IVCA Provides Updates for State and Federal Legislative Issues - 03.01.17

IVCA Provides Updates for State and Federal Legislative Issues


UPDATE provided by Stricklin & Associates on March 1, 2017:

The budget stalemate in Illinois continues with relatively few positive signs of a resolution anytime soon.

As you know, Illinois state government has been operating FY 16 and FY17 via various short term budgets, court orders and consent decrees for Medicaid and other human services, and with full year funding for K-12 education. The disagreement continues between the governor and the Democratic leadership of the Illinois General Assembly over whether policies advocated by the Governor should be tied to a full-year budget agreement.

Senate President Cullerton and Senate Minority Leader Radogno have negotiated a “grand bargain” to provide for a full-year balanced budget with various structural reforms.  There were 14 bills originally introduced (SB1-SB14), which have since undergone several changes. Components such as a minimum wage increase, and a sugar-sweetened beverage tax were taken out of the deal.  The package still contains a personal and corporate income tax increase, gaming expansion, pension reform, workers compensation reform, procurement reform, education funding reform, local government consolidation, and an expanded sales tax on food and drugs.  The bills are written such that if any one of them fail, the entire package fails to become law.   

Votes were taken Tuesday, February 28th:
SB5, pertaining to "pension parity" for Chicago Teacher's Pension Fund, passed on a vote of 35 yes, 22 no, and 1 present.
SB6 is the spending portion of the package, appropriating funds to departments for FY17.  It passed 42-16-1.
SB7 passed 31 yes to 26 no, and would expand gaming in Illinois- with several new casinos including one in Chicago.
SB16, the pension reform bill, failed and has been placed on postponed consideration.  This is the second time the measure has failed (it was previously voted on as SB11).
SB8- procurement reform- and SB3- local government consolidation- were approved during session two weeks ago.

As a reminder, if any one of the measures fails to pass and be signed into law, the entire package fails.  More votes are expected Wednesday, March 1.

The Illinois Chamber of Commerce, Illinois Retail Merchants Association, and Illinois State Medical Society and others have argued against components of the deal. Similarly, more conservative groups have criticized the reforms for not going far enough, while some unions have also argued that the reforms will hurt workers and the middle class.

On February 15th the Governor issued his FY18 budget and provided some specifics as to his view on the Senate grand bargain. While open to an income tax increase, Governor Rauner stated he did not support the temporary property tax freeze-- instead calling for a permanent version. The Governor also expressed opposition to the proposed taxes on food, and reiterated his determination to passing term limits and workers compensation reform. 

There is no “grand bargain” package of bills in the House and it is unclear if the House will consider what the Senate produces.

Illinois faces an unpaid bill backlog of $12.2 billion, accruing interest payments that are costing the state approximately $30 million a day, resulting in continued credit downgrades by the rating agencies.

There are several pieces of legislation this session that specifically impact members of IVCA which we are following closely:

SB 778, Senator Daniel Biss, to make private equity investments of pensions funds FOIA-able under statute.

SB 779, Senator Biss, a version of which was introduced in the last session, requires public retirement systems to disclose various expenses and fees that are paid to investment funds.  

SB 778 and SB 779 have been assigned to Senate Licensed Activities and Pensions Committee, and neither have any listed co-sponsors.

SB 1719 -- Biss, assigned to Senate Revenue, no additional cosponsors at this time.
Synopsis As Introduced
Amends the Illinois Income Tax. Imposes a privilege tax at a rate of 20% on partnerships and S corporations engaged in the business of conducting investment management services, until such time as a federal law with an identical effect has been enacted. Provides for the determination of the tax due, defines "investment management services". Effective immediately, but this Act does not take effect at all unless the states of Connecticut, New Jersey, and New York enact laws having an effect identical to this Act.

SB 2091 (Sandoval) and HB 3061 (Guzzardi) mirror legislation from late last session and would require the Illinois Investment Policy Board to identify companies that contract to build a border wall and include those companies in the list of restricted companies for public retirement systems. HB 3061 has been assigned to the Economic Opportunity Committee, with Representative Theresa Mah as a co-sponsor.

Representative Camille Lilly introduced HB 775 to require pension funds to create a climate change risk minimization policy, and to consider investments’ impact on climate change.  This bill has been assigned to Personnel & Pensions Committee but has no listed co-sponsors. 

Representative Grant Wehrli introduced HB 3527, assigned to House Revenue and Finance, and Senator Chuck Weaver introduced SB 2012, assigned to Senate Revenue:
Neither bill has additional cosponsors.Synopsis As Introduced
Amends the Illinois Income Tax Act. Provides that aggregate amount of angel investment tax credits that may be claimed for qualified new business ventures is increased to $25,000,000 (from $10,000,000) per calendar year, of which $2,500,000 is reserved for investments in minority owned businesses, female owned businesses, or businesses owned by a person with a disability, and $2,500,000 is reserved for investments made in businesses headquartered in counties with a population of not more than 250,000. Defines "minority owned business", "female owned business", and "business owned by a person with a disability". Extends the angel investment tax credit to December 31, 2021 (now December 31, 2016). Effective immediately.
Senator Biss SB 1622, assigned to Senate Revenue, no additional cosponsors at this time.
Synopsis As Introduced
Amends the Illinois Income Tax Act. Provides that the angel investment credit applies for taxable years ending on or before December 31, 2022 (instead of December 31, 2016). Makes changes concerning the annual report submitted by the Department of Commerce and Economic Opportunity to the Governor and the General Assembly. Effective immediately.
Senator Clayborne SB 1714, assigned to Senate Licensed Activities and Pensions, no additional cosponsors at this time.
Synopsis As Introduced
Amends the General Provisions Article of the Illinois Pension Code. Requires a consultant to annually disclose to the board of the retirement system, board of the pension fund, or the investment board that retains the consultant certain information concerning searches for investment services from minority owned businesses, female owned businesses, and businesses owned by persons with a disability. Requires a consultant to disclose any compensation or economic opportunity received in the last 24 months from investment advisors retained by the board of a retirement system, board of a pension fund, or investment board. Requires consideration of these disclosures before awarding a contract for consulting services. Effective immediately. 

Outside of the legislature, the conflict of state workers pay and contracts continues.  Shortly after the budget impasse began, a temporary court order compelled continuing payments to state workers.  In January, Attorney General Lisa Madigan filed a motion to reverse this order, citing the Illinois Constitution language that requires appropriations prior to payments.  On February 16th, AG Madigan’s motion was denied.  While there will be an appeal, payments to state workers remain. 

In a similar vein, the largest state workers’ union- AFSCME- has gone without a contract since July 2015, when its previous one expired.  In mid-2016, after stalled negotiations, Governor Rauner announced an impasse last year.  AFSCME filed a motion against this move, which allows the Governor to provide a 'final offer'. However, the court had sided with the Governor. AFSCME and the Governor disagree over a number of provisions, including changes Governor Rauner sought to health insurance for state workers, overtime rules and limits on privatization.  It is unclear if the union will strike, and what that means for the state or the budget impasse.