Week in Review for 5/26/14 through 6/6/14

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Capital Road Projects 
$1.1 billion for roads and bridges. HB 3794 and SB 3224, a two-bill package, sets aside $1.1 billion for road and bridge repairs in Illinois. Of this sum, $100 million will be distributed to local governments by pre-existing formula, and $1.0 billion will be spent through the Illinois Department of Transportation (IDOT) on urgent road and bridge projects identified in the Department’s existing multi-year plan.

Proponents of these bills point to inadequate funds from motor fuel taxes. The legacy of increasing numbers of Illinoisans buying gas-sipping smaller vehicles, and repeated raids on the Road Fund to meet other spending programs of the State, have made it impossible in the eyes of transportation experts for IDOT to fully fund its commitments to construct and reconstruct the road and bridge projects that its long-term plan had already committed to accomplish. The $1 billion committed in this two-bill package is meant to provide resources to maintain the usable status of Illinois roads and highways and to keep these road safety and usability commitments.

“Shovel-ready” projects to be funded by this capital plan were chosen by IDOT from its previously-published multi-year transportation reconstruction and road-and-bridge improvement plan.

The capital funds committed by these two bills are from funds that are separate from Illinois’ troubled general funds, which are unconstitutionally unbalanced (see below). HB 3794 and SB 3224 were approved by both houses of the General Assembly on Saturday, May 31, and Friday, May 30, respectively. The bills now go to the Office of the Governor for final action.

Budget – Spending
Democrats Pass Unconstitutional, Unbalanced Budget. The Fiscal Year 2015 budget is meant to cover the State’s operational spending needs for a 12-month period starting July 1, 2014. It is based upon a $35.7 billion blueprint, although certain spending assumptions made in the five-bill spending package do not add up to that precise figure. The five bills, HB 6093, HB 6094, HB 6095, HB 6096 and HB 6097 make appropriations for FY15.

In addition to these five bills, other bills approved by the Democrat-controlled General Assembly also play a role in the overall FY15 budget: SB 220 contains FY15 budget implementation (BIMP) language; HB 3793 reappropriates funds for FY15 not spent in FY14 – typically grant funds and funds set aside for projects that include the expenditure of capital funds; HB 6060 contains FY14 supplemental appropriations; SB 274 authorizes $660 million in “fund sweeps” used to move money out of other funds and into general funds to enable the FY15 budget to scrape through until after Election Day.

The Constitution of Illinois (Article VIII, subsection 2(b)) requires the General Assembly to enact a balanced budget, a spending plan in which spending does not exceed anticipated revenues. However, the FY15 budget enacted by the Democrats clearly does not meet these constitutional requirements. It anticipates spending money the State has already admitted that it will not have and opens the door to a second massive lame-duck tax-hike vote in between Election Day and January 2015.

As in previous years, the Democrats’ budget was unveiled at the last minute and approved by partisan roll calls on the final full day of the spring session, May 30.

Budget – Revenues 
Fund sweeps, dubious revenue projections; Quinn administration, allies suddenly “find” $857 million. Faced with daunting dilemmas on taxation and spending issues, and bound by its promise to roll back Illinois income tax rates and live within the State’s estimated FY15 revenue total of $34.5 billion – a total that many State bureaucrats testified they could not live under – the Quinn administration and its Democrat allies in the General Assembly decided to look under the seat cushions. HR 1157 and HJR 100 proclaim that during FY15, the State will take in not $34.495 billion in general funds revenues, but $35.352 billion. The new, more optimistic numbers were approved on partisan roll calls of 65-49-1, with House Republicans voting against the budget resolutions.

The newly-discovered $857 million includes massive Democrat “fund sweeps” totaling $660 million. These are monies in other State funds and alleged to not be immediately needed for the purposes for which they were deposited. The State’s general funds need them, so the other funds will be forced to “lend” these monies to general funds. The strategy reflect a throwback to one of the favorite moves of the Governor’s Office of Management and Budget under former Gov. Blagojevich, in which “fund sweeps” were an annual ritual.

The Democrats also expect to collect more money from existing income, sales, death, gaming, and other taxes that are deposited in State general funds. Should State tax revenues fall short of estimates in summer or fall 2014, the budget will no longer be balanced but the General Assembly will be safely out of town. Global bond rating experts have pointed to imprudent and overly-optimistic Illinois budget policies as one of the grounds for adopting at least 13 separate reductions in Illinois’ all-important credit rating since 2009. On Tuesday, June 3, influential rating agency Moody’s labeled the FY15 revenue estimates and budget as enacted a net “credit negative” for Illinois, raising the possibility of a renewed round of cuts to Illinois’ debt score and bond status on global financial markets.

Education – Charter Schools
General Assembly enacts key charter school bills. HB 3232 and HB 3937 enacted major changes to Illinois laws governing charter schools. Charter schools are private schools granted status and standing within the public school system, including funding from cash flows allocated to elementary and secondary education, to improve outcomes for enrolled students.

HB 3232 added new mandates on charter schools described by proponents as improving their governance, aiding them to meet potential conflict-of-interest challenges, improving their financial oversight, and enabling parents to know how charter school advertisements are being paid for. HB 3937 extends the moratorium on the establishment of charter schools with virtual-learning components from April 1, 2014 (current law) to December 31, 2016. “Virtual learning” includes cyber learning where students watch and participate in lectures and training activities from distance locations, including their own homes. Both bills were sent to the Governor for final action.

Elections – Democrats’ “Election Wish List” Fraught with Voter Fraud Potential
Same-day voter registration comes to Illinois. HB 105, approved by partisan roll calls in both houses of the General Assembly on Friday, May 30, enacts a Democrat “wish list” of changes to Illinois election law. Key to the changes is the new authorization granted to Illinoisans not registered to vote to walk into any polling place on the day of the 2014 general election and to cast a provisional ballot.

In addition, HB 105 directs election authorities to set up polling places on each Illinois public university campus for in-person absentee voting, the votes to be credited to the students’ or other voters’ places of registration; extends the grace period for registration as a voter prior to the 2014 general election; provides for submittal of change-of-address forms as late as Election Day; and suspends certain photo-ID requirements for early voting in the 2014 general election.

In addition to key partisan changes like these, HB 105 makes many other changes to the Election Code, some of them minor “cleanup” changes. Insiders say that the totality of HB 105 will greatly reduce barriers to election fraud in Illinois by making it possible for persons to vote even though they are not authorized to cast a ballot and by making it possible to vote in two or more election jurisdictions on the same day.

Elections – Democrats Stack 2014 Ballot with Referendum Questions
Illinoisans voting in the November 2014 general election will see many ballot questions. The General Assembly took steps in May to finalize a list of questions to appear before voters on the November 2014 ballot. Two of these questions, crime victims’ rights and voting rights, are bona fide constitutional amendments that will require three-fifths majorities from those voting on the questions at hand.

HJRCA 1, already approved by the General Assembly, was finalized with the approval of HJR 103, a required trailer resolution that issues instructions to the Secretary of State to place language on the ballot for a proposed constitutional amendment that enhances the status of certain language now in Illinois statute that protects crime victims’ rights. Enhanced rights granted by this amendment includes provisions such as the solidified right of a crime victim to be independently represented by counsel at all times during a criminal proceeding.

HJRCA 52, already approved by the General Assembly, was finalized with the approval of HJR 102, a required trailer resolution that issues instructions to the Secretary of State to place language on the ballot for a proposed constitutional amendment that, with respect to the right to vote, grants strict-scrutiny rights to nine separate population subgroups. These groups include race, color, ethnicity, status as a member of a language minority, national origin, religion, sex, sexual orientation, and income. Amending the Constitution will make it more difficult to pass a future law or administrative rule that will stand in the way of encouraging voting behavior among members of any of these groups.

The three remaining referendum questions approved by the General Assembly at the close of the 2014 spring session are advisory referendum questions only. They have no force of law, were approved by both chambers on partisan roll calls, and were characterized by opponents as empty gestures aimed at increasing partisan political turnout in November 2014.

HB 3814 contains language that encourages a future Governor and General Assembly to take steps to increase Illinois’ minimum wage (currently $8.25/hour for most workers). HB 3816 contains language that urges a future General Assembly to approve, for future placement on a general election ballot even further in the future, language to break the current ironclad requirement that the Illinois individual income tax must be charged at a flat rate. The advisory referendum is meant to encourage approval by the voters of the concept of an income tax surcharge on high Illinois incomes. HB 5755 creates the Women's Health Referendum Act, asking voters whether any health insurance plan in Illinois that provides prescription drug coverage should be required to include prescription birth control as part of that coverage. Concerns were raised that this bill was duplicative of existing State law that already mandates contraceptive coverage for health insurance plans.

In addition to these constitutional questions and referenda, work continues to progress on a third constitutional amendment. Submitted by petition and slated to join these other questions on the November 2014 general election ballot, this question would move the State towards legislative term limits. The term limits amendment has been challenged by partisan litigation, and it is not yet certain whether or not it will appear on the ballot together with the questions listed above.

Energy – Coal
House adopts resolution defending Illinois coal industry, under attack by federal rulemaking. HR 782 urged the federal Environmental Protection Agency (EPA) to develop guidelines for regulating carbon dioxide emissions that take into account the unique policies, energy needs, resource mixes, and economic priorities of Illinois and other states.

On Monday, June 2, the U.S. EPA promulgated draconian regulations to reduce carbon dioxide emissions from U.S. territory. These regulations impose unfunded mandates on the states that burn coal and are expected to have a strongly negative impact on what remains of the Illinois and national underground coal mining industry. The EPA’s supporters believe the agency has the legal right to impose mandates on coal-burning plants throughout the United States, including mandates that would raise the price of coal-generated electricity and heat above the price of the same commodities from other sources. Many environmentalists hope that coal will soon no longer be burned in large quantities in the U.S. Currently, thousands of megawatts of electricity are generated throughout all of the rich and developing countries (including India and China) from coal.

In an unusual move, HR 782 was discharged by the full House from committee by a vote of 71-40, and was then approved by a vote of 66-36-2 on Friday, May 30. The vote demonstrated the commitment of a majority of House members, including House Republicans, to fight against the EPA’s regulations and to defending the future of the coal industry and the men and women who carry out the dangerous work of digging coal in Illinois. The EPA is required to accept public comments on its rulemaking, which is expected to be followed by litigation.

Energy – Fracking
Bill to speed up implementation of 2013 fracking law fails in House. SB 1715, approved by substantial majorities of both houses in spring 2013 and signed into law as P.A. 98-22, was expected to open the door to horizontal shale drilling (“fracking”) in Illinois. Geologists say that the horizontal shale beds that lie underneath much of Downstate Illinois, especially the southeastern counties in and around Interstate 64, are prime formations for the discovery of potentially commercial quantities of crude oil and natural gas.

A quirk in current State law has, however, delayed the ability of this potential resource to create jobs and become productive. The law requires the Department of Natural Resources (DNR) to issue permits to horizontal shale drillers in accordance with the provisions of State administrative law. The Department‘s lawyers have informed the Department that these permits cannot be issued until the Department has completed the task of developing and filing administrative rules to govern the permitting process. The usually routine task of drafting these rules has been delayed by an estimated 20,000 individual ‘public comments’ sent to DNR by persons and groups that oppose fracking.

SB 649, a bill that would have bypassed this comment process and untied DNR’s hands, was considered by the House in May 2014 but did not pass. It was re-referred to the House Rules Committee, thereby providing a green light to DNR to continue its rulemaking work on the same issue.

Energy – Nuclear Power
House supports stability, continuity of Illinois nuclear power plants. HR 1146 urges relevant federal agencies and private-sector electrical power consortia, headed by the Federal Energy Regulatory Commission (FERC) and the Mid-Continent Independent System Operator, to prioritize adequate supplies of electrical power in the summer of 2014 and following summers, when demand for U.S. electricity typically reaches its peak.

The resolution recognizes the essential role of eleven separate operating nuclear power reactors, grouped into six reactor complexes throughout central and northern Illinois, in generating the electricity used in the Land of Lincoln. The resolution supports nuclear power in Illinois. A typical nuclear reactor complex generates more than 1,000 megawatts of power, employs 800 or more skilled workers, and pays significant property and corporate income taxes. Nuclear reactors, furthermore, can generate power in calm weather and during nighttime hours when potential sources of alternative energy are not available. The House approved the resolution by voice vote on Thursday, May 29.

Equal Rights Amendment
Illinois Senate votes on amendment to federal constitution; House takes no action. The Equal Rights Amendment (ERA) was submitted to the 50 states by Congress in March 1972 for ratification. The language of the amendment states that “equality of rights under the law shall not be denied or abridged by the federal government, or by any State, on account of sex.” If this language were to be made explicit in the United States Constitution, rather than implicit under the federal Fourteenth Amendment, State and federal laws that draw distinctions of gender would be subjected to what constitutional lawyers call “strict scrutiny.”

The approval by a three-fourths majority, 38 of the 50 states, was required to ratify the amendment. The original amendment resolution was counter-stamped, by Congress, with a ratification deadline of March 22, 1979. After only thirty-five of the 38 required states had enacted instruments of ratification, Congress approved separate language that erased the March 1979 deadline and substituted June 30, 1982. Illinois did not ratify the ERA during either period and the 1982 deadline expired.

In May 2014, Illinois ERA supporters took steps to achieve ratification of the Equal Rights Amendment. SJRCA 75 was approved by the Illinois Senate on Thursday, May 22, by a vote of 39-11-6. This vote is claimed by supporters to be a step toward ratification of the amendment by Illinois. The 1979 and 1982 deadline issues, and other issues, mean that Illinois’ action and the ultimate ratification of this federal constitutional amendment could be questioned by ERA opponents and by constitutional lawyers. The House did not take action on SJRCA 75 prior to their May 30, 2014 adjournment.

Gambling – Chicago Casino, Slots at Tracks
Bill to open new Chicago casino, license video games at horse racetracks fails to advance. SB 1739 had been brought to the House as a potential “vehicle bill” for proposals made by many advocates of new gaming opportunities. Among the proposals circulated were ideas for a new Chicago super-casino with as many as 10,000 gaming positions; casino floors at each Illinois horse racetrack, featuring electronic games; additional licenses for as many as four new casino riverboats, slated for various locations in metropolitan Chicago and Downstate; and additional video games at Illinois truck stops.

Proponents pointed to potential job creation and tax revenues from the gaming expansion proposals. In addition, some of the new casino opportunities would have been located in places within Illinois that arguably need economic stimulus. However, numerous objections were also heard to Illinois gaming expansion. The lead sponsors of the bill decided not to develop final language or call a vote. The issue will be discussed later in 2014, possibly during the run-up to the November 2014 General Assembly veto session.

Health Care – Medicaid Expansion
Medicaid expansion will provide help for patients and care providers, but will also increase Illinois’ annual spending commitments by at least $221 million/year. Many health care advocates have expressed concerns to the State about various payments made and not made, and treatments offered and not offered, within Medicaid under current law. SB 741 contains a complex package of changes to the Medicaid system negotiated by the State, hospitals, nursing homes and other medical care provider organizations. Some of these revisions are designed to draw in matching funds from the federal government, but the State and its taxpayers will also have to put up a stream of money. The cost of the changes contained within SB 741 is estimated as at least $221 million/year. Persons concerned about this bill believe the cost could be more accurately estimated at $275 million/year or more.

SB 741 will move many categories of patients from a traditional Medicaid billing and payment model to a managed-care model. It will create a new, supplemental series of payments to some groups of medical care providers, such as nursing homes, to further compensate them for the increased costs of providing various forms of specialized care to patients with intensive or long-term medical challenges. It will redeploy existing State workers to process the Medicaid eligibility of many patients who have standing for Medicaid designation as long-term patients. It will pay dentists’ bills and podiatrists’ bills for services provided to patients with Medicaid standing. It will provide some triage psychiatric care to patients without insurance coverage or private means. It will provide funding for the statewide Poison Control Center hotline.

Although this bill contains some attractive elements, it also rolls over and reauthorizes an existing State tax (the hospital ‘bed tax’), and does not contain a funding source for the increased demand on State general funds for the benefits authorized by the Act. The House vote of 75-37-1 on Wednesday, May 28, and the Senate vote of 46-10-0 on Thursday, May 29, sent SB 741 to the Governor for final action.

Health care – Psychologists – Prescription Rights
House approves bill that allows some trained psychologists to prescribe medication. The rights granted in SB 2187 will be limited to a subset of psychologists who receive additional training, comply with additional continuing education requirements, and comply with strict security rules over controlled substances. These psychologists will have the right to dispense prescriptions for medication that may help some of their patients, thus making effective mental health treatment more accessible to underserved populations in Illinois. The House vote, on Thursday, May 29, was 94-21-0. Action by the Senate on Friday, May 30, moved this measure to the Governor’s desk.

Illinois Tornadoes
House approves measure to help small businesses rebuild. SB 3259 helps Illinoisans who were affected by the Illinois tornado outbreak of November 17, 2013. A squall line spawned numerous tornadoes throughout Illinois, killing eight people and causing extensive property damage.

SB 3259 grants eligibility for a property tax abatement to owners of real commercial and industrial property that rebuild their properties and maintain/increase jobs after a natural disaster. To be eligible, the property owner is required to rebuild within a 2-year period. The abatements will hold the property owner partly harmless, for a limited number of years, for the increased value of the newly rebuilt property over the old, damaged property. After being approved in the Senate by a near-unanimous vote of 53-0-1, SB 3259 was amended in the House and approved on Thursday, May 29 by a vote of 114-0-1. Concurrence by the Senate sent this measure to the Governor for final action.

Juvenile Crime 
Juvenile expungement bill sent to Governor. SB 978 creates a pathway for automatic expungement for a wide variety of juvenile adjudications. Records that will be expunged include court records of acts that would have been criminal acts if they had been committed by an adult or if the juvenile charged with the act had been charged and convicted as an adult.

Records covered by this bill include an arrest or incident that occurred before a person’s 18th birthday. Sex offenses, Class X felonies, Class 1 felonies, and Class 2 felonies are excluded from this expungement. Many concerned parties pointed to problems facing law enforcement should this bill be signed into statute. Law enforcement professionals are required, by law, to treat offenders at different levels depending on the defendant’s prior offenses. Unanswered questions like these were on the minds of many House Republicans who voted against the measure, which passed the House on a vote of 74-40-0.

Labor – Employee Background Checks
House grants final approval to HB 5701. This controversial measure would forbid many Illinois employers and employment agencies from performing a criminal background check or otherwise inquiring into the criminal history of a job applicant during the prequalification stage of hiring for a new or vacant job position.

While nothing in HB 5701 will forbid performing a criminal background inquiry into the past of a job applicant after the applicant has been determined to be otherwise qualified for a position, the timing and schedule imposed by this bill upon Illinois employers will add to the expense of carrying out this security procedure. In particular, proponents and opponents of this bill agree that it will forbid many employers from placing the question “Have you ever been arrested for/convicted of a serious crime/violent crime/felony” on a job application form.

Certain employers, such as criminal alarm service providers, emergency medical services providers, locksmiths, nursing homes, school districts, school bus fleets, and security guards are partly or entirely excluded from this ban. In some employment categories the exclusion is absolute, and in other cases these hiring processes are excluded if the employer is looking to fill a specific position for which the hiring of a person with a criminal history is forbidden by State or federal law.

After being approved by the Senate as amended, HB 5701 returned to the House for a final concurrence vote on Thursday, May 29. Many House Republicans voted against the bill. The vote of 67-47-0 sent the measure to the Governor to be signed into law.

Lincoln Library
House Speaker calls for Lincoln Library to become independent agency. HB 3836, approved by the House by a vote of 84-29-2 on Tuesday, May 27, would have split the Abraham Lincoln Presidential Library and Museum away from the Illinois Historic Preservation Agency, its current home, and creates a governing structure for the museum that makes it a separate State agency with its own governing board. Opened in 2005, the celebration of the life and legacy of America’s 16th president has welcomed more than 3 million visitors.

The House approved this measure, sponsored by Speaker Madigan, on Tuesday, May 27. The state Senate did not take up the measure, holding it over until the November 2014 fall session. Critics responded to the bill by saying that Illinois already has more than enough separate State agencies and should think carefully before enacting a bill to create a new one. The bill remains in the Senate Committee on Assignments.

Local Government
Labor unions push prevailing wage mandate through House; stalled in Senate. HB 924 was aimed, by its labor union allies, to accomplish major steps toward their long-sought goal of closing off the local branch of Illinois’ public sector construction projects from participation by contractors who are not identified as allies by organized labor. The bill would require that all public works covered by the definition contained in the new law, including projects carried out by or under the supervision of units of Illinois local government, pay prevailing wages and adhere to other legal standards intended to identify and reward contractors identified by labor as allies.

Opponents pointed out the shortage of these contractors in many parts of Illinois. Many local taxpayers, if HB 924 were to become law, would not be allowed to work through their local governments to hire their neighbors. Instead, the local entities would be required to hire contractors from far away and the taxpayers would pay higher taxes to hire them. The bill also contains extensive affirmative-action language to allocate percentage slices of this public-sector contractual work to minority-owned businesses, female-owned businesses, and businesses owned by persons with disabilities. The House vote on HB 924 was 60-50-3; however, the bill remained in the Senate on the order of Second Reading at the time of adjournment.

Obama Library
Bipartisan majorities in General Assembly signal support for presidential library built in Illinois with private-sector resources. The U.S. Presidency is celebrated by a constellation of 13 American presidential library/museums built across the 50 states, each one recognizing the oath of office and achievements of the chief executives from Herbert Hoover (Iowa) to George W. Bush (Texas). These libraries, which together cover 80 years of U.S. history, stimulate visitation and are assets to the communities in which they are built. The next president to be eligible to have a library built will be President Barack Obama, whose home is Chicago, Illinois.

After the controversy caused by HB 6010, a bill sponsored by Democrat Speaker Madigan to spend $100 million in Illinois taxpayer funds to help build the Obama Library, members of both parties agreed to use the legislative process to make a public statement that would welcome the future facility to Illinois and signal the appropriateness of paying for it through donations from the private sector, as has been done with the thirteen existing U.S. presidential library/museums. SB 125 was acclaimed as a suitable compromise. This measure authorizes the leadership of the State Senate to make a suitable loan or contribution, at non-taxpayer expense, to the future Obama Presidential Library of key tangible items used by the future President when he served in Springfield as a member of the State Senate. Examples could include Obama’s chair from the State Senate Chamber.

House and Senate Republicans, who see presidential libraries as a signal of enduring American public respect for the Office of the President (rather than necessarily signaling support for any individual president), welcomed this compromise and cast votes to show their agreement. After a House vote of 113-0-1 on Tuesday, May 27, SB 125 was approved by both houses of the General Assembly and sent to the Governor for final action.

Pensions – Cook County
Cook County employee pension reform does not receive final House approval. HB 1154 was approved by the House Pensions Committee, as amended, on Wednesday, May 28. However, the full House did not vote on the bill prior to adjournment.

As with other pension reform bills passed recently, such as SB 1 (State pension systems), HB 1154 contains language intended to reduce the “unfunded liabilities” of the system – in this case the local government of Cook County – by reducing the otherwise-locked-in increases in annuities and pension payouts enjoyed by retirees. These compounded increases are typically called “COLA hikes” as a tribute to their original function as relief to pensioners from increases in the cost of living, but in many Cook County contracts the pension increases are automatic and are not ties to changes in the consumer price index (CPI) or any other index of the cost of living.

The county operates many of the most labor-intensive public-sector facilities of the Chicago area, including Stroger Hospital (the former Cook County Hospital) and the Cook County Jail. These and other county employees are affected by this pension reform, which was agreed to by some (but not all) of the organized labor unions that represent county employees. Other employees and groups opposed the bill. Opposing the measure from a different stance are fiscal reform and taxpayers’ rights groups who assert that SB 1, HB 1154 and parallel measures do not do nearly enough to rein in out-of-control public sector pension cost increases. HB 1154 is supported by the Cook County board president, Toni Preckwinkle.

Taxes – Business Tax Relief
EDGE bill stalls in Senate; many promises made to employers not kept. SB 346 contains complex changes to the Economic Development for a Growing Economy Act (EDGE Act), the controversial State law that provides special tax breaks for some firms that are withheld from others. The EDGE Act is supposed to create net new jobs in Illinois, but during the years of its operation Illinois unemployment rates have increased to 7.9 percent, one of the highest jobless rates in the United States.

SB 346 did not contain many features promised in a bipartisan report issued by the House Revenue/House State Government Committees, including repeal of the “business franchise tax” levy on employer paid-in capital. While even many Democrats admitted this tax was obsolete and difficult to enforce, no legal language appeared in the final days of session to repeal it. The EDGE Act rewrite was supported by many House Republicans even as they labeled it an inadequate answer to the growing problem of long-term joblessness in Illinois. A bipartisan vote of 107-4-0 on Friday, May 30, sent the measure to the State Senate for concurrence. The bill stalled there while negotiations continue.

Insiders say that Democrats are preparing an “alternative minimum tax” proposal to raise additional revenue from firms that currently pay no corporate income tax in Illinois. Firms that could be hit by this “Illinois corporate AMT” proposal include “pass-through” firms that pass through their liabilities to individual owners for purposes of State and federal taxation. LLCs and Subchapter S firms are often organized as “pass-through” firms. Details of this Illinois corporate AMT proposal have not been disclosed.

Taxes – Sales Tax Sourcing
Complex issue passes both houses. SB 2612 was amended by language in the House that responds to a recent Illinois Supreme Court case (“Hartney v. Hamer,” November 2013) and clarifies the exact geographic location where many (not all) of the goods transferred to an end-user within Illinois have in fact been sold. This issue, called “sales tax sourcing,” is being closely followed by many because much of the more than $10 billion collected annually by the Illinois Department of Revenue (IDOR) as sales taxes is redistributed to the municipality or other local government where the sale took place. Many local governments depend on this sales tax revenue as an essential funding stream to support the day-to-day operations of the essential public services they provide, such as police and fire protection.

The House approved this language on Thursday, May 29 by a vote of 76-38-1. The bill is not expected to close discussion of this issue, as the bill does not enumerate all of the transactions that constitute legal sales of taxable goods in Illinois. Many varieties of complex sales transactions, such as a transaction that comingles the functions of a sale and a lease, will have to be revisited in future negotiations, legislation, and administrative rulemaking. Supporters say enactment of this measure creates “bright line” sales tax legal standards governing most of the actual dollar-valued transactions that take place in Illinois.

As with other bills approved in the closing days of the 2014 spring session, SB 2612 will be sent to the Governor for his signature, which will constitute final action on the bill. Meanwhile, IDOR has also promulgated administrative rules to cover broad swaths of sales-tax-sourcing, including sales-activities not covered in detail in SB 2612.

Taxes – Soda Pop Tax
Soda pop tax increase fizzles out. The controversial HB 397, as amended by House Floor Amendment #1, would have imposed an additional State excise tax of 1 cent per ounce of sweetened beverages sold in Illinois. Parallel taxes would have been imposed on soda pop fountain syrup, and on package syrups/powders for drinks prepared in homes. The House Revenue Committee defeated the amendment on Tuesday, May 27 by a vote of 2-7-0, with House Republicans casting four of the seven “no” votes.

HB 397, had it been enacted as amended, would have sharply increased the prices paid by Illinois consumers for soda pop or other sweetened beverages. The price of a two-liter bottle of soda would have increased by approximately 67 cents, and the price of a case of canned soda would have increased by $2.88. It was the declared intent of HB 397 that the cost of the tax be passed through to consumers as a way to “nudge” them away from sweetened beverages, described by proponents of the measure as unhealthy items for human consumption. The Teamsters Union, representing beverage delivery tradespersons, joined business in opposition to the bill. Advocates are expected to continue to push this measure in future General Assembly sessions.

Telephone Bills – 9-1-1 Bailout Bill Passes
General Assembly sends 9-1-1 bailout bill to Governor. HB 2453 moves around funds, reauthorizes existing monies, and increases 9-1-1 fees in Chicago in order to maintain the operations of existing 9-1-1 emergency first response systems throughout Illinois. Additional funds are allocated to 9-1-1 services within Downstate counties with populations below 100,000. Law enforcement and public safety professionals recommended the measure. No fees were increased in Downstate Illinois. The House vote on Friday, May 30 was 83-22-3. Approval by both houses of the General Assembly sent this measure to the Governor for final action.

Transportation – Illiana Expressway
General Assembly examines Gov. Quinn’s plea for State authority to sign contract with private partner. HB 1022 and SB 1825 were used as a platform for language from the Illinois Department of Transportation (IDOT). Senate Amendment #2 to HB 1022, and House Amendment #3 to SB 1825, would have separately authorized creation of the Illiana Expressway Public Private Agreement Trust Fund. This trust fund would have been a State fund to back up the contract that the State hopes to sign with a private contractor later in 2014. The amendment to HB 1022 was approved by a Senate committee, but the bill as amended was not approved by the full Senate. The amendment to SB 1825 was not approved.

IDOT would like to sign a contract with a private partner to build and operate the Illiana Expressway, a limited-access toll highway that has been planned to connect Illinois’ Interstate 55 near Wilmington with Indiana’s Interstate 65 south of Gary. Extensive land condemnations will be required to construct the proposed road, and the State and its taxpayers will be required to make contractual payments to the private partner that fronts the money for the highway. These contractual payments could be greater than the revenue that IDOT will collect from charging tolls to use the highway, leading to a potential cash crunch affecting the Road Fund.

The failures of HB 1022 and SB 1825 to advance do not necessarily stop the Illiana toll road from being built. IDOT, which strongly supports construction of the new toll highway, is examining its options. Preliminary agreements with the State of Indiana have been signed, and planning approval has been granted by some oversight authorities and withheld by others (such as the Transportation Committee of the Chicago Metropolitan Agency for Planning). Further debates and discussions are expected to continue.

Week in Review
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