Week in Review: Estate Tax, immigration, pensions & more


McCombie and House Republicans Back Estate Tax Legislation. This week, the Illinois Farm Bureau unveiled new legislation aimed at improving the Illinois Estate Tax. House Minority Leader Tony McCombie has spearheaded efforts throughout her tenure to address this problematic “death” tax, one that has disproportionately hurt family farms but also small businesses and manufacturing in Illinois. McCombie and members of her leadership team stand in support of the recently unveiled bipartisan proposal.

For the past seven years, Leader McCombie has worked in the Illinois House of Representatives to address the estate tax–alongside several House Republican members who have pursued ways in which small businesses, farmers, and family businesses could see relief from the punitive nature of the state’s archaic tax system which “re-taxes” assets upon death of the owner.

This past Spring, McCombie provided subject matter testimony in the House Revenue Committee in support of legislation she sponsored to reduce the estate tax and protect family farms. McCombie was joined in the Capitol last March by members of the Farm Bureau and the National Federation of Independent Business who were supportive of her bill and provided key testimony in favor of the measure, which would prevent any double taxation of inherited farms and small businesses.

While McCombie’s more comprehensive legislation on this issue has not moved forward, the need for tax relief still ranks as a top priority for House Republicans this legislative session. “I have advocated for a fix to the estate tax for a long time, and I take this newly introduced bill as a bipartisan step forward, with the understanding that we must go much further to change Illinois’ reputation as a bad place to do business,” said Leader McCombie.

In a press conference Wednesday in Bloomington, at the home office of the Illinois Farm Bureau, House Republican leaders stood with bipartisan lawmakers supporting the new measure. House Bill 4600, named the Family Farms Preservation Act, is designed to protect the heritage of family farmers by updating the Illinois Estate Tax code.

Deputy House Republican Leader Norine Hammond recognized the progress this bill makes to protect family farms in the state, but also noted the need for greater bipartisanship to continue doing more.

“Illinois’ estate tax hurts our farm families. House Republicans have consistently fought to increase the exclusion amount to account for rising farmland values. House Bill 4600 is a bipartisan agreement that will help family farmers pass their farmland on to the next generation, protecting our family farms from being sold off to large corporate or foreign interests. I’m proud to stand with the Illinois Farm Bureau and my colleagues in support of this critically needed change to our tax laws,” said Hammond.

According to State Representative Charlie Meier, “The estate tax has devastated family farms for decades as these farms are often sold to pay the inheritance tax.”

Rep. Meier is not only a farmer but serves as the Republican Spokesperson on the House Agriculture & Conservation Committee. “Improving estate tax exemptions for farmers will help save family farms when the farm is passed down to each generation,” continued Meier. “Family farms treat their farmland like family as it helps provide for their family and produces the crops that help feed the world. Our country has the lowest food costs in the world, thanks to family farms.”

State Representative Jason R. Bunting also echoed his support for the measure. “For far too long, Illinois’ estate tax system has threatened family farms – like mine and my neighbors – with the prospect of having to sell the farm if there is a death in the family,” said Bunting. “Families going through a difficult time should not have to make the tough decision about whether or not to sell the farm. This legislation moves us toward a better system which will help keep farms in the family hands which have worked for generations.”

Illinois State Police announce plans for new Joliet ISP campus. The campus will include facilities for a new Zone 1 forensic crime lab and new Troop 3 headquarters building. The $76.5 million ISP campus project will replace the State Police’s aging Joliet crime lab built in 1964. The new crime lab will have capabilities for logging and testing controlled substances, toxicology, fingerprints, DNA, firearms individualized ballistics, and other crime scene evidence. The new campus, which will be built adjacent to existing State Police facilities, will include the construction of approximately 75,000 square feet of law enforcement operational space. The construction announcement was made on Monday, January 29.

Massive costs continue for healthcare benefits program for undocumented immigrants. As part of the Democrat-passed FY24 State Budget, $550 million in taxpayer funding was set aside to provide subsidized health care for undocumented immigrant adults. Called the “Healthcare Benefits for Immigrant Adults” (HBIA) and “Healthcare Benefits for Immigrant Seniors” (HBIS) programs, the programs make Medicaid-like payments to health care providers (overwhelmingly hospitals and hospital-affiliated clinics) for the care they provide to undocumented immigrant adults who are not eligible for Medicaid.

Current testimony, presented to the General Assembly’s Joint Committee on Administrative Rules (JCAR), indicates that the $550 million appropriated for these programs is falling far short of the required sum. Current law allows hospitals to bill the State for this care, and the State must pay the bills. Calling the current situation an “emergency,” the Illinois Department of Healthcare and Family Services (HFS) has published an emergency rule that will deduct a set of co-payments from the funds they are required to pay healthcare providers when they are billed. The hospitals will be expected, in turn, to pass these co-payments on to the affected patients.

As of February 1, 2024, new co-pays and co-insurance for existing enrollees in the Health Benefits for Immigrant Seniors (HBIS) and Health Benefits for Immigrant Adults (HBIA) programs went into effect:

Non-emergency Inpatient hospitalizations: $250 co-payment per stay.

Non-emergency Hospital Outpatient Services or Ambulatory Surgical Treatment Center: 10% of what HFS would pay the provider. The amount an enrollee can be charged will vary depending on the service and the provider, and enrollees should check with the provider on whether they will need to pay an out-of-pocket cost for a service.

Beginning January 1, 2024, many HBIA and HBIS enrollees have begun receiving services through HealthChoice Illinois, the State of Illinois' Medicaid Managed Care Program. Previously, services were delivered to HBIA and HBIS enrollees solely via a fee-for-service model. MCO enrollment for HBIA and HBIS customers is taking place in waves, with the last cohort of HBIA and HBIS customers enrolling with an MCO April 1.

While implementing co-pays has the potential to help bring the projected annualized cost down, the likelihood of this happening appears to be small, as it was recently announced that (Cook) CountyCare Health Plans will be the only MCO to not implement the co-pays. This will have a drastic fiscal impact as a large majority of the undocumented immigrants in the HBIA/HBIS program are from Cook County. Additionally, the transitioning of groups from Fee-For-Service to Managed Care is an on-going process, and it is likely that, even with the last group transitioning April 1st, the State won’t see a huge impact before the end of the fiscal year.

Each month, HFS releases updates on enrollment/costs for this program. The most recent report was released on January 9th, and the projected annual cost to provide healthcare benefits to undocumented immigrant adults was still at $773 million, or $223 million over FY24 appropriations.

Grand American trapshooting meet inks deal to extend Sparta, Illinois as host for additional 10 years. The Amateur Trapshooting Association, operator of Grand American, worked with the World Shooting and Recreational Complex prior to this week’s announcement. The compact is expected to keep the Grand American in Randolph County through 2036. The Illinois Department of Natural Resources estimates that the Grand American brings $27.5 million into Southern Illinois every year.

The State of Illinois has $141.4 billion in unfunded pension liabilities. The Commission on Governmental Forecasting and Accountability (CGFA) has once again reported to the General Assembly on the massive actuarial unfunded liabilities currently being run by State-managed pension funds. This week’s report, a revised version of an earlier report submitted to the General Assembly in November 2023, utilizes updated actuarial data that has been certified on a year-end basis. The updated data reflects pension fund assets, pension fund obligations, and anticipated future pension fund returns as of June 30, 2023.

Under the current update, the total unfunded liabilities of the State’s five managed pension systems were $141.4 billion on June 30, 2023. The phrase “unfunded liability” refers to the amount by which the system’s total liabilities to vested beneficiaries exceeds the assets of the funds, plus the additional moneys that can be expected from prudent investments during the period of time between June 30, 2023, and when these moneys will have to be paid out. The largest single chunk of unfunded liability, $81.9 billion, represents unfunded liabilities of the Teachers’ Retirement System (TRS). This is the system that guides the pensions that are paid to Illinois teachers and educators who are enrolled in TRS.

This week’s revised CGFA report indicates that after a long period of very negative trends in State pension unfunded liabilities, the situation has stabilized. Over a more than ten-year period during the fiscal years 2009 through 2020 (FY09 – FY20), the unfunded liabilities of Illinois’ five state-managed pension funds ballooned from $77.8 billion (FY09) to $144.2 billion (FY20). After peaking at $144.2 billion in the later year, this anticipated debt has hovered around the $140 billion mark. The same numbers were $139.8 billion in FY22 and $142.2 billion in FY23.

Illinois’ unfunded pension debt is deeply implicated in the overall credit standing of Illinois. As of February 2024, our State’s unfunded pension liabilities have stabilized (for now) and our State’s credit rating, the debt ranking awarded to Illinois by major global bond rating firms, has inched away from “junk bond” status. However, the credit rating most recently granted to Illinois by Fitch Ratings, A- in November 2023, is far below the ratings granted by the same agency to most of the 50 states. As of early 2024, most states have double-A or triple-A credit ratings, and can borrow money at much lower expense to taxpayers than can Illinois.

Members of Illinois National Guard units ordered to ready for deployment in the Middle East. Since the commencement of the Global War on Terror in September 2001, the armed forces of the United States have maintained a heavy, continuous presence in the Middle East. This has included deployments and combat in Afghanistan, Bahrain, Iraq, Jordan, Saudi Arabia, Syria, Turkey, Yemen, and the waters surrounding these countries. At the beginning of this week, more than 300 Illinois National Guard members were preparing for deployment in Operation Spartan Shield. The service personnel were reviewed by Major General Rodney Boyd at Wintrust Arena in Chicago on Saturday, January 27.

While in Operation Spartan Shield (OSS), the deployed personnel will be under the umbrella of the U.S. Central Command (USCENTCOM). Operation Spartan Shield is an open-ended deployment operation that, since September 2012, has rotated U.S. service personnel into and out of the Middle East. All the personnel who are assigned for Spartan Shield deployment are members of personnel units that have undergone specialty training for the duties they will be asked to perform while deployed. National Guard units assigned to Spartan Shield deployment tasks typically perform duties related to infrastructure support and logistics.

Tax Foundation ranks Illinois 49th of 50 states for business taxes. The consolidated tax rate levied on the income of incorporated businesses in Illinois, 9.5% (7.0% standard corporate income tax plus a 2.5% “personal property replacement” tax) is the second-highest corporate tax rate levied by the 50 states. Only one state, Minnesota, levies a higher income tax rate (9.8%). The corporate tax rankings were published in January by the Washington, D.C.-based Tax Foundation.

Most U.S. states levy either an income tax or a gross receipts tax on the businesses located within state lines. The natural resource-rich states of South Dakota and Wyoming are the only states that levy neither type of broad-based tax on a business’s income, or on the value added within gross receipts of the business. However, many states with state income taxes on business levy these taxes at rates much lower than Illinois. In North Carolina, for example, the business income tax is 2.5%.

Furthermore, the property taxes imposed on business-owned real property by Illinois units of local government are a further heavy burden on the Prairie State’s economy and job creation. In Illinois, our property tax burden is often classified as making Illinois the 49th or 50th among the 50 states in terms of property taxation. To make matters even worse, a significant percentage of Illinois business property is in a jurisdiction – Cook County – which “classifies” property for appraisal purposes, shifting a substantial share of the Cook County property tax burden onto owners and operators of commercial and industrial property.

All the states that neighbor Illinois levy income taxes on business, but their rates are much lower than Illinois. Furthermore, some state income tax codes levy marginal rates which offer a break to smaller businesses. The top business income tax rates charged by Illinois-neighboring states are 7.9% in Wisconsin, 7.1% in Iowa, 4.9% in Indiana, and 4.0% in Missouri. Between 2021 and 2023, all of Illinois’ neighboring states reduced their personal income tax rates, their corporate income tax rates, or both. According to the Illinois Policy Institute, these neighboring states lowered their burdens on their taxpayers by an estimated $13 billion during this period.