The following are descriptions of the top ten bills Illinois Opportunity Project will be tracking during 2014 Veto Session (11/19/2014 – 11/21/2014)
2011 Income Tax Increase Extension
Governor Quinn and Democrat leaders will likely push legislation to extend the 2011 Democrat temporary income tax increase, which is scheduled to partially repeal on January 1, 2015. The current temporary individual income tax is 5% and the corporate income tax rate is 7%. If the temporary income tax increase expires, the individual and corporate rates will fall to 3.75% and 5.25%, respectively.
Tax Policy Changes
In December 2013, the Speaker announced that he was creating a joint committee on tax policies with the goal of enacting revenue-neutral tax policies. Members of the State Government and Revenue Committees met jointly several times between January and May and subsequently filed a report summarizing the testimony taken and issues discussed during their hearings.
Although no legislation was filed as a result of the joint hearings, it is anticipated that the Democrats will propose revenue-neutral tax policy changes the could include: the repeal of the Corporate Franchise Tax, the creation of a new “alternative minimum tax” on businesses based on payroll, an R&D Tax Credit extension and modernization, a Manufacturer’s Purchase Credit extension, a reduction to corporate income tax rate, and a reduction of LLC filing fees.
EDGE Tax Credit Reform
Many believe that the Speaker will make another attempt to pass an EDGE Tax Credit reform bill before the 99th General Assembly. This spring, SB 346 (Cullerton/Madigan) included the Speaker’s EDGE reforms, which passed the House by a vote of 107-4-0 but stalled in the Senate. The changes in the bill are intended to stymie the proliferation of “Special EDGE” benefits. Highlights of SB 346 include:
- Places enhanced requirements on all future applicants wishing to claim EDGE credits against withholding taxes (“Special EDGE”).
- Requires applicants to agree to hire at least 65% of its new employees in a geographic area of high poverty or high unemployment.
- Requires a CEO affidavit saying, but for the credit, the company would not locate in Illinois.
Pension Cost Shift
Speaker Madigan will likely renew his efforts to shift the normal pension costs from the state to school districts, community colleges, and universities. In FY15, it is estimated that a shift would have a $1.1 billion impact to locals and public universities.
Education Funding Reform (SB 16)
SB 16 (Manar/Chapa LaVia) passed the Senate by a vote of 32-19-6 on May 27th to dramatically change how the state funds elementary and secondary education. As passed the Senate, SB 16 is cost-neutral and creates a new single weighted formula that places most school grants into the formula, including transportation, special education, and bilingual education. The formula also places weights for types of students, such as low income, ELL, gifted, and special education students. All funding in the formula is equalized based on school district’s property wealth (Available Local Resources). Over the summer, House Democrat members met with various education groups in anticipation of making changes to SB 16.
Currently about 40% of State education funding is equalized, because some grants are competitive, such as Early Childhood Education, and other programs are reimbursements on claims for prior year services, such as special education and transportation. Using the single formula under SB 16, roughly 83% of state funding will be equalized for local wealth.
On September 19th, HR 1276 (Sandack-Wheeler-McSweeney-Tryon-Ives) was introducd to urge the General Assembly to cease their efforts to pass SB16 to make certain that all aspects of the Senate Education Funding Advisory Committee report are analyzed and discussed thoroughly and publicly by all members of the General Assembly, taxpayers, parents, and the education community.
Minimum Wage Hike
The advisory referendum received approval of 67% of the voters.
There will likely be another push to increase the minimum wage for employees over the age of 18 from $8.25 an hour to $10. The federal minimum wage rate is $7.25. During the Spring Session there were not enough votes in the General Assembly to pass a minimum wage increase. Instead, an advisory referendum was placed on the November ballot.
Surcharge on Millionaires
The advisory referendum received approval of 63% of the voters.
Speaker Madigan unsuccessfully proposed to change the Illinois Constitution to impose a 3% additional income surcharge on individuals earning $1 million and above. Instead an advisory referendum was placed on the November ballot. It is anticipated that the Speaker will renew his efforts to pass the initiative. The surcharge would raise $800 million in revenue for education.
Illinois Secure Choice Savings Program (NEW)
SB 2758 (Biss/Currie) creates the Illinois Secure Choice Savings Program Act. The bill establishes an automatic payroll deduction IRA program for private-sector employees that will be overseen by the Treasurer, Comptroller, GOMB, and 7 gubernatorial appointees. Businesses with 25 or more employees are required to automatically set up the payroll deductions unless the employee opts out.
President Obama announced in his 2014 State of the Union Address that Supporters of the bill contend that nearly half the American workforce is not building a retirement nest egg through either traditional pensions or 401(k)-style defined contribution plans. The goal is to encourage sensible savings habits among low- to moderate-income employees, though they could opt out of the program.
Opponents believe that the bill represents a mandate on employers who are already buried in state and federal paperwork. These business groups include IMA, IRMA, the Chamber, NFIB, and others.
Cook County Pension Reform
Cook County continues to advocate for a pension reform bill in an effort to save the County from further credit downgrades. Although a Cook County pension reform bill, HB 1154 (Raoul/Madigan) passed Senate by a vote of 36-16-3, it did not have enough votes to pass the House. There will likely be another attempt to move reform legislation.
State Retiree Health Insurance Premium Reimbursements
There may be legislation to facilitate the transfer of funds to reimburse retirees for the health insurance premiums paid due to a recent decision by the Illinois Supreme Court (Kenerva v. Weems), which found that state retiree payment of premiums for health insurance is unconstitutional. The case was remanded to the circuit court for further action. An injunction by the Sangamon County Circuit Court to implement the high court’s constitutional finding was issued on August 28th. The Sangamon County Circuit Court’s next scheduled hearing is on November 21st.
Court action and negotiations continue with respect to refunds to retirees of premium increases already paid. About $33.4 million is in an escrow account and is owed to approximately 54,000 retirees who are members of the State Employees Retirement System. Another $25.8 million that has been has been collected from members of the other four retirement systems covering judges, General Assembly members, university employees, and downstate teachers has been deposited into the Health Insurance Revolving Fund.
It is still uncertain when or how the retirees will receive a reimbursement for premium payments already paid. To expedite the process, on September 17th HB 6301 (Poe) was introduced to ensure that state retirees receive a full refund for any contributions made to their health insurance premium. The bill directs the Director of CMS to certify monies to be paid to each annuitant, survivor, or retired State employee, and requires the State Comptroller and the State Treasurer to transfer the required amounts to a dedicated account that will be used, subject to appropriation, solely for these repayments as provided by court order.
