ELECTRICITY GENERATION TAX ADVANCED TO HOUSE FLOOR

With a few hours notice, an amendment was attached to SB 1592 (Forby, D-Benton), yesterday evening in the House Electric Utility Oversight Committee that would enact a multi-billion dollar tax on electricity generators.  The measure also re-establishes an electricity rate freeze for residential and small business customers for at least one year while the generation tax continues on in perpetuity.  This tax would be levied at the rate of $70,000 per megawatt of generating capacity per generating unit.  The tax would not apply to the following:

• a generating unit owned by a municipality or an electric cooperative
• a generating unit that generates electricity from a renewable energy resource
• a generating unit designed to produce both heat and electricity from a single heat source
• a generating unit operated fewer than 876 hours during the taxable year (or fewer than 438 hours during  taxable year 2007, i.e. some peaker plants), or
• a generating unit that is owned by a vertically integrated utility, i.e. Mid-American Energy

The money from this tax, reported to be over $2 billion, would be deposited in a fund used to subsidize residential and some small businesses’ electricity bills since electric deregulation began January 1, 2007.

It has been CICI’s contention since the original 10-year rate freeze expired that any effort to again “freeze” residential rates will likely be done at the expense of industrial users.  This tax is no different, as it will eventually be passed on to industrial users.

The measure passed out of committee on a party line vote of 5 Democrats voting “yes” and 4 Republicans voting “no” and now heads to the House Floor where negotiations with the state’s utilities are currently ongoing.  The state’s utilities are currently offering a half billion dollars for a rebate fund for customers experiencing difficulty paying their electric bills.  Needless to say, this has been one of the hottest issues for rank and file legislators, especially in downstate Illinois. 

The language of this measure can be accessed here through this link: http://www.ilga.gov/legislation/fulltext.asp?DocName=09500SB1592ham003&GA=95&SessionId=51&DocTypeId=SB&LegID=29675&DocNum=1592&GAID=9&Session=
The language regarding the generation tax begins on page 52.

LEADERS BEGIN BUDGET NEGOTIATIONS

The state’s three top Democratic leaders – House Speaker Michael Madigan, Senate President Emil Jones, and Governor Blagojevich – met for the first time yesterday to craft a new state budget.  With the idea of the GRT dead, the Governor’s massive spending plan will have to be drastically altered.  While it was reported that there were no significant breakthroughs at this meeting, at least the three were all sitting at the same table, which is a start. 

The discussions are now focusing on other sources of revenue and to the budget itself.  There are numerous ideas floating around Springfield at this time, particularly gaming expansions and eliminating certain tax credits and exemptions.  According to some press reports, these tax credits and exemptions could include:

• Eliminate motor fuel retailer’s discount
• Close exemption for sales of vehicles to auto renters 
• Create a straight-line depreciation for equipment
• Eliminate sales tax exemption on farm inputs for farms grossing over $1 million
• Enact sales tax on software licensing
• Eliminate exemptions on federal bonds
• Include all income apportionable in Illinois

Also being discussed are income tax hikes, extending sales taxes to cover some services, a “no growth” budget that just spends current revenue growth, and an alternative minimum tax (AMT) on corporations which is likely based upon gross receipts.  However, the idea of any income or sales tax hike and, to a lesser extent, a “no growth” budget have been met with much resistance.

Only one week remains before the scheduled adjournment of the Spring Session.  This year’s Spring Legislative Session is scheduled to adjourn on May 31 but it’s very likely the legislature is looking at going into overtime.  Legislation with an immediate effective date passed after the May 31 deadline, i.e. the budget and the means to pay for it, requires a 3/5’s majority – 71 votes in the House and 36 votes in the Senate.  This may not matter much in the Senate, where the Democrats already have 37 votes but in the House the GOP would have to be part of any ultimate budget solution.

CICI will keep you informed on any developments.  Needless to say, CICI will adamantly oppose any expansions of government that is solely paid for by the state’s business community.

GREAT LAKES COMPACT ADVANCES TO THE GOVERNOR

This legislation, HB 375 (Franks, D-Woodstock) creates the Great Lakes-St. Lawrence River Basin Water Resources Compact Act and authorizes the governor to enter into the compact between the states of Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and Wisconsin.  The bill also creates the Great Lakes-St. Lawrence River Basin Water Resources Council, which will consist of the governors of the parties to the compact ex officio and provides that all appointments by the governor would be subject to the advice and consent of the Senate.

This bill is just one aspect of a major initiative between the Great Lakes states and Canadian provinces designed to protect the integrity of the world’s largest fresh water supply.  The bill further provides for numerous specific requirements that would be contained in the compact and requires the Department of Natural Resources and other state agencies to perform, at the direction of the Governor, the functions and duties required of Illinois under the compact.

This measure passed both chambers unanimously and now heads to the governor for further consideration.

Please note that the Chemical Industry Council of Illinois Legislator is not intended to convey legal advice or set forth all legal requirements applicable to particular circumstances.

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