Next session dates: April 8-11, 2008
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This week...
Senate Democrats Guilty of Fiscal Irresponsibility
Not since Congress passed the controversial $200 million "Bridge to Nowhere" in Alaska has a legislative body in the United States committed such fiscal irresponsibility that was witnessed in the State Senate this week.
With the state facing a massive $3.6 billion deficit (source: Illinois Comptroller), reduced tax revenues, and a slowing economy that is moving toward a recession, members of the Senate Democrat caucus chose to ignore reality and voted in lockstep with Senate President Emil Jones in support of Governor Rod Blagojevich's plan that allocates tens of millions of dollar in pork projects. More than $130 million in new spending was contained in HB 3860 (Trotter, D-Chicago) including $60,000 for a volleyball court in Chicago, $20,000 for rodent abatement in Cicero, and more than $200,000 for baseball fields across the state.
To pay for this largesse, the majority Democrats gave Governor Blagojevich the unprecedented power to raid $530 million from special funds in the State Treasury. Special funds are comprised of revenue from dedicated fees that are supposed to go for a specific purpose instead of being lumped into the state general checkbook. While previous Governors have used fund sweeps in the budgetary process, no Governor in recent memory has been given the power to unilaterally determine what funds to sweep. A relatively small number of funds, including the Road Fund, Open Space Preservation Fund, and some funds to help veterans were exempt from the sweep contained in HB 473 (Trotter, D-Chicago).
The power play in the Senate, which included passage of the Governor's universal health care plan, included millions in pork projects in an attempt to entice Speaker Michael J. Madigan (D-Chicago) and his Democrat majority to play along. However, in reaction to the plan, Madigan's spokesperson called it "delusional" to spend more money when there is a $700 million deficit in the current state budget that expires on June 30.
The IMA applauds Senate Republican legislators who unanimously opposed this disastrous legislation that further imperils the state's finances. If you would like to see how you legislator voted on the pork-laden appropriation bill, please click here.
Senate Passes Blagojevich Health Care Plan
After three defeats in recent months, Governor Rod Blagojevich successfully muscled his massive health care expansion through the Senate on a partisan 37-21 vote. After failing previously in the Senate and twice before the Joint Committee on Administrative Rules (JCAR), the expansion of FamilyCare was approved to make 147,000 more people eligible for free or subsidized health care.
The program, that provides free or subsidized health care for families earning up to $82,000 annually, will cost $40 million for the remainder of this fiscal year and is projected to cost taxpayers more than $300 million next year. In addition to the Family Care expansion, the provisions of HB 315 (Link, D-Vernon Hills) also include $10 million for breast and cervical cancer programs and $15 million for a children's health care program.
Senate Republicans vehemently opposed the change noting that the state is facing a budget crisis and can't pay its current obligations to health care providers.
Because of the massive out-year costs, it is very possible that the Governor and his legislative allies will continue to push forward on plans to impose a 3 percent payroll tax on employers to generate nearly $1 billion annually. At a time when the state is facing a massive budget deficit, slowing economy, and deflated tax revenues, this is a fiscally irresponsible measure that will create greater problems.
Double Income Tax on High Wage Earners?
Four Democrat members of the Illinois House of Representatives announced a plan this week to amend the State Constitution that would double the income tax on individuals earning more than $250,000 per year. To become law, HJRCA 42 ((Smith, D-Pekin) must be passed with a three-fifths majority in both chambers of the General Assembly and be signed into law before May 4. It would then be submitted to voters in the 2008 general election for ratification which requires 60 percent of voters to favor the measure.
Under current law, the individual income tax rate is 3 percent which would be doubled to 6 percent under this new legislation that is set to be heard in the House State Government Administration Committee next Wednesday. According to the bill sponsors, the higher income tax rate would impact 107,000 Illinois taxpayers and generate nearly $3 billion annually to be used for infrastructure ($1 billion), education ($1 billion) and an increase in the standard exemption from $2,000 to $4,500 ($850 million). One Democrat lawmaker, Joe Lyons (D-Chicago) deemed it the "Robin Hood referendum" saying – "it takes from the wealthy and gives to the poor."
The proposed Constitutional Amendment maintains the current income tax ratio (5 to 8) between individuals and corporations but creates problems with its impact on the business community. Many businesses, including small and medium-sized companies, are set up as Subchapter S Corporations, LLCs, or partnerships and shareholders are taxed at the individual rate. So, doubling their tax rate would negatively impact these small and medium-sized companies.
House Passed Recall Amendment
More than two-thirds of the Illinois House voted this week in support of an amendment HJRCA 28 (Frank, D- Woodstock) that would allow voters to recall officials from the executive and legislative branches of government. Under the provisions of the constitutional amendment applicable to the recall of an executive branch official, a petition must include signature of at least 12 percent of total votes cast or roughly 416,000 signatures while more than 20 percent of voters must sign a petition to recall a state legislator.
The proposed constitutional amendment is similar to the laws of 18 states including California which used it several years ago to recall Governor Gray Davis. If enacted into law, Illinois voters would be able to vote in a special election to both recall and incumbent official and choose their replacement at the same time.
The amendment to HJRCA was adopted on a vote of 80-25 now must pass the full House before being sent to the Senate and ultimately the Governor. Advocates of the bill, including sponsor Jack Franks, indicate that it was introduced largely because of the actions of current Governor Rod Blagojevich.
IMA Chairman to Address Illinois Manufacturing Caucus
IMA Chairman Ron Bullock will provide the keynote address to the Illinois Legislative Manufacturing Caucus next week and highlight the critical need for workforce development programs in the state. Bullock, the chairman of Bison Gear & Engineering Corporation, will stress the need for an integrated education system that prepares students for work in today's global economy and helps address the critical skill shortages facing the manufacturing sector.
Attend 2008 Business Day
Recent actions by elected officials in various levels of government across Illinois show the tremendous need for manufacturers to get involved and attend the 2008 Legislative Day in Springfield.
In the past few weeks along, we have witnessed Cook County officials implement the single largest sales tax rate in the United States while General Assembly members seek to make Illinois' income tax rate the 2nd highest in the country. The Governor is proposing to eliminate manufacturing tax incentives and impose a new 3 percent payroll tax on employers.
Combined – these taxes and fees will cost businesses BILLIONS of dollars.
Now is the time to act. Visit the IMA website and sign up today to attend this daylong event at the State Capitol. This is YOUR opportunity to meet with legislators face-to-face and tell them that new taxes and regulations will hurt manufacturing. Sponsorships are also available – please call Kim McNamara at (630) 368-5300 ext. 2109 for more information.
Latest Economic Report from Commission on Forecasting and Accountability
The Illinois Commission on Government Forecasting and Accountability (ICGFA), a bipartisan economic arm of the General Assembly, released its FY2009 Economic and Revenue Forecast that clearly shows the slowing of economic growth and accelerated correction in the housing market. It is imperative that the Governor and lawmakers cannot continue their unabated spending given the poor economic conditions that exist and decreased tax revenue flowing into state coffers.
Other Springfield Highlights available online
