Next session dates: House & Senate July 23-27, 2007
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Governor's sights set on destroying Illinois business climate
Taking a page from Governor Arnold Schwarzenegger's past life, Illinois Governor Rod Blagojevich has assumed the role of "jobs terminator" and unveiled a package of tax increases on employers that will devastate the business community resulting in lost jobs and less economic investment in the state. The latest tax list was provided in response to queries from legislators in the House and Senate during hearings regarding the sale or lease of the state lottery.
Governor Blagojevich continues to call for the sale or lease of the state lottery (which has been rejected by a vote in the House) as a way of raising billions of dollars in revenue for the state's pension systems. Under current state law, all annual net proceeds from the state lottery are dedicated to elementary and secondary education. However, the lottery lease plan outlined by the Governor creates a nearly $650 million annual hole in the education budget because it fails to identify a funding source to replace the lottery revenue. In an effort to fill this hole and increase state spending my more than 30 percent in one year, the Governor has suggested shifting the tax burden to employers by eliminating tax incentives that create jobs and implementing new taxes.
Many of these tax incentives that the Governor proposed to repeal are aimed directly at the manufacturing sector (still the backbone of the Illinois economy) including elimination of the Machinery & Equipment exemption, Research & Development tax credit, and Manufacturers' Purchase Credit. In addition, the Governor suggests eliminating the Single Sales Factor, imposing a new sales tax on computer software, decoupling from the qualified production activities standards, and even changing the definition of the United States be able to tax products from additional locations.
It is very clear that Governor Blagojevich and his advisors lack the understanding of what it takes for Illinois to compete against other states and countries when he proposes eliminating tax incentives that are regularly used by other states to create jobs and foster investment. In research and development for example, Illinois currently ranks in the top 10 states for R & D expenditures and the average R & D job pays more than $74,000. The technology and information sectors, fueled by Illinois' world-class university system, are seen as engines that will help move the economy forward and yet the Governor proposes elimination of the Research & Development tax credit that will help grow this sector.
Similar stories can be told for each incentive on the list. Recently, Missouri passed a new law creating a tax exemption for energy used in the manufacturing process making Illinois the only state in the Midwest without an energy tax exemption. Working with Sen. Mike Jacobs (D-Moline) and Rep. Pat Verschoore (D-Rock Island), the IMA had legislation (SB 1697) introduced but the bill failed largely due to opposition from the Governor's administration.
Illinois has lost nearly 200,000 manufacturing jobs in the past seven years and the state's chief executive continues to stand by and watch companies like Honda and Toyota locate new plants, employing thousands of people, in Indiana and Mississippi. Unfortunately, Governor Blagojevich's actions this week will only help hasten the loss of additional jobs and investment in Illinois.
Senate plans vote on universal health care program
Senate President Emil Jones (D-Chicago) publicly indicated that the full Senate will consider a scaled back version of the Governor's health care proposal on Tuesday or Wednesday next week that could help ruin the state economy in the future. While final details have not been released, the plan would be implemented in July of 2008 and funded through a billion dollar payroll tax on Illinois employers. Passage of a new, multi-billion dollar universal health care plan in Illinois will sound the death knell for the state's already-deteriorating fiscal health
Months ago, the Governor proposed universal health care, dubbed Illinois Covered, to provide health care benefits to nearly 1.4 million uninsured residents across the state. The plan was funded through a combination of a gross receipts tax and payroll tax. In addition, the program created new mandates and a massive new state bureaucracy to compete with private business.
Manufacturing companies understand the need for health care and studies show that 98 percent of companies provide benefits to their employees. However, the Governor's multi-billion dollar plan was simply too big and too expensive for a state that already owes its health care providers more than $2 billion and has a chronically-underfunded pension system ($42 billion).
Other states that have implemented similar plans have seen their costs skyrocketed by more than 300 percent. Passing a massive health care plan in Illinois, at a time when the state's fiscal house is not in order, is recipe for disaster and the negative impact will be felt by generations to come. Governor Blagojevich and the legislature need to adopt sound business practices and learn to live within their means.
URGENT: CALL YOUR LEGISLATOR!
With the health care vote scheduled for next week in the Senate, the IMA would request that you call your state senator (and state representatives) and let them know that you oppose the Illinois Covered universal health care plan. Employers cannot afford to pay billions of dollars in new taxes to support a massive new state-run health care program.
Click here to find your legislator's name and contact information.
Governor, General Assembly set to break record for overtime session
The Governor and Illinois General Assembly are poised to break the record for the longest overtime session in state history on July 25. The previous record, set in 2003 during Governor Blagojevich's first term, was July 24.
While legislators are denied per diem and travel reimbursement during a normal overtime session, the Governor's continued calls for daily special sessions beginning on July 5 has cost taxpayers nearly $40,000 per day according to published press reports. The latest stories in the media indicate that this year's bill for overtime session has now passed $500,000.
House Speaker discusses income tax increase
In response to a question posed in a radio interview and the Governor's demand for revenue ideas, House Speaker Michael Madigan (D-Chicago) broached the idea of raising the income tax to help fund the state's spending priorities. In the interview, Madigan noted many cases of politicians changing positions on key issues and indicated that Governor Blagojevich would have to break his campaign promise not to raise the income or sales tax.
In response, Senate President Emil Jones noted his general support for the income tax as a means to fund Illinois schools but noted that such a plan would need bipartisan support for passage.
Three legislators announce retirement
Three Republican legislators have announced their plans to retire at the end of their current terms in office. Senator Bill Peterson (R-Long Grove) served ten years in the Illinois House and the last fifteen years in the Senate. For many years, Sen. Peterson served as chair of the Revenue Committee and has always been a strong advocate of the manufacturing sector. His leadership and expertise will be missed.
Rep. Patricia Lindner (R-Aurora) is a social moderate and member of the House Republican leadership team. Rep. Lindner has been a strong ally of the business community since first being elected in 1993. Three-term incumbent Joe Dunn (R-Naperville) is returning to the private sector and plans to spend more time with his young family. Dunn was an expert in financial and regulatory issues during his tenure.
The IMA applauds all three legislators on their distinguished careers and wishes them luck in future endeavors.
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