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Springfield Highlights

Springfield Highlights – March 24, 2017

Cook County Judge Authorizes Legislator Pay

On Thursday, Cook County Judge Rodolpho Garcia ruled that paychecks for Illinois lawmakers and constitutional officers cannot be delayed by placing them into the normal bill payment cycle. Newly inaugurated Comptroller Susana Mendoza indicated that she plans to comply with the ruling to release all back pay and will not seek an injunction while an appeal is filed.

Due to the lack of a state budget, former Comptroller Leslie Munger imposed a “no budget, no pay” policy and refused to pay legislators monthly, instead placing them in line with the rest of the state’s vendors. Comptroller Mendoza maintained the policy since taking office in December. As a result, Illinois lawmakers were waiting nearly eight months for a paycheck creating financial hardship for many of them.

Five former and current Democrat legislators including Rep. Chris Welch (D-Hillside) and Rep. Mary Flowers (D-Chicago) filed the lawsuit to overturn the Comptroller’s policy citing law requiring monthly pay regardless of the lack of a state budget.


House Committee Approves “Buy American” Provisions

Democrat members of the House State Government Administration Committee approved two measures (HB 137, HB 138) sponsored by Rep. Jay Hoffman (D-Collinsville) this week that amend Illinois procurement laws to incent the purchase of goods made in Illinois or the United States. While well-intentioned, these bills are poorly drafted and could actually have a detrimental result on Illinois companies especially if other states or countries impose similar barriers.

The Illinois Manufacturers’ Association testified in committee to the fact that lawmakers are trying to answer the wrong question. Rather than trying to have state government simply buy more Illinois or American products, the General Assembly should be addressing the larger question of why Illinois is bleeding manufacturing jobs while all of our neighboring states are adding jobs.

In our testimony, the IMA noted that since the recession ended in June 2009, Illinois has actually lost 1,600 manufacturing jobs. During the same time period, Michigan (163,700), Indiana (90,800), Ohio (76,700), and Wisconsin (41,300) all gained tens of thousands of jobs. The best way to help manufacturing companies grow and compete is by fostering a strong economic climate so that Illinois is an attractive location.

Specific provisions of the legislation actually reduce the incentive for Illinois goods. The sponsor noted that the federal 1933 Buy America Act is the basis for the Illinois law. However, the federal law provides preferences between 6 and 50 percent of the cost while the Illinois proposals only provide a flat 12 percent. This means that certain Illinois or American products would see a reduced preference under this law while others would see a slight increase.

It also fails to note that the vast majority of customers live outside of Illinois or United States’ borders and companies have global supply chains. The legislation sets an arbitrary floor that 50 percent of the cost (not percentage of components) must be sourced either in Illinois or the United States. This could have a negative impact for products that may have 90 percent of the components sourced domestically if the remaining 10 percent of the parts account for more than half of the cost. One or two high cost components could actually make a product ineligible for Illinois procurement.

The IMA proudly represents Illinois manufacturing companies that can compete with anyone in the world on a level playing field. Unfortunately, costly and cumbersome laws and regulations combined with the instability created by the budget impasse and spiraling debt are harming the industrial sector. Lawmakers need to focus on growing our manufacturing base and middle class.


Eminent Domain Law Changes Contemplated

Two lawmakers – one Democrat and one Republican – supported legislation in a House Civil Law subcommittee this week that will make major changes to Illinois’ eminent domain law resulting in increased cost and lengthy delays in major construction projects. The IMA joined more than a dozen business organizations, labor unions, and individual companies in opposing HB 2532 sponsored by Rep. Anna Moeller (D-Elgin). The sponsor introduced this legislation as part of a package targeting energy and pipeline companies.

At issue is the concept and timing of “just compensation” in eminent domain cases involving private companies. The proposed legislation seeks to delay condemnation rights until a final jury trial has determined compensation for all parties that may involve hundreds of claims. Under current law, construction projects are allowed to proceed after condemnation rights have been granted following an open and transparent process where stakeholders have the ability to intervene. HB 2532 will result in delayed projects and increased costs.

The IMA appreciates Rep. Thaddeus Jones (D-Chicago) for opposing HB 2532 and were disappointed that Rep. Andre Thapedi (D-Chicago) and Rep. Steve Andersson (R-Geneva) chose to delay important infrastructure projects that create jobs and investment in Illinois.


Labor Committee Debates Workers’ Compensation

The House Labor & Commerce Committee debated the creation of a State Workers’ Compensation Fund for nearly an hour this week before finally passing the legislation on a partisan vote of 17-10-0. Sponsored by Rep. Laura Fine (D-Glenview), HB 2622 is a perennial initiative of the Laborers International Union designed to focus attention on insurance rather than addressing the root causes of the high cost workers’ compensation system. Currently, Illinois has the eighth most expensive workers’ compensation system in the United States with costs nearly 20 percent higher than the average state.

This union-backed legislation seeks to take $10 million in employer money from the Workers’ Compensation Commission Operations Fund to start a new State Workers’ Compensation Fund that would compete with private insurers. Labor unions and trial lawyers attempt to argue that insurance companies are to blame for the high cost of workers’ compensation despite the fact that Illinois has one of the most competitive markets in the nation with more than 325 companies competing for business. No single company has more than eight percent of the market.

Nationally, only four states (North Dakota, Ohio, Washington, and Wyoming) have monopolistic state funds to sell workers’ compensation insurance where employers are required to buy their insurance. They rely on a “pay as you go” system and fall back on taxpayer money when the pool runs low. Nearly twenty states have state-operated or owned funds that compete with the private marketplace. They were created largely in states that do not have a competitive market due to the lack of private insurers. These funds also guarantee that employers can buy a policy when they can’t receive coverage from private insurance.

The IMA, along with the business community and insurance industry, opposed HB 2622. It uses employer money to subsidize creation of a new insurance company to compete with the existing private sector and risks tax dollars. Recently, California taxpayers had to pay $250 million to shore up their State Fund. More importantly, creation of a State Fund will not reduce the cost of workers’ compensation in Illinois or make the necessary meaningful changes to the system such as primary causation or reduction in medical costs.

The Labor & Commerce Committee then spent less than five minutes debating the Democrat workers’ compensation reform bill (HB 2525) sponsored by Rep. Jay Hoffman (D-Collinsville). This repetitive legislation was considered last spring on several occasions and has not been amended despite an acknowledgment from the sponsor that he has engaged in more than one hundred hours of negotiation with the Governor’s office, lawmakers, and other stakeholders. The IMA and business community opposes the legislation because it contains no meaningful reforms of the system.

HB 2525 codifies the “a cause” standard established by the Sisbro Inc. v. Illinois Industrial Commission that has helped increase the cost of workers’ compensation. Additionally, the legislation mandates insurance rate regulation, resolves the Will County Forest Preserve case that separated the shoulder from the arm when determining awards after one hundred years of precedence, increases fraud penalties, and makes some other minor changes.

HB 2525 passed on a partisan vote of 17-12-0.


Protective Orders and Reasonable Accommodation

Democrat members of a House Civil Law subcommittee narrowly approved changes to the Human Rights Act that would make it a violation for employers who refuse to make reasonable accommodations for employees who are under an order of protection. An employer who violates this law could be subject to fines and penalties.

The business community including the IMA understands the serious nature of protective orders but employees are already covered under the Illinois Victims Economic Security and Safety Act (VESSA). This current law requires employers to provide reasonable accommodation along with allowing employees to take leave in certain circumstances.

The problem with HB 647 is that it is duplicative but also in conflict with VESSA in some ways. For example, VESSA covers employers with more than 15 employees while this new legislation covers all employers. They have different requirements for what constitutes an accommodation along with how an employer can determine what is an “undue hardship.” This places employers in a difficult situation of trying to comply with competing laws if passed.

Rep. Kifowit (D-Aurora) has pledged to amend the bill but it will likely not be satisfactory. The IMA and opponents including the Illinois Human Rights Commission have asked the sponsor to address any shortfalls within the current VESSA law rather than writing another new law.


Restrictions on Illinois Pension Fund Investments

The House Personnel and Pensions Committee heard testimony on a measure to block the State of Illinois from investing pension funds in companies that are deemed to be responsible for climate change. Sponsored by Rep. Camille Lilly (D-Oak Park), HB 775 would require state pension fund managers to develop a climate change risk minimization policy. The policy would require consideration of potential levels of financial risk related to climate change potentially barring investment in Illinois companies based on vague and unsubstantiated environmental claims.

The bill is opposed by a large coalition of business groups including the IMA, union groups and the Chicago Teachers Pension Fund. It was not called for a vote due to strong opposition and remains in committee.


Food Menu Labeling Requirements Introduced

Sen. Emil Jones, III (D-Chicago) is working on a pair of food labeling bills that could potentially alter restaurant menus. SB 312 (amendment #1) would require restaurants to include the country of origin labeling (COOL) for catfish listed in menus, white boards, chalkboards and buffet labels. Seafood producers and distributors are already required to provide COOL labeling for seafood products but those requirements do not extend to menus.

The IMA has also had discussions with Sen. Jones about his intention to file legislation requiring restaurant menus to disclose products that use transglutaminase (TG), also known as “meat glue” in food products. TG is a protein and common food ingredient used to bind and improve the texture of proteins. The U. S. Department of Agriculture lists TG as a safe food ingredient.

As a result of discussions with the IMA, Sen. Jones has agreed to exclude all meat products produced in federal and state inspected facilities from menu labeling requirements. The legislation will likely be filed as an amendment to SB 313 next week.


Financial Transaction Tax Proposed

The House Revenue & Finance Committee listened to subject matter testimony on a proposal to impose a $1 per transaction fee for the privilege of engaging in financial transactions at the Chicago Board of Trade, Chicago Stock Exchange, Chicago Mercantile Exchange and the Chicago Board Options Exchange. Sponsored by Rep. Mary Flowers, HB 453 is estimated to raise nearly $6 billion in revenue that could help the State of Illinois deal with the current budget crisis.

Opponents noted that most financial transactions are preformed on computers and imposing billions of dollars in new taxes could encourage exchanges to close trading floors and move servers out of state to avoid the additional expense.

The committee did not take a vote on HB 453.