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Next Sesson Dates: March 6-8, 2007
Governor to unveil Universal Health Care proposal
As has been expected for several months, Governor Rod Blagojevich will officially release his plan to reform Illinois’ health care system on Sunday. According to most sources, the plan will address the nearly 1.6 million uninsured residents of Illinois at a cost of between $2.5 and $3 billion. While the funding mechanism has not yet been identified, the cost will likely be borne by employers through the imposition of a Gross Receipts Tax or the creation of a new 3-5 percent payroll tax on employers.
Studies show that nearly 98 percent of all manufacturing companies provide health care benefits for their employees. However, government mandates and regulations have consistently increased the cost of providing insurance for employees. The IMA will oppose any measure that seeks to punish manufacturers with additional taxes and change the fundamental structure of Illinois’ competitive insurance marketplace.
Governor poised to propose largest tax hike in Illinois history?
In less than a week, Governor Rod Blagojevich is scheduled to address a joint session of the General Assembly to provide his annual State of the State/Budget Address that will serve as a blueprint for the spring legislative session. It is widely anticipated by Capitol sources that the Governor will propose a Gross Receipts Tax (GRT) that will cost businesses and consumers nearly $9 billion – the single largest tax hike in state history. Imposition of a Gross Receipts Tax will disrupt and cripple the Illinois economy.
A Gross Receipts Tax will devastate the manufacturing sector in Illinois. This oppressive tax will be "pyramided" or "compounded" as the product moves through various stages of production including raw material, manufacture, and distribution. The GRT further creates a disincentive to buy Illinois products because of their increased costs and hurts companies with low-profit margins.
The IMA is strongly opposed to the GRT. As a founding member of the Coalition for Jobs, Growth & Prosperity – a bipartisan coalition of business leaders which will serve as the unified voice of opposition to the GRT – the IMA will continue fighting to defeat this tax.
Illinois House debates electric rate freeze
A rare Committee of the Whole was convened on Tuesday this week by Speaker Michael J. Madigan (D-Chicago) to address the issue of electric deregulation in Illinois. Tuesday’s hearing provided legislators an opportunity to hear testimony and ask questions of utility companies, members of the Illinois Commerce Commission (ICC), the Attorney General’s office and consumers. The marathon session, which lasted for more than 12 hours, was subject matter only (no votes taken) and served as a public relations show for legislators.
The General Assembly deregulated the electricity market in 1997. As a result of the law, the legislature froze electric rates for ten years ending on December 31, 2006, saving businesses tens of millions of dollars. Since January 1, Illinois businesses and residential consumers have bought power in a competitive marketplace. Interestingly enough, electric rates today are at the same level as they were in 1995.
Two days after the subject matter hearing, the House Utility Oversight Committee debated and passed HB 1750 (Scully, D-Flossmoor), a bill that would implement a 3-year rate freeze for residential customers only. In addition, it would require the transmission companies to refund the excess billings with interest back to customers. While this appears to help consumers, it could be very detrimental to the business community.
HB 1750, if enacted, would threaten the safe and reliable energy that manufacturers depend on to make products. By freezing rates at artificially established levels, the transmission companies would be forced to sell power at a loss, endangering their financial stability. As a result of poor credit, the transmission companies would then be forced to buy energy for resale on the high-cost daily spot market. This would increase electric rates and could result in brownouts because of the lack of electricity during high usage periods.
Comptroller Dan Hynes: "Illinois has a sizeable deficit."
This week, Illinois Comptroller Dan Hynes released the Illinois Comprehensive Annual Financial Report for the past fiscal year that shows the state with a debt of $2.328 billion. The report, based on generally accepted accounting principles, clearly shows that Illinois continues to struggle with its finances while a vast majority of states are operating in the black.
According to Hynes, a long-time advocate of fiscal restraint, "Illinois still has a sizeable deficit and will face tremendous challenges in the future just to meet these pension and Medicaid responsibilities and to pay its bills in a timely manner." According to Hynes, the problem will be compounded next year as the state resumes making its mandated contributions to the state pension systems.
In releasing the Financial Report, Hynes also called for eliminating Section 25 of the State Finance Act that allows the state to defer bills from one fiscal year to the next. This bill deferral, associated primarily with Medicaid, allows the state to delay the payment of hundreds of millions of dollars to health care providers while making the budget look balanced. As a result of delayed payments, health care providers are forced to supply no-interest loans to state government and risk their financial health.
The Financial Report also showed that the Net Assets of Government Activities (defined as the amount that the State has left to fund traditional government services after assets are used to pay liabilities) increased by $769 million in the past year. Further, the Net Pension Obligations increased by nearly $2.5 billion because the state failed to make its mandated pension contributions in FY06. According to the Report, pension obligations have increased by $4.2 billion during the past two years.
The IMA has issued warnings for several years that the state’s financial health is in crisis because of the spending decisions made by the Governor and General Assembly. It is critical that the legislature reign in spending and address Illinois’ long-term debt problem.
Expansion of Family & Medical Leave Act
Members of the House Labor Committee voted this week to create the Illinois Family & Medical Leave Act that would require certain employers to provide up to 12 weeks of unpaid leave to employees. In addition to the existing federal law, HB 374 (Franks, D-Woodstock) would expand the definition of family member to include in-laws (mother-in-law, father-in-law, etc). The new mandate passed the Committee on a vote of 13-8 and now moves to the full House for consideration.
Senate committee changes Joint & Several Liability Provision
An initiative of the Illinois Trial Lawyers Association passed the Senate Judiciary-Civil Law Committee on a partisan 6-4 vote this week over IMA opposition. SB 1296, sponsored by Sen. John Cullerton (D-Chicago) would exclude settling defendants from being assessed for fault on verdict forms. In effect, the measure changes the "apportionment" formula for determining fault that has been used by judges and juries for more than two decades. The legislation, a response to an Illinois Appellate Court ruling in Ready v. United Goedecke Services now moves to the full Senate for a vote.
Illinois Business Day – Make Your Voice Count
Mark your calendar and plan to attend 2007 Business Day in Springfield on May 2. With critical issues such as the Gross Receipts Tax and Universal Health Care being debated at the Capitol, it is extremely important that we rally the troops. The Governor and legislature need to hear directly from the manufacturing community.
Register today by calling Kim McNamara at 630-368-5300 x2109 or emailing at kmcnamara@ima-net.org. Sponsorship opportunities are also available. Check the IMA website for future announcements.
Are you dazed, confused and stunned about new utility rates? The IMA can help. Contact Mark Frech at 217-522-1240, ext. 3022, or email mfrech@ima-net.org.
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