BUDGET STILL WAITING ON GOVERNOR
For over a week now Governor Blagojevich has had the state’s budget sitting on his desk awaiting action. The Governor’s office claims that he will line-item veto $500 million in “member initiative” money, or what he refers to as “pork”, and then spend that amount on his cherished, but significantly scaled back, health care program now that the 3% payroll tax is all but dead. If the governor does indeed line-item veto money in the budget, the rest of the budget goes into effect and then the General Assembly can act on what the Governor vetoed. Senate President Emil Jones (D-Chicago) made it very clear, however, that the Senate will not act on an override of the Governor’s line-item vetoes. It’s anyone’s guess at this time when and what the governor will do with the budget but time is running out as the state is paying its employees and a few other obligations pursuant to a court order that expires August 31.
However there are many other issues still revolving around the budget. Even if the governor does line-item veto the budget and the General Assembly fails to override it, a capitol construction program and a bail out of the CTA & RTA, are still lingering. In other words, the Spring 2007 Session is far from over. The capitol program is a multi billion dollar endeavor to build schools, roads, and bridges, with the revenue coming from an ever changing gaming expansion proposal that could include a casino in Chicago. The funding that the CTA and the RTA is seeking could come from increased local sales tax and real estate transfer taxes or could be financed by additional gaming. There is also a proposal to increase the cigarette tax throughout the state and for local governments, even though that money was originally earmarked for the governor’s health care program. CICI will keep you abreast of any developments.
If there is any good news to come out of this session is that the governor’s proposed Gross Receipts Tax (GRT), his proposed 3% payroll tax, and other attempts to gouge the business community through higher taxes and fees have so far all failed.
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LEGISLATION SIGNED BY THE GOVERNOR
Elimination of Corporate Tax Incentives – SB 1544 (Hendon, D-Chicago) PA 95-233
While the governor has signed into law a bill eliminating some corporate tax incentives, most of the important ones for Illinois industry remain intact.
“Corporate tax incentives” contained in PA 95-233 include the following:
• Establish an amnesty period for overdue Corporate Franchise Taxes.
• Require withholding of non-resident partners/subchapter S shareholders that elect not to be part of a composite Illinois tax return. This proposal requires withholding only for non-resident partners who elect not to be part of a composite return in Illinois.
• Require bond deductions to be net of expenses as are state and municipal bonds.
• End double-deduction for discharged debt. This essentially means that the same loss is creating 2 deductions.
• Deny artificial deductions for certain expenses between affiliated companies. Tax administrators argue that businesses use this situation specifically to avoid tax, because the businesses shift expenses to their affiliates that have a lower effective tax rate.
• Apply destination apportionment. The proposal would change the apportionment rule for companies like telecommunications services and electricity services. Income from telecommunications services would be sourced to where the customer is located, and income from electricity services would be sourced to where the meter is read.
• Eliminate exemption for sale of vehicles to automobile renters.
• Disallow the Dividends Paid Deduction to Real Estate Investment Trusts (REITS). Because Illinois’ income tax is tied to the federal code, the federal tax treatment remains. The proposal would decouple Illinois from this tax treatment.
In all, it was liberally estimated that these tax changes could bring in $300 million more in new revenue. That estimate has been readjusted to resemble reality, however. It has also been discussed that 2 components of this package - sale of vehicles to automobile renters and bond deductions - will be taken out in another piece of legislation as a result of an agreement with the four legislative leaders.
Awards for Grief, Sorrow and Mental Suffering – HB 1798 (Fritchey, D-Chicago) PA 95-3
This is a measure not quite as controversial as their deep pockets legislation (SB 1296) pushed by the Illinois Trial Lawyers Association but HB 1798, which was signed into law as soon as the governor received it, nonetheless went after the state’s business community with the aim of increasing award damages for grief, sorrow and mental suffering in wrongful death cases. The legislation also originally added damages in cases where contributory negligence is a factor, redistributing any reduction of a contributory negligent party's damage award to dependents of the decedent. Under the current proposal, reductions based on contributory fault are not paid to anyone. This particular language was removed at the request of the insurance industry, thus removing the insurance industry’s opposition; however, the state’s business community remained opposed to this legislation.
CICI Position: Oppose
Electricity Reciprocity Agreements – HB 894 (Beiser, D-Alton) PA 95-130
This CICI-supported measure, HB 894, changes the 1997 electricity deregulation law to remove a provision requiring that, in order to grant a certificate of service authority, the Illinois Commerce Commission must find that an applicant, its corporate affiliates, or its principal source of electricity provides delivery services to the electric utility or utilities in whose service area or areas the transmission or distribution of electricity to end users will be offered that are reasonably comparable to those offered by the electric utility.
This issue has long been debated in the courts since the 1997 deregulation law took effect. It was put into statute at the behest of the International Brotherhood of Electrical Workers (IBEW), who wanted job protections, and the utility generators, who didn’t want the competition. However, during the 10-year rate freeze period, generation in the state went from 60% to 90% capacity and utility generators no longer worried about other Alternative Retail Electric Suppliers (ARES) coming into the state and IBEW maintained their job protections, although some local union shops are divided on this issue.
Now that this measure is enacted, it will remove a huge barrier to competition for the electricity market in Illinois by encouraging more ARES’s, which, in turn, could mean better prices/rates for electricity.
CICI Position: Support
Biomonitoring Feasibility Study – HB 680 (Nekritz, D-Northbrook) PA 95-74
This measure, HB 680, allows the University of Illinois at Chicago, the Great Lakes Center for Occupational and Environmental Safety and Health (Center), to conduct an environmental contaminant biomonitoring feasibility study that proposes the best ways to monitor the presence and concentration of designated chemicals in the bodies of the people of this State. The bill also provides for a Scientific Guidance Panel that will be composed of 11 members appointed by the Directors of Public Health and the IEPA and provides guidance to the Center. After 2 years, the Center would submit a report to the Governor and the General Assembly containing findings of the feasibility study and include recommended activities and estimated costs of establishing an Illinois Environmental Contaminant Biomonitoring Program.
While this bill is significantly different than what was introduced earlier this year, CICI worked with the sponsor to address our industry’s concerns.
CICI Position: Neutral
Great Lakes Compact – HB 375 (Osterman, D-Chicago) PA 95-238
This legislation, HB 375, 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, and Pennsylvania. 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.
Since the flow of the Chicago River was reversed in the early 20th century, water from Lake Michigan that is used in Illinois has been diverted to the Mississippi River watershed. That diversion is governed by a 1967 U.S. Supreme Court decree and a 1980 amendment. The 1967 decree limits the amount diverted to 3,200 cubic feet per second, averaged over 5 years. The 1980 amendment made technical changes to permit Illinois' effective use and management of the permitted diversion, increasing the averaging period to 40 years and adding a goal to reduce withdrawals from the Cambrian-Ordovician (deep bedrock) aquifer. For right now, this Supreme Court decree would govern Illinois’ water usage from Lake Michigan, not this Compact.
CICI Position: Neutral
Phosphorus in Detergents – SB 376 (Harmon, D-Oak Park) PA 95-115
This measure, SB 376, was debated two years ago as the Metropolitan Water Reclamation District (MWRD) of Greater Chicago attempted to remove phosphorus in automatic dishwashing detergents. An agreement between the MWRD and the detergent manufacturers produced this proposal which will reduce the amount of phosphorus in automatic dishwashing detergents from 0.8% to 0.5% by July 1, 2010. The bill further prohibits home rule unit of local governments from regulating phosphorus in detergents.
CICI Position: Support
MWRD – Water Quality Projects – HB 679 (McCarthy, D-Orland Park) PA 95-125
This proposal, HB 679, changes the Metropolitan Water Reclamation District (MWRD) Act to establish that the term "construction purposes" includes water quality improvement projects and that they may issue bonds for the purpose of replacing, remodeling, completing, altering, constructing and enlarging water quality improvement projects.
CICI Position: Neutral
Green Cleaning in Schools – HB 895 (May, D-Highwood) PA 95-84
This proposal, HB 895, creates the Green Cleaning Schools Act to require the Illinois Green Government Coordinating Council (IGGCC), in consultation with other agencies and interested stakeholders, including representatives of cleaning products, to establish guidelines and specifications for environmentally-sensitive cleaning and maintenance products for use in school facilities. CICI and the Consumer Specialty Products Association (CSPA), who both originally opposed the bill, worked with the sponsor of the measure to include various avenues for which these types of products can become certified with the concern for allowing the use of disinfectants, sanitizers, and anti-microbial agents.
CICI Position: Neutral
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