June 3, 2016
Spring Legislative Wrap-Up
For the second year in a row, the Illinois legislature adjourned from the spring session without enacting a budget for the upcoming fiscal year. There is some willingness by the governor and lawmakers to pass a temporary, stop-gap budget that would fund state operations until January 2017.
The Illinois Chamber of Commerce hopes the legislature recognizes the importance of the state's economy to the revenue side of the equation, and continues to negotiate a budget that includes pro-growth reforms such as workers' compensation reform, tort reform, a property tax freeze and local control over projects.
Lawmakers are expected to return to Springfield periodically throughout the summer to continue negotiations on a stop-gap budget and other non-budget reforms (i.e. workers' compensation, property tax freeze, collective bargaining).
Please see below for an overview on the Chamber's major victories and other pertinent legislation that was brought forward this session that would impact the business community.
Lawmakers overwhelmingly passed the Lockbox Amendment (HJRCA 36 - Phelps/Haine), an Illinois Chamber initiative that would protect transportation infrastructure funding. Illinois has used billions of dollars from the Road Fund for other purposes, and voters will now decide in November whether those dollars should be locked for transportation.
As the legislative session came to a close, another resolution that creates and authorizes the ballot language resolution for HJR 154 (Phelps/Haine) passed the Senate after flying through the House May 31. The education campaign necessary to win in November will require a lot of resources and time. If your organization wants to be engaged in these efforts, please contact Benjamin Brockschmidt, executive director of the Chamber's Infrastructure Council.
Graduated Income Tax
There was a great deal of discussion this spring about constitutional amendments authorizing a graduated income tax. HJRCA 59 (C. Mitchell) and SJRCA 1 (Harmon) would have replaced Illinois' current flat tax system with a graduated income tax system. This so-called "fair tax" would have resulted in a stifling of small business growth and more high earners leaving Illinois.
The Illinois Chamber of Commerce actively lobbied against the proposal in both the House and Senate. While many opposed the tax increases, Chamber President and CEO Todd Maisch was one of fewer than a handful of opponents who appeared before lawmakers to stand up for small businesses and aspiring entrepreneurs in committee.
After previously failing to receive the required 3/5th majority last year, HJRCA 26 (Madigan) failed again in 2016. HJRCA 26 would have added a 3% income tax surcharge on individuals that make greater than $1 million for the taxable year. Revenues collected from the tax would be distributed to school districts on a per pupil basis.
The Chamber opposed this measure and testified in opposition to the idea in committee.
Data Breach Compromise Signed
Gov. Rauner signed the data breach bill, HB 1260(Williams/Biss), on May 6. The Illinois Chamber worked for two years on this bill, explaining the real impact on both businesses and consumers and helping to guide a workable solution. The original bill would have placed onerous, costly requirements on businesses that would have done little if anything to help consumers. The final language will help consumers, yet no over-burden businesses.
This spring the Chamber celebrated the launch of a new economic development agency for the State of Illinois, the Illinois Business and Economic Development Corporation. The Chamber is confident this long-needed entity will bring Illinois' economic development program up to national standards and beyond.
The successful launch of the new corporation is in contrast to other developments that are less encouraging. Despite calls from the Chamber to start a dialogue for a new comprehensive and bipartisan approach to economic development, the legislature did little to address the looming sunset of the EDGE tax credit, the state's primary tax incentive, nor act to renew the research and development and manufacturer's purchase tax credits.
Union Representation on Economic Development Boards
Most alarming, the Democratic majorities in the legislature passed two pieces of legislation that will require all local economic development agencies and local chambers of commerce that receive any public funds, to automatically include on their boards two members of organized labor. SB 2531 (Lightford/Welch) and SB 2600 (Delgado/Welch) mandate this labor representation free of charge. These bills represent an unprecedented intrusion in the affairs of not-for-profit entities of any kind. Please contact the Illinois Chamber to support the effort to secure and sustain a veto of these terrible pieces of legislation.
Employee Leave Mandates
This spring session saw many bills introduced concerning employee leave benefits mandated on employers. Some are for very specific reasons like Veterans' Day or organ donation while others are for broad reasons or expand existing leave benefits.
The Chamber's Employment Law Council was able to successfully negotiate several of these bills that removed opposition from the Chamber. While there were eight total mandated employee leave bills, only three successfully passed both chambers.
HB 4036 (Lilly/Hutchinson) amended the Victims Economic Security & Safety Act (VESSA) to require employers with one or more employees to allow an employee who has a family member or household member who is a victim of domestic or sexual violence 4 weeks of unpaid leave. The Chamber was able to negotiate the time down from 12 to 4 weeks and was neutral on its passage. The bill now heads to the governor and expect the governor to sign.
HB 6162 (Skoog/Collins) is an initiative of AARP that would require any employer providing paid sick leave to include that the leave may be used for absences due to an illness, injury, or medical appointment of the employee's child, spouse, sibling, parent, mother/father-in-law, grandchild, grandparent, or stepparent, for reasonable periods of time as the employee's attendance may be necessary, on the same terms upon which the employee is able to use sick leave benefits for the employee's own illness or injury.
The Chamber's adopted changes clarified that an employer's paid time off policy already meeting the bill's requirements does not need to change its policy. Also, the Chamber removed language that could have been interpreted to allow sick time to accumulated and accruable. The Chamber was part of negotiations on the bill and was neutral on its passage. The bill now heads to the governor and is expected to sign the legislation.
SB 2613 (Bertino-Tarrant/Manley) creates the Child Bereavement Leave Act allowing an employee to use up to 4 weeks of bereavement leave to grieve the death of the employee's child, attend services in relation to the death of the employee's child, or make arrangements necessitated by the death of the employee's child.
The Chamber's adopted changes reduced the 4 weeks of unpaid leave to 2; aligned the definitions of employee and employer with the federal Family and Medical Leave Act; reduced the ability to bring an action alleging violation of the Act from 3 years to 60 days; removed punitive damages and replaced the penalty provisions such that a first offense is a fine not to exceed $500 and subsequent offenses not to exceed $1,000. The bill now heads to the governor and is expected to sign the legislation.
Prevailing Wage Calculation
SB 2964 (Harmon/Hoffman) would require the prevailing wage rate to be calculated as the rate that prevails for similar work on public works projects when the work is performed under a collective bargaining agreement or understanding between an employer and bona-fide labor organizations in a locality where 30% or more of the workers are involved. The Chamber opposed this bill and will be asking the governor to veto its entirety.
The energy debate this session was primarily a carry-over from last year that discussed three competing energy plans. This year also saw new efforts that were harmful to energy businesses and growth in Illinois.
The Next Generation Energy Plan
SB 1585 (Trotter), the Next Generation Energy Plan, received a great deal of attention this session. Introduced on behalf of Exelon and ComEd, the bill introduces a Zero Carbon Emissions Standard in Illinois, provisions that mirror a plan agreed to by New York Governor Andrew Cuomo earlier this year, in an effort to keep the Clinton and Quad City nuclear facilities online. SB 1585 also provides for increasing energy efficiency programs, new funding for solar development, and micro-grid expansion. Its introduction sparked continued negotiations between the Clean Jobs Coalition, Exelon, and ComEd - three parties that have been in negotiations on a comprehensive energy bill since the beginning of last year.
SB 1585 received a subject matter hearing before the Senate Energy and Public Utilities Committee on May 19th. The Committee room was filled to capacity, highlighting the broad range of opinions and the intense interest in the issue. The bill, however, was not called for a vote before the May 31st deadline. Exelon announced on June 2nd the company will begin the process of closing its two nuclear facilities.
HB 6165 (McAsey) and HB 6022 (McAsey) were introduced this session to set additional insurance liabilities on pipelines. The Illinois Chamber was heavily involved in the initial discussions and succeeded in not allowing the bills to move forward in Committee. The bills would have set unreasonable and duplicative insurance liability standards on pipeline companies in an effort to protect communities in the event of a spill. Pipeline companies already have high insurance coverage and pay into the federal Oil Liability Trust Fund to cover costs from spills.
While the legislature engaged in its annual discussion of a major casino gaming expansion, it also ended session with its annual lack of action on the issue. However, a majorlegislative battle did take place over legislation that would authorize and regulate online fantasy sports betting. The Chamber opposed HB 4323 (Zalewski/Raoul) due to the fact tax and regulatory structures for the fantasy gaming entities would be much lower than those for existing gaming concerns, creating an un-level playing field.
Health Insurance Claims Assessment (HICA)
In May, the House Appropriations Human Services Committee held a subject matter hearing on HB 5750 (G. Harris), which imposes a 1% assessment on health and medical claims provided by a health care carrier or third-party administrator. Moneys collected will go into a Fund for purposes of Medicaid services. However, it is pertinent to note that the sponsor indicated in his testimony that the money could be used for other purposes. This bill did not move out of Committee this session; however, the Chamber will continue to monitor this issue in case it gets traction in the overall budget discussions. The Chamber testified in committee expressing our opposition to the bill as it will increase employer health costs by triggering higher premiums borne by employers or individual employees.
The legislature passed SB 10 (Haine/Lang), a bill that makes modest changes to the state's medical cannabis law and extends the pilot project to 2020. Two new conditions are added to the definition of "debilitating medical condition": terminal illness and post-traumatic stress disorder (PTSD). The latter condition poses a risk of abuse and the Chamber will closely watch both the rulemakings and implementation of the new law.
SB 346 (Haine/Lang) was similar to SB 10 but did not contain provisions adding the two new debilitative medical conditions. The bill passed the Senate with a vote of 34-11-0, but was held on House 2nd Reading. The Chamber is neutral.
A bill that would exempt certain medical devices used for cancer treatment from sales and use taxation passed both chambers this spring. SB 3047 (Nybo/Breen) provides that the reduced rate of tax applies to products classified as Class III medical devices by the United States Food and Drug Administration that are used for cancer treatment pursuant to a prescription, as well as any accessories and components related to those devices. The Chamber was in support of this legislation.
Public Private Partnerships (P3s)
During both sessions of the 99th General Assembly the Infrastructure Council introduced legislation to expand the consideration of public-private partnerships (P3s) in Illinois. Our state's infrastructure needs are too large for traditional funding and financing mechanisms to properly and quickly address them. Some estimates put the needs of Illinois' transportation, water, and other infrastructure needs well over $100 billion over the next 25 years. Our legislation,SB 3277 (Steans) would have help expand the consideration of P3s for local infrastructure investment.
Today, local governments often lack the resources to consider using a P3 due to the cost and complexity of the contracts required for these projects. This legislation would establish an office to work with local governments on P3 agreements and provide and ensure an optional, open, and transparent submission process for projects to be considered for P3s, and allow for multiple projects-even those from different parts of the state-to be aggregated into one larger project to increase their viability and attractiveness. While this legislation was unsuccessful we are continuing to work with local governments and other stakeholders to expand the consideration of this tool for infrastructure investment.
State of Infrastructure
With the lack of a budget there is concern about construction projects that rely on state money continuing as we enter the summer months. Last year there had been a smaller appropriations that allowed some construction to continue but no similar bill was introduced in the waning hours of regular session. Without a budget and without certainty that money will reach contractors, we remain concerned that much of the summer building season could be lost. Additionally, delaying projects adds additional costs that take away from other future projects. We also remain concerned that this could impact the amount of money received by local governments and threaten federal grant funds.
Finally the long term implications are concerning as well. Over the last few months, several thousand new logistics jobs have been announced here in Illinois. Without steady improvements to our transportation networks, this bright spot of our economy-and our competitive advantage to other states-will be at risk. We continue to advocate for a capital plan and infrastructure investment to be included in any budget agreement.
Amendment No. 1 to SB 584 (Harmon) passed the Senate Executive Committee (10-0-6) with the Chamber testifying in support. The bill includes several new efficiencies in state procurement including, amongst others, the following: 1) Eliminating the current communications reporting requirements; 2) Adding a new "best value" procurement pilot project for IDOT, IDNR, Dept. of Agriculture, and institutions of higher education; 3) Allowing for joint purchasing with a federal agency or consortium of governmental, educational, medical, research or similar entities; and 4) Adding new higher education exemptions. The bill passed committee, but became mixed up in overarching budget battles. Therefore, the issue of procurement is temporarily on hold.
The Chamber will continue to encourage the General Assembly to advance legislation which ensures the state's procurement opportunities are handled through a sensible, fair, and transparent process.
Despite several pending tax issues, the 2016 spring legislative session saw virtually no major tax legislation enacted.
The good news is that a number of bad ideas, including so-called "loophole closing" legislation was not passed by the General Assembly.
The bad news is that the unresolved issues also include a number of expired and expiring credits and exemptions:
-The research and development credit has not been reinstated (Chamber Solution: HB 5659 - K. Wheeler).
-The Manufacturers' Purchase credit has not been reinstated (Chamber solution: HB 5634 - K. Wheeler).
-The Graphic Arts Machinery and Equipment exemption has not been reinstated (Chamber solution: HB 5716 - Zalewski).
-The expanded Temporary Storage Exemption is scheduled to sunset on SB 2904 - Brady) (Chamber solution:
-The EDGE credit is scheduled to sunset on .
-The Angel Investment Credit, IITA Section 220, is scheduled to sunset on .
The Chamber's Tax Institute will continue to work over the summer to ensure that the legislation forming a final budget package addresses these critical issues.