last month including personal income tax revenue (-$129 million), corporate income tax revenue (-$42 million), sales tax revenue (-$42 million), public utility taxes (-$37 million) and corporate franchise taxes (-$20 million).
Year to date, corporate income tax revenue is down $482 million while personal income tax revenue has decreased by $375 million. Illinois sales tax revenue has increased only slightly by $52 million through the first two-thirds of the year.
Illinois has a backlog of bills totaling more than $11 billion and the state is adding at least $11 million in new debt every single day as spending outpaces revenue. It’s absolutely imperative that the Governor and lawmakers finalize a balanced budget to restore fiscal integrity.
IMA Testifies At Telecommunications Hearing
The Illinois Manufacturers Association joined business and labor leaders this week in offering testimony in support of a modernized telecommunications law in Illinois. Manufacturing companies rely on new technology and a strong, modern network in order to operate efficiently. Today, only ten percent of customers use the traditional “landlines” but the telecommunications companies are required to spend an inordinate amount of money to maintain antiquated networks.
Illinois is one of only two states that have not fully adopted a modernized communications law. Legislation (SB 1381, HB 2691) filed in the House of Representatives and Senate will update Illinois’ law to ensure that the state has robust high-speed Internet and wireless service. Manufacturers rely on technology to communicate with facilities across the globe, connect with employees, suppliers, and customers, and to monitor equipment on a real time basis.
The IMA will continue working with the Governor’s Administration and lawmakers to pass a modern telecommunications law.
Labor Law & HR Bills Moving Forward
House and Senate committees approved numerous labor and human resource bills this week that will negatively impact manufacturing companies if they become law. The IMA continues to work with the sponsors to mitigate the negative impact of the legislation if possible or outright oppose the bills.
The IMA strongly opposed HB 813 (Hoffman, D-Collinsville) that will change the WARN Act notification process by lowering the threshold for notification (75 employees to 65 employees) while increasing the length of time that notice must be provided (60 days to 90 days). Initiated by retired steel workers, this law would put Illinois out of balance with federal WARN notice requirements. The IMA has communicated with Rep. Hoffman and remains hopeful that the bill will not be called for a vote on the floor after it passed committee on a partisan vote.
Rep. Will Guzzardi (D-Chicago) is sponsoring legislation (HB 2749) that passed the House Labor & Commerce Committee that more than doubles the salary threshold for determining when overtime pay is required. This state initiative comes after a federal judge issued an injunction in November against a similar rule proposed in the waning days of the Obama Administration. Under the Illinois legislation, any salaried worker earning less than $47,476 would automatically qualify for overtime pay. It would effectively convert these salaried workers into hourly workers and employers would be forced to track hours worked.
Two proposals (SB 981 and HB 2462) sponsored by Sen. Daniel Biss (D-Skokie) and Rep. Anna Moeller (D-Elgin) seek to amend the Equal Pay Act to prohibit an employer from screening candidates based on wage or salary history. An employer could not ask a job applicant to disclose prior wages or salary nor can they require employees to sign a contract or waiver prohibiting the employees from discussing wages. Violators could get hit with both punitive damages and special damages in addition to the current civil penalties.
Majority Leader Barbara Flynn Currie (D-Chicago) muscled legislation (HB 2351) out of the House Labor & Commerce Committee that would place a lien on an employer’s property (including a natural person’s principal residence) solely if an employee claims wage theft. The alleged wage theft does not have to be proven to file the lien – only to enforce a lien. The IMA and business community had met with Leader Currie and the bill will not move it its current form and will likely be amended.
Senator Jacquie Collins (D-Chicago) is pushing legislation (SB 1697) that seeks to create a human rights violation for an employer that imposes dress codes that may violate a person’s sincerely held practice of religion. The U.S. Equal Employment Opportunity Commission has ruled that Title VII of the Civil Rights Act protects religious freedom that may include a dress or grooming practice. The IMA is working with the sponsor on an amendment affirming that employers have the right to enforce a dress code particularly when it comes to issues like worker safety or food sanitation.
Mandatory Transportation Program in RTA Region
Freshman legislator Rep. Theresa Mah (D-Chicago) is pushing a new initiative forcing most employers in the six-county region covered by the Regional Transportation Authority (RTA) to provide transportation benefits to their employees. Under the terms of HB 2802, any employer with 20 or more employees (defined as a person who works more than ten hours per week for at least one month) shall be required to supply the workers with a transit pass or allow the employees to exclude the cost of commuting incurred for a transit pass from taxable wages.
A cost for employers would depend on the type of transit used by employees. A monthly CTA/PACE bus pass costs $100 while a monthly Metra rail pass could cost as much as $306 depending on a person’s location. An employer with 50 employees that all use Metra could be forced to pay more than $15,000 per month or $183,000 annually.
Employers may provide benefits such as health care, paid vacation or transportation benefits but these should be optional and unique to an employer rather than a mandated and costly one-size-fits all approach.
HB 2802 passed out of the Mass Transit Committee on a vote of 7-5-0.
Buy Illinois, Buy American Bills Introduced in the House of Representatives
Rep. Jay Hoffman (D-Collinsville) introduced two amendments this week to legislation (HB 137, HB 138) that amend the Illinois procurement law to incent the purchase of Illinois or American-made products. The IMA is still in the process of reviewing the details of the legislation and supports the intent to encourage the purchase of American products.
There are some concerns that this exponentially increases the complexity of the procurement system for businesses and could result in small and mid-size companies simply choosing not to sell to the State of Illinois. If other states start similar programs Illinois companies could lose more out-of-state sales is another concern that has been raised with the IMA. Companies will have to ensure that domestic components exceed 50 percent of the cost of all components of a product in order to qualify to receive a 12 percent variance in cost. The standard would change from an “unreasonable amount” to the 12 percent threshold but would be subject to review and written approval from the state’s chief procurement officer.
The Buy Illinois language contains similar waivers to the current Procurement of Domestic Products Act in that products do not have to be purchased from Illinois manufacturers if not manufactured in reasonably available quantities, the price exceeds comparable products by more than 12 percent, the quality of American products in substantially less, the purchase of products manufactured outside the U.S. better serves the public interest by helping protect or save life, property, or the environment, the products are pharmaceutical or regulated by the Food & Drug Administration, or are in conjunction with telecommunications, fire suppression, security systems, communications services, Internet, or information services.
The IMA is interested in your comments and feedback.
“Expatriate Corporation” Legislation Passes House Committee
Democrat members of the House State Government Committee approved legislation this week that would define an “expatriate corporation” and prohibit them from bidding on state contracts. An initiative of State Treasurer Mike Frerichs, HB 3419 classifies companies as “expatriate” if they are (1) publicly traded, (2) incorporated in a foreign tax haven, (3) generate less than 10 percent of gross income from county of incorporation, (4) less than 10 percent of the employees are permanent located in the foreign country and (5) there was an inversion whereby a foreign entity acquired substantially all of the properties held by a domestic company.
The legislation includes three-dozen countries as “tax havens” that are all largely island-based countries such as Aruba, Bahamas, Barbados, and more.
The IMA has shared concerns with Treasurer Frerichs about the impact that this could have on companies and facilities located in Illinois if the parent is located outside of the United States.
Congressional Republicans Introduce ACA Repeal and Replace
Earlier this week, Republican leaders in the United States Congress introduced a package of bills titled the “America Health Care Act” that is designed to repeal and replace certain provisions in the Affordable Care Act. The overwhelming majority of Illinois manufacturers offers health care to their employees but the costs and regulations continue to skyrocket.
The federal legislation was assigned to both the Ways and Means Committee and the Energy And Commerce Committee with committee mark ups this week after a marathon session.
The legislation maintains key components of the ACA including insurance market reforms, coverage of pre-existing conditions, allowing adult children to remain on a parent’s insurance until the age of 26, limiting out of pocket expenses, and providing for guaranteed availability and renewability.
There are many changes in the American Health Care Act and the IMA’s partner – Manufacturers Insurance Services of Illinois (MIS 360) has prepared a brief summary of the new legislation. Among the major changes are replacing the individual mandate to buy healthcare, eliminating shared responsibility penalties for employers, and repealing the Marketplace Premium Tax Credits with new age-based credits.
The IMA will continue to keep members abreast of changes in federal laws impacting the health care marketplace.