Veto Session/Lame Duck Preview

Lawmakers return to Springfield this week for the 2014 Veto Session. During the 2014 Spring Session, Governor Quinn issued either a partial or full veto of ten bills. He also issued a line item veto in relation to one of the FY15 appropriations bills (HB3793). Some of the vetoes were at the request of bill sponsors, but vetoed items of interest are summarized below:

HB3796: This bill seeks to protect units of government from those who abuse the Freedom of Information Act (FOIA) and are chronic filers of requests that overburden municipal employees. The bill would not affect those citizens who take an interest in issues and file FOIA requests in good faith. The Governor issued a full veto, claiming it decreased transparency.

HB4075: The Governor also issued a full veto of this bill, which seeks to add regulations to for-profit commercial transportation providers such as Uber, Lyft and Sidecar. The bill was an initiative of the association which includes almost all of the taxi cab companies in Chicago. Ridesharing companies oppose the bill because they feel it favors the current taxi cab companies while discouraging healthy competition within the transportation industry. Quinn also issued a full veto to a trailer bill, HB5331, which attempts to address the concerns expressed by the ridesharing industry about HB4075. In both cases, the Governor said he felt transportation issues were best left to local control.

SB930: Governor Quinn issued a full veto of this measure, which would increase the speed limit for semi-trucks and school buses on interstate highways in Cook, DuPage, Kane, Lake, McHenry and Will Counties to 60 mph from the current limit of 55 mph. Quinn cited vehicle safety concerns in his veto statement.

SB2015: This bill seeks to increase the speed limit for cars on all highways under the jurisdiction of the Illinois State Toll Highway Authority to 70 mph. Last year a law was passed that increased the speed limit to 70 mph on highways outside of urban districts, and the new law would create consistency. The Governor issued a full veto of the bill.

SB2664: This bill amends the Condominium Property Act to provide that a purchaser of a condo unit in foreclosure is only required to pay nine months of any past-due assessments to the association. Governor Quinn issued an amendatory veto which adds an additional requirement for the mortgagee of the property requiring the bank holding the mortgage to pay any liens on the property. Quinn said this was necessary because he felt SB2664 as approved in the House and Senate did not do enough to protect condo associations from losing payments of past-due assessments and fees when foreclosed condos are sold.

In addition to the above items, which are expected to come before legislators during Veto Session, the following items of interest may also be debated either during Veto Session or during an early January Lame Duck Session:

Tax Hike Extension
Governor Quinn and Democrat leaders might push legislation to extend the 2011 temporary income tax increase, which is scheduled to partially repeal on January 1, 2015. The current temporary individual income tax is 5% and the corporate income tax rate is 7%. If the temporary income tax increase expires, the individual and corporate rates will fall to 3.75% and 5.25%, respectively.

Tax Policy Changes
In December 2013, House Speaker Mike Madigan announced that he was creating a joint committee on tax policies with the goal of enacting revenue-neutral tax policies. Members of the State Government and Revenue Committees met jointly several times between January and May and subsequently filed a report summarizing the testimony taken and issues discussed during their hearings.

It is anticipated that the Democrats will propose revenue-neutral tax policy changes the could include: the repeal of the Corporate Franchise Tax, the creation of a new “alternative minimum tax” on businesses based on payroll, an R&D Tax Credit extension and modernization, a Manufacturer’s Purchase Credit extension, a reduction to corporate income tax rate, and a reduction of LLC filing fees.

Pension Cost Shift
Speaker Madigan will likely renew his efforts to shift the normal pension costs from the state to school districts, community colleges, and universities. In FY15, it is estimated that a shift would have a $1.1 billion impact on locals and public universities.

Education Funding Reform
SB 16, a bill that would dramatically rewrite the funding formula used to disperse General State Aid to Illinois school districts, passed in the IL Senate in May. At the time, Senators were urged to vote in favor of the bill to “keep the education funding conversation going.” Over the summer, House Democrat members met secretly with education groups in anticipation of reviving SB 16.

As written, SB16 adds no new funding for Education; it simply reallocates existing resources in a manner that is very punitive to most collar county school districts that are deemed “wealthy” by the State. The schools located within IL House District 64 would see the following reduction in General State Aid if SB16 is approved and signed into law:
  • Nippersink District 2: 79.5%
  • Johnsburg District 12: 32.6%
  • McHenry District 15: 85.5% 
  • McHenry District 156: 38.4%
  • Richmond Burton District 157: 58.1%
  • Crystal Lake District 47: 72.6%
  • Crystal Lake District 155: 17.2%
  • Grass Lake District 36: 77.5%
  • Lake Villa District 41: 1.8%
  • Fox Lake District 114: 86.5%
  • Antioch District 117: 25.0%
  • Grant District 124: 13.0%
  • Wauconda District 118: 79.7%
A subject matter hearing for SB16 will be held on Tuesday, November 18 in Springfield. The timing of the hearing suggests a plan is in place for the bill to move either during Veto Session or during the Lame Duck Session.

Minimum Wage Hike
This issue appeared on the November 4 ballot as an advisory referendum. It was approved by 67% of the voters. There will likely be another push to increase the minimum wage for employees over the age of 18 from $8.25 an hour to $10. The federal minimum wage rate is $7.25. During the Spring Session there were not enough votes in the General Assembly to pass a minimum wage increase.

Surcharge on Millionaires
Speaker Madigan unsuccessfully proposed to change the Illinois Constitution to impose a 3% additional income surcharge on individuals earning $1 million and above. Instead an advisory referendum was placed on the November ballot, and 63% of Illinois’ voters voted in favor of the measure. It is anticipated that the Speaker will renew his efforts to pass the initiative. The surcharge would raise $800 million in revenue for education.

Equal Rights Amendment
SJRCA 75 is a constitutional amendment that seeks to add Illinois to the list of states that have ratified the Equal Rights Amendment (ERA) for inclusion in the United States Constitution.

Illinois Secure Choice Savings Program
SB 2758 creates the Illinois Secure Choice Savings Program Act. The bill establishes an automatic payroll deduction IRA program for private-sector employees that will be overseen by the Treasurer, Comptroller, GOMB, and 7 gubernatorial appointees. Businesses with 25 or more employees are required to automatically set up the payroll deductions unless the employee opts out.

Opponents believe that the bill represents a mandate on employers who are already buried in state and federal paperwork. Those who oppose the bill also feel the state should not be in the business of establishing IRA programs for the private sector.

Cook County Pension Reform
Cook County continues to advocate for a pension reform bill in an effort to save the County from further credit downgrades. Although a Cook County pension reform bill, HB 1154 passed in the Senate, it did not have enough votes to pass the House. There will likely be another attempt to move this type of reform legislation.

Manufacturer’s Purchase Credit Extension
The Manufacturer’s Purchase Credit (MPC) expired on August 31, 2014. There were several attempts to pass the MPC extension over the course of the 2013 Veto Session and the 2014 Spring Session. It is expected that there will be another push to extend the MPC during Veto Session that will be retroactive to the purchases after August 31st.

The MPC is a sales-tax-relief credit granted to qualifying manufacturers in Illinois. It is earned when a manufacturer purchases manufacturing or graphic arts machinery and equipment that qualify for existing sales/use tax exemptions. Approximately 500 manufacturing firms qualify for the credit. When a manufacturer earns MPC credits, the firm may use these credits to pay State sales or use taxes on future purchases of qualifying production-related tangible personal property. Many legislators fear that this bill, which is a good idea, will be tacked onto a bad piece of legislation.

Repeal Premium Tax on Industrial Insured’s Captive Insurance
It is expected that legislation will move to reverse the tax hike provisions in SB 3324, which passed the Senate and House unanimously and was signed into law as P.A. 98-978. The bill was a Department of Insurance initiative that was presented to the General Assembly as clarifying an already existing law that surplus line insurance procured from an unauthorized insurer is subject to a 3.5% tax.

The Department’s fact sheet on SB 3324 made no mention of a new tax, closing a loophole, or captive insurance arrangements. The Department now claims that SB 3324 institutes a new tax that applies to an industrial insured’s captive insurance premiums. Examples of industrial insureds that use captive insurance include the City of Chicago airports, cyber liability policies and contractors, nursing homes, and restaurants/taverns that receive more than 25% of their revenue from alcohol sales. When it was discovered that the intention of the bill is to place a tax on industrial insured’s premiums it became apparent that the Department was either disingenuous at the time of SB 3324’s passage or is overaggressive in its interpretation of the bill.

House Republican members actively pursued an amendatory veto of the bill to remove the tax provisions. On August 15th, however, the Governor chose to sign the bill despite business and industry pleas. In response, the House Republican Caucus sent a letter to the Governor and to the director of the Department of Insurance formally requesting that the Department reverse its interpretation of a law that otherwise will increase taxes on Illinois employers. In addition, the House Republican Caucus filed HB 6302 on September 22nd to repeal the tax increase.

Eavesdropping/Police Body Camera Legislation
Legislators have been working on legislation that would create a comprehensive framework for an Illinois eavesdropping statue, including provisions that would govern the use of body cameras by police. The Illinois Supreme Court in March 2014 struck down the state's eavesdropping law, saying it is too broad. Since then, legislators have been working to reach consensus on an eavesdropping law. In addition, HBs 5803 and 5804 are shell bills to authorize and fund police body cameras. The two bills have been posted in the Judiciary Committee for a hearing on November 19th. Many believe, however, that legislation will start in the Senate.

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