IVCA Feature: Stricklin & Associates Advocating for IVCA Interests in Springfield

June 7, 2017

At the IVCA luncheon last month, David Stricklin – of the public affairs company Stricklin & Associates – gave a brief overview of the legislation that could affect the Venture Capital and Private Equity industries that is currently in the House and Senate for the State of Illinois. With the State budget stalemate still going on, and the legislatures currently in overtime session, it’s getting harder to discern what is going on through the volatile and partisan legislative body.
 
Stricklin & Associates is a bipartisan public affairs consulting firm representing client interests in Chicago, Springfield, and Washington, D.C.  Mr. Stricklin's career in public affairs began in 1983 as a local television reporter. In 1989 he moved to Washington where he was a press secretary – and later chief of staff – to three members of Congress.  His assignment was to achieve the policy and political goals of those elected officials. In 2003, he was named director of government relations at a large Chicago law firm.  He formed Stricklin & Associates in 2005. The IVCA reached out to Dave to expand his take on last month’s luncheon remarks, and talk about the “state of the State Capitol” in Springfield, Illinois.
 
IVCA: We don’t have to go over all the bills of interest to the IVCA, after the Illinois state legislature adjourned last week. Which one in particular do you think has the most interest, and more importantly the most chance of passing, and why?
 
David Stricklin: The bill SB1719 remains our primary concern this session. As amended, the bill would establish a 20% ‘privilege tax’ on investment management services, applied on the fees associated with the performance of the investment, as opposed to fees measured by the value of assets. With an effective date of July 1st, 2017, the bill passed out of the Senate with 32 votes, but stalled in the House and was not heard for a vote before the regular session deadline.  
 
It had received a deadline extension to June 30th, but any vote would now require a three/fifths majority. It seems unlikely the sponsor could collect the 67 ‘yes’ votes that are now necessary for it to be approved. The legislation that is most likely to be signed into law is an extension and expansion of the ‘angel tax’ credit. SB 2012 was sponsored in the Senate by a Republican and in the House by a Democrat, and unanimously passed both chambers.
 
IVCA: The inability to pass a state budget has a ‘waiting for the other shoe to drop’ quality to it that is actually distressing. Where is the main divide, and where are the compromises that could break the divide?
 
Stricklin: The primary issue that has engendered the budget impasse is the Governor’s contention that economic and structural reforms included within his ‘Turnaround Agenda’ must be included in passage of a balanced budget. The Democratic majority in the General Assembly has opposed connecting these reforms directly to the budget and disagree with many of the policy specifics, resulting in a budget stalemate creating significant hardship on social service providers, higher education and the state's overall fiscal condition.
 
Of the Governor’s most sought-after reforms, local government consolidation and procurement reform are prime for agreement. The issues with the greatest philosophical divide are workers compensation, the length of a property tax freeze, and pension reform. Leadership in both parties in the Senate were negotiating a compromise on these issues and, while they came close, they were never able to fully agree. Some have argued that a compromise is only possible in so far as both groups truly want a compromise. Politically, there is reason to believe that one or both parties are willing to allow the budget impasse to continue in order to blame the other side.

IVCA: We have a thriving entrepreneurial infrastructure here in Chicago, which affects jobs all over the world. What does this budget impasse mean to the potential for this renaissance of new businesses, besides the obvious funding for government and state programs?
 
Stricklin: The primary issue for businesses is not the funding of government and state programs, but the instability of government and the economic climate. Illinois has the fifth largest economy in the country, and in an effort to introduce economic reforms, the budget impasse has significantly thwarted our economic growth. This uncertainty prevents businesses and entrepreneurs from investing in Illinois, and the budget impasse has increased the unpaid bill backlog from $4 billion in 2014 to over $14 billion today – which in turn produced eight credit downgrades to ‘BBB-’, one step above junk status.  
 
IVCA: At Stricklin & Associates, you emphasize the four ‘P’s’ in your approach – Preparation, Policy, Process and Politics. Within those four areas of strategy, what is an example where a wrench can be thrown in that really grinds the gears of law making?
 
Stricklin: It is ordinarily preferable to argue the policy merits of your legislation, but ‘Politics’ is perhaps the one common thread in this equation. ‎Take for example SB1719, which many legislators on both sides of the aisle have agreed is poor policy to implement in Illinois. Not only is it an attempt to resolve a federal issue, but Illinois would be the only state in the nation to establish this substantial tax.
 
Despite this, the issue was driven by the teacher’s unions as a direct attack on a Governor whose business career was in Private Equity. The partisan nature of the bill, in addition to pressures by leadership – and a sponsor who is currently running against the Governor – resulted in an unfortunately-too-common situation where the merits took a backseat to the polls and the politics.
 
IVCA: You’re a veteran observer of the scene in Springfield. What vibe do you get from the House and Senate regarding the frustrations that are occurring, and how often are they hearing that this budget impasse is messing with Illinois’ reputation?
 
Stricklin: Legislators are hearing daily from their constituents, businesses, schools, and service providers regarding the budget impasse. No legislator is immune from recognizing how the impasse impacts Illinois on multiple levels. The Senate was especially frustrated this session as negotiations on the Grand Bargain seemed simultaneously close and far away.
 
The Senate Democrats feel that they have done all they can to pass a balanced budget, with many of the Governor’s reforms. Senate Republicans, meanwhile, feel the reforms do not go far enough and that the Democrats have abandoned the negotiating table. In the House, Democrats largely believe the Governor will torpedo any effort and are frustrated within their own caucus that necessary tax increases do not have enough support. The frustration is matched with the concession that a resolution is unlikely until after the 2018 election.
 
IVCA: You always stress contacting district legislators and continuing to voice concerns in regards to an individual’s interests. In our busy lives, what is the most effective way to reach a politician and get him or her to really listen?
 
Stricklin: The most effective way to reach an elected official depends upon the person. Certain legislators are more receptive to emails, while others prefer to receive phone calls to their various offices, while still others are most connected through social media. Legislators will take the time to meet with constituents and will hear out their concerns and thoughts on any given issue, and if a person can spare 30 minutes to talk to their legislators they should absolutely do so. And legislators also notice volume. No matter the means of contact, they do listen to their community, when many voices are speaking out on a certain issue.
 
IVCA: Finally, what suggestions do you have for IVCA members going forward?
 
Stricklin: Take a moment this summer to reach out to your state representative and state senator – we can also can help you do that –  and make an appointment to see them. If you have a good example of a project that helped to keep or bring or add jobs in Illinois, describe it to them. If you're working with the next great thing in technology, explain it to them.
 
VC and PE isn't always easy to comprehend initially but practical examples help – always give public officials a way to see the value of keeping VC/PE a thriving industry in Illinois. If your fund holds investments from Illinois pension systems, explain how your returns help make those pension payments. Overall, your objective is to put a name, a face and story to the concept of VC and PE investing. Stricklin & Associates is available to work through Maura to help you identify your legislator, prepare for the meeting, and attend with you if preferred. Pick up the phone and make the call – it helps!
 
For more information about Stricklin & Associates, go to www.StricklinAssociates.com