SPRINGFIELD HIGHLIGHTS - February 3, 2012

Quinn Gives State of the State Address

During his annual State of the State message to a joint session of the General Assembly this week, Governor Patrick Quinn outlined his plans for a 2012 Jobs Agenda while pledging to address the state’s massive pension debt and unbalanced budget during his Budget Address later this month.  While the State of the State message allows the Governor to provide broad themes and highlight successes in office, specific details and the real work begins after the state’s spending plan is unveiled on February 20.   

While applauding Governor Quinn for focusing almost exclusively on jobs and exports, the IMA issued a press release calling for further job creation measures including pension reform, balancing the budget, Enterprise Zone extension, tax incentives, and further changes in Workers’ Compensation.  In pressing for further reforms to help the industrial sector, Greg Baise, president & CEO of the IMA, noted that “manufacturing is the strongest sector of Illinois’ economy” and Illinois cannot afford to wait because “too many people are out of work and too few companies are looking to expand in Illinois.” The IMA will soon be rolling out its Manufacturing Renaissance program.

Seeking to double exports by 2014, Governor Quinn reached out to several IMA members when announcing creation of a new Export Council that will meet quarterly and aggressively promote trade.  Quinn appointed Navistar International Corporation Chairman Daniel Ustian to chair the Council that will also include executives from Caterpillar, Archer Daniels Midland, Astellas, and Motorola Solutions.  As part of this goal, Governor Quinn will lead a trade mission to Brazil later this year.

Governor Quinn highlighted recent successes including reforms of the Workers’ Compensation system, extension of the Research & Development tax credit, and changes to the Unemployment Insurance system that will save employers hundreds of millions of dollars.  According to the Governor, Illinois has added “almost 100,000 jobs to our economy” since 2010 including 20,000 manufacturing jobs. 

Governor Quinn outlined a four-point Jobs Agenda that he hopes to pass in 2012 that includes (1) targeted tax growth to promote growth, (2) investing in education from birth through higher education, (3) affordable housing, and (4) clean water initiatives.  Included in his tax proposal is the elimination of the state sales tax on natural gas that was proposed by the IMA (along with elimination of the sales tax on electricity) during a meeting with Governor Quinn earlier this year.  Under this proposal, Illinois residents and businesses would save $164 million annually if the General Assembly agrees. Other proposals include a new Child Tax Credit that would provide $100 of direct tax relief for a family of four and an enhanced tax credit for employers hiring veterans returning from Iraq or Afghanistan.

The Governor cited a need to increase the number of adults with a college degree, associates certificate, or career certificate from 43 percent to 60 percent by 2025.  In order to help reach this goal, Governor Quinn called for an increase in need-based MAP grants for college students.  He proposed investing in early childhood and accepted President Obama’s recent challenge to increase the minimum attendance age of students to 18 years.

In his final two points of the Jobs Agenda, Governor Quinn pressed lawmakers to pass legislation helping families avoid foreclosure by consolidating resources available for homeowners.  Noting the crumbling infrastructure, the Governor pledged to invest in schools and replace aging water mains wastewater systems.

Many legislators including the two Republican leaders chastised Governor Quinn for failing to address looking at issues like Medicaid costs, pension reform and the state’s mountain of unpaid bills.  Senate Republican Leader Christine Radogno (R-LaGrange) stated “the best thing we can do for jobs right now is fix the state’s budget.  You can’t spend another $500 million unless you’ve corrected the underlying problem.”  Rep. Tom Cross, the House Republican Leader echoed those sentiments saying “all of those things sound good, but we can’t afford them.”

While this speech served as a trial run, the real message and vision from the Governor will be articulated during the Budget Address on Wednesday, February 22.  This budget blueprint will serve as the basis for negotiations before the scheduled end of session on May 31 but the bulk of the work will occur following the Primary Election on March 20.

IMA Hosts Tenaska Meeting

This week the Illinois Manufacturers’ Association hosted a meeting of the STOP Coalition that is working to defeat the Tenaska Electric Rate Hike bill.  One of the worst pieces of legislation in decades, this proposal would increase electric rates by $286 million annually for the next 30 years in order to fund construction of a new “clean coal” facility in downstate Illinois.  To placate voters, the sponsoring lawmakers capped residential rate increases at 2 percent while foisting unlimited rate increases onto commercial and industrial ratepayers.

The STOP Coalition, co-founded by the IMA, represents hundreds of businesses and trade associations who are opposed to paying electric rates that are 500 percent higher than current market rates to finance one private project owned by an out of state company.  SB 678 narrowly passed the Senate in the fall after intense lobbying by Senate President John Cullerton.  It is now in the House of Representatives where vote will be very close.

The IMA needs every company to contact your local state representative and let them know that you cannot afford to pay an electric rate hike.  Ask lawmakers to oppose Tenaska and SB 678.  Visit the STOP Coalition for more information.

Pension Debate Continues

After failing to pass pension reform in the General Assembly, the Governor and lawmakers continue to talk about the issue without taking any action to reform a system that is underfunded by $85 billion.  The IMA has long-advocated in support of the Civic Committee’s plan (IllinoisisBroke.com) that creates a new three-tier program for current state employees.  Under SB 512, state employees can choose to stay in the richer system and pay a higher contribution, move to the new, less expensive plan and pay their current contribution, or move to a private-style 401k system.  In each, the state’s share of the cost would be the same.

While the pension system debt grows, the Governor and Democrat leaders appear to be leaning toward a system that will shift the cost of pensions to local governments (school districts, cities, counties) who are the actual employers.  If this occurs, many local governments will be pressed to either make massive spending cuts or raise property taxes to fund this cost.  One scenario under consideration would be to shift the employer costs to local governments only for new hires.

The IMA believes that it is absolutely imperative to reform the pension system.  Last year, the state’s contribution to the pension system was $4.3 billion that is expected to increase to $5.9 billion in three years.  Without changes, the state will be unable to pay its bills and the “temporary income tax hike” could be made permanent.

New Report Shows Illinois’ Financial Problems

A new report issued by the nonpartisan Civic Federation rehashes repeated warnings about the dire financial straits facing Illinois.  According to the fiscal analysis, Illinois accumulated debt that totals $85 billion today could triple and reach $34.8 billion by 2017 unless the Governor and lawmakers take immediate steps to reign in Medicaid and pension spending.  

The Civic Federation calls for pensions and Medicaid reforms but does not offer a specific plan.  Without changes, the report concludes that Medicaid spending alone will jump by 41 percent, or $4 billion, to a total of $12.1 billion, over the next five years.  Pension costs will double from the current $4.3 billion annual payment to more than $9 billion by 2017.

The future debt will be reduced by $7 billion if lawmakers make the temporary income tax permanent.  The Civic Committee also asked policy makers to consider taxing retirement income and imposing a higher tax rate on cigarettes.

New Bill Introductions

Lawmakers have already introduced hundreds of bills for consideration this spring session and will ultimately file more than 3,000 pieces of legislation.  Here are some bills that the IMA is tracking:

HB 4113 (Nekritz, D-Northbrook): Creates the Toxic Chemical Safety Act that allows the Illinois EPA to publish a list of high-concern chemicals.  Imposes new reporting requirements by manufacturers and allows the Director of the EPA to prohibit the sale or distribution of certain products.

SB 2892 (Noland, D-Elgin): Creates the Single Payer and Universal Health Care system Act.

SB 2950 (Silverstein, D-Chicago): Creates a Toxic-Free Toddler Act that bans the distribution or sale of BPA in children’s products beginning on January 1, 2013.

SB 3236 (Sandoval, D-Cicero):  Provides that the sales tax on motor fuel and diesel fuel within the metropolitan region (defined by the Regional Transportation Agency) shall be increased or decreased annually based on the consumer price index.

SB 3203 (Silverstein, D-Chicago): Amends the Consumer Right to Know Act to require certain disclosures in standard form consumer contracts.

SB 3215 (Garrett, D-Lake Forest): Eliminates the current $100,000 cap on Net Operating Losses.

SB 3253 (Frerichs, D-Champaign): Extends Enterprise Zones by an additional 20 years (Note: while the IMA supports a simple extension, IMA legislation represents a comprehensive reform to improve enterprise zones).