Corporate Tax

CAPITOL RECAP: Governor’s price range focuses on corporate tax adjustments | Illinois

SPRINGFIELD – Gov. JB Pritzker outlined a $41.6 billion budget proposal Wednesday that would hold most state agencies at flat funding levels but which relies heavily on changes to the state’s corporate tax structure that lawmakers have not yet approved.

The budget proposal, which is only the governor’s request for lawmakers in the General Assembly, does not call for income tax increases. Over the next four months, lawmakers will work on an operating budget of their own to send to the governor which may or may not address all of his requests. 

It also does not rely on any federal funding increases that have not yet been passed into law, although a federal Medicaid reimbursement rate increase that is already in place does account for a $638 million reduction to the state’s expenditures.

The budget proposed for fiscal year 2022 relies on more than $900 million in corporate tax changes that will require action from the General Assembly. Those include a reversal of previous General Assembly action to repeal the corporate franchise tax, a cap on net operating losses for the fiscal year that would allow for $314 million in savings and a cap on a retailer’s discount to $1,000 per month, and other changes.  

Senior budget officials, in a briefing before the address was streamed, noted the governor will still seek to decouple the state tax code from changes allowed in the federal Coronavirus Aid Relief and Economic Security, or CARES, Act. That change would keep revenues flat from a year ago by providing that the CARES Act cuts passed last year would not automatically reduce Illinois state tax burdens for businesses.

K-12 education funding from the state will remain flat from a year ago, the second straight year the state would forgo that added $350 million called for in state law each year as part of an evidence-based funding formula.

The budget proposal also eliminates a 48-month deadline for repaying interfund borrowing, which alleviates $276 million of pressure in the current fiscal year by allowing the state to repay fund borrowing on an extended deadline. 

The budget calls for a full pension payment and increases funding for the Department of Children and Family Services by 7.9 percent. Pritzker also asked lawmakers to pass a standalone bill increasing spending for the Illinois Department of Employment Security by $60 million in federal funds for the current fiscal year and called for an added $73 million for the current fiscal year in federal funds.

Higher education would see funding levels maintained and Monetary Award Program grants for college students would increase by $28 million, per the governor’s request. 

Local governments also would see a cut in financial assistance they get from the state to 90 percent of current levels.

Budget officials also claimed the budget shortfall for the current fiscal year has been addressed through the federal borrowing, $700 million in operational cuts and revenues performing better than projections.

REACTIONS DIFFER ON TAX CHANGES: Gov. JB Pritzker’s proposed $41.6 billion spending plan for the coming fiscal year relies, in part, on ending nine tax incentives for businesses in an effort to preserve an estimated $932 million in state revenues.

However, Pritzker’s proposal to end what he called “unaffordable corporate loopholes” would require action by the Illinois General Assembly. 

“This will be one of the most challenging budgets this government has ever had to craft, but I know there are willing partners in the General Assembly,” Pritzker said during his prerecorded budget address on Wednesday, adding that General Assembly members incorporated their ideas, “like cutting corporate loopholes that force the middle class to pay more.”

Republican lawmakers decried the proposal as a “tax increase,” and business interest groups criticized the plan as unfairly targeting retailers.

“At a time when businesses across the state are grasping at straws to stay afloat, after being shuttered due to executive orders, Gov. Pritzker is now proposing a tax increase on all of them, saying they are just loopholes,” said Republican House Minority Leader Jim Durkin, from Western Springs.

Two of the tax deductions eliminated in Pritzker’s plan were passed under the federal Tax Cut and Jobs Act in 2017, including the bonus depreciation deduction for certain property, according to senior budget officials who gave a background briefing before the address.

BLACK CAUCUS REACTION: Illinois Legislative Black Caucus members expressed measured support, and points of concern, for Gov. JB Pritzker’s proposed budget Wednesday following Pritzker’s annual budget address.

In the group address, some members praised Pritzker for his messaging regarding COVID-19’s impact on Black communities, and said he promised to “very soon” sign sweeping reform bills — including controversial criminal justice omnibus legislation — backed by the Black Caucus that passed the General Assembly last month.

In their budget response, the caucus’ new leadership also touted the mostly successful legislative agenda of the previous session, while providing a preview of some issues the caucus will take up this year. They also promised a continuation of the four-pillar agenda unveiled last year.

New Black Caucus House Chair Rep. Kam Buckner, D-Chicago, praised the proposed budget, particularly that it does not call for an increase in the state’s flat tax while increasing funding for the Department of Children and Family Services. However, he had several indirect criticisms for Pritzker’s administration surrounding its handling of medical and recreational marijuana.

Recreational marijuana was legalized in Illinois as part of the 2019 Cannabis Regulation and Tax Act. However, provisions of the legislation due to be completed in 2020 have not been fulfilled.

Severe delays resulted in the finalists for 75 social equity licenses not being announced until last September. That announcement resulted in massive backlash, much of it from the Black Caucus, over the perception that the process was not as equitable as promised and concerns about the third-party private auditing firm KPMG’s involvement in grading applications for the Illinois Department of Financial and Professional Regulation.

As a result, no licenses were awarded in 2020.

Senate Majority Leader Kimberly Lightford, of Maywood, said the proposed budget does not offer the support Illinois schools need to function through COVID, specifically low-income schools that have been forced to transition to online and hybrid learning models. While Pritzker’s budget relies on federal funds to assist education, Lightford called on the state to allocate resources more closely tied to the evidence-based funding model which calls for an added $350 million to education funding each year.

TEACHING STANDARDS APPROVED: A legislative panel on Wednesday allowed the Illinois State Board of Education to move forward with new rules that call on colleges and universities in the state to change the way prospective teachers and administrators are trained in order to make them more accommodating to diverse students.

On a party-line vote, the Joint Committee on Administrative Rules, or JCAR, declined to block the new “Culturally Responsive Teaching and Leading Standards” from going into effect, despite objections by Republicans who argued the rules would ultimately require licensed teachers and administrators to adhere to a particular political ideology.

Specifically, the new standards, which will take effect in 2025, define a culturally responsive educator as, among other things, one who will “critically think about the institutions in which they find themselves, working to reform these institutions whenever and wherever necessary,” as well as one who will “assess how their biases and perceptions affect their teaching practice and how they access tools to mitigate their own behavior (racism, sexism, homophobia, unearned privilege, Eurocentrism, etc.).”

“Culturally responsive teachers and leaders understand that there are systems in our society that create and reinforce inequities, thereby creating oppressive conditions,” the standards state. “Educators work actively against these systems in their everyday roles in educational institutions.”

Rep. Steve Reick, R-Woodstock, opposed the changes.

 “So I do believe that what you’re doing is you’re taking teachers who may object to some of the things that are in this rule, and thus are saying that their inability or unwillingness to abide by this (is) making them, in effect, incompetent,” Reick said.

But Amanda Elliott, executive director of legislative affairs for the state board, said the new rules do not change the way licensed teachers or administrators are evaluated, only the way they are trained in schools of education.

JCAR is a 12-member committee that is evenly divided between Republicans and Democrats, and between House and Senate members. Its main purpose is to review proposed rules from administrative agencies to make sure they are consistent with the legislative intent behind the statutes that authorize them.

LABOR COMMITTEE: One week after Illinois Department of Employment Security Acting Director Kristin Richards testified before the Senate Labor Committee, labor and business leaders came before the Senate Labor Committee Wednesday, Feb. 17, regarding changes they would like to see made as the state grapples with continued economic fallout amid the COVID-19 pandemic.

Pat Devaney, secretary treasurer for the Illinois AFL-CIO, a federation of labor unions,

called on legislators to prioritize support for IDES ahead of what he referred to as a “bleak picture” of the state’s financial future.

“I would suggest that our experiences, observations and frustration caused by the inadequate investment in IDES should be an illustration on why we should invest in our state agencies,” Devaney said in his testimony.

Jeremy Rosen, director of economic justice at the Shriver Center on Poverty Law, said continued state and federal support will be key in assisting populations that have been hardest hit by the pandemic such as hospitality workers and minority populations.

Gov. JB Pritzker called on lawmakers to pass a $60 million supplement to IDES for the current fiscal year to allow for more federal funding, as well as a $73 million federal funding increase in the upcoming fiscal year.

Both Devaney and Rosen called on the state to cease requiring claimants to pay back overpayments that the state may have issued at no fault of the claimant, and for the state to allow non-instructional education workers such as bus drivers and cafeteria employees to continue to file for unemployment insurance if their schools are not operating in-person.

Richards, the acting IDES director, told the committee last week that the department was implementing a waiver system to allow claimants who received overpayments to apply to have their repayment requirements forgiven if the overpayments were not their fault.

By law, claimants who were overpaid benefits must repay the money they were not due under unemployment laws. The waiver authority provided in federal law allows the state to waive the repayment in certain circumstances if the overpayment was not the fault of the claimant.

The overpayment waivers are available through the federal Continued Assistance for Unemployed Workers Act which was signed into federal law in December.

SCHIMPF TO RUN FOR GOVERNOR: Former state Sen. Paul Schimpf, who spent four years representing the 58th District and was the Republican Party’s candidate for attorney general in 2014, announced Monday he will run for governor in 2022.

Schimpf made the announcement via videoconference at 10 a.m., beginning a day of traveling the state with planned stops in Algonquin, Rock Island and Morris Monday and Decatur, Morris and his hometown of Waterloo Tuesday.

In his announcement, Schimpf sought to distance himself from Democratic Gov. JB Pritzker on both issues of policy and life experience.

A U.S. Naval Academy graduate and Marine Corps veteran, Schimpf was an outspoken advocate for veterans in the Senate, serving as minority party spokesperson on the Senate Veterans Affairs Committee. In 2005, Schimpf served as the chief American advisor in the trial of Saddam Hussein in Iraq. He rose to the rank of lieutenant colonel in the Marine Corps, according to his campaign.

He was elected to the state Senate in 2017, retiring in January ahead of his run for governor. He said his proudest accomplishment as state senator was his work with a higher education working group that produced legislative changes such as AIM High grants, which aim to provide Illinois’ highest performing students with the means to remain in Illinois for college.

He is an of counsel attorney with the law firm of Stumpf & Gutknecht P.C. in Columbia, meaning he is not an equity partner in the firm. 

 “For far too long, we have had literally governors who were either career politicians or wealthy corporate executives who couldn’t understand or empathize with the struggles that the people of Illinois face,” he said.

While Schimpf tied himself to popular Republican icon Ronald Reagan, Illinois Democrats quickly sought tie Schimpf to a less popular, more recent Republican elected official – ex-Gov. Bruce Rauner, who presided over a two-year budget impasse which saw the state’s backlog of unpaid bills balloon to over $16 billion.

Mary Morrissey, Executive Director of the Democratic Party of Illinois, referred to Schimpf as a “Rauner/Trump acolyte” in a statement.

Schimpf’s biography touted his vote against the compromise budget which raised the state’s flat income tax and ended the two-year budget impasse in 2017.

REDISTRICTING QUESTIONS: The U.S. Census Bureau announced Friday that due to the COVID-19 pandemic and other delays, it will not be able to deliver the detailed, block-level data that states need for redistricting until Sept. 30, long past the deadline spelled out in the Illinois Constitution for the General Assembly to approve new maps.

That’s also a full month after candidates are scheduled to begin circulating petitions to run for office and qualify for the March 15, 2022, primary election. The petition period begins Aug. 31 and filing begins Nov. 22, according to a spokesperson for the Illinois State Board of Elections.

The U.S. Constitution requires states to draw new congressional district lines every 10 years, following the decennial census. States also use those numbers to draw maps for their state legislative districts.

In Illinois, the process is spelled out in the state constitution, which provides that the General Assembly is to redraw those maps in the year following the census and that it must adopt those maps no later than June 30. With Democrats controlling each chamber of the General Assembly and the governor’s office, that would normally mean the party controls the mapmaking process.

But, the constitution provides, if lawmakers are unable to adopt new maps by that deadline, the task is automatically turned over to an eight-person commission evenly divided between Democrats and Republicans, and between lawmakers and people who are not members of the General Assembly.

That commission then has until Aug. 10 to produce maps that are agreeable to at least five members of the commission. And if the commission deadlocks in a 4-4 tie, the secretary of state then draws a name at random from a list of two individuals, one Republican and one Democrat, to break the tie.

The commission then would have until Oct. 5 to file a redistricting plan that has the support of at least five members. But if the census numbers don’t arrive until Sept. 30, that would leave the commission with only five days to complete its task.

That also leaves candidates little time to circulate petitions in order to file for office by the filing deadline in late November. Rep. Tim Butler, R-Springfield, said lawmakers may have no choice this year but to push back the date of the primary.

WINTER STORM DISASTER: Dangerous sub-zero temperatures and massive snow accumulation across Illinois prompted Gov. JB Pritzker to issue a disaster proclamation for the entire state on Tuesday.

“I have directed my administration to use all resources at our disposal to keep our communities safe amid dangerous and ongoing winter weather,” Pritzker said in the news release.

Chicago and the surrounding suburbs were hit especially hard, with some areas receiving as much as 12 inches of snow in the past 24 hours, on top of several inches of existing snowfall.

Northern regions of the state have faced significant snow accumulation, as persistent freezing temperatures have kept snow from melting.

Current forecasts indicate that portions of northern and west central Illinois will continue to experience subzero temperatures in the coming days.

Central and southern Illinois, including the Metro East region near St. Louis, were hit with between four and eight inches of snow in the past 24 hours, along with single-digit temperatures, according to the National Weather Service.

Pritzker said in the release that his administration is communicating with local governments “to ensure they have the support they need in disaster response and recovery operations.”

VACCINE DELIVERY DELAYS: State officials have been notified that winter weather across much of the U.S. is causing delays in the delivery of COVID-19 vaccine shipments, according to a Tuesday release.

“To help offset delayed vaccine deliveries, the State of Illinois proactively ordered vaccine to be delivered to its Strategic National Stockpile Receipt, Store, and Stage site in anticipation of adverse weather,” according to a news release.

Those vaccine doses from the stockpile site will be distributed to providers as weather permits in the coming days, according to the release, which said the Illinois Department of Public Health has been in close contact with providers about the federal delays.

The U.S. Department of Health and Human Services and Operation Warp Speed are projecting delays to the supply chain due to weather, according to the state, which may impact deliveries for Tuesday and the rest of the week.

VACCINE UPDATE: The state administered 40,354 COVID-19 vaccinations statewide Monday. As of Tuesday, Feb. 16, the state has issued over 1.8 million doses, with 3.3 percent of the state’s population being fully vaccinated.

The state has used over 74 percent of the 2.4 million does allocated by the federal government.

Eleven percent of the state’s population has received at least one dose of the COVID-19 vaccine, moving Illinois to 23rd in vaccine distribution nationally according to the New York Times vaccination database.

The state’s seven-day rolling average for daily vaccines administered stood at 63,772 Tuesday, up from 55,000 doses per day a week ago.

The state will also begin distribution pilot programs at some state prison locations this week. Inmates and prison workers are eligible to receive the vaccine under Phase 1B, along with frontline non-health care essential workers and residents aged 65 and older.

Eligible residents can search for a vaccination site closest to them and make an appointment at coronavirus.illinois.gov.

COVID-19 UPDATE: The statewide positivity rate stood at 2.8 percent Tuesday, Feb. 16, the second straight day that number was below three percent and the lowest mark since July 19. Public health officials reported 1,348 new confirmed and probable cases of COVID-19 out of 46,630 test results Tuesday.

The positivity rate has not increased more than a tenth of a percentage point since early January, and has continued on a downward trend since then.

Public health officials announced 32 deaths due to COVID-19 Monday, bringing the state’s death toll to 20,034 since the pandemic began.

On a seven-day rolling average from Monday to Sunday, there were 1,932 hospital beds used on average last week, a decrease of 382, or 16.5 percent, from the week prior. Over the same period, there were 433 ICU beds used on average daily, a decrease of 69, or 13.8 percent, from the week prior. Ventilator usage decrease by 44, or 17.3 percent, to 212 in use on average over the same period.

The 41 virus-related deaths reported over the previous 24 hours drove the death toll to 20,002 as the state reported 1,420 new cases amid 52,389 tests conducted. The state has reported more than 17 million test results and 1.1 million confirmed or probable cases since the beginning of the pandemic.

REMOTE CRIMINAL HEARINGS:  The state’s highest court issued new rules last week to help courts transition to remote hearings for criminal cases as the pandemic continues to disrupt court operations statewide.

Illinois Supreme Court Chief Justice Anne Burke said the order “provides guidance for our courts to address the backlog of criminal cases created by the COVID-19 pandemic,” in a news release last week.

Courthouses shut their doors last March, allowing only essential matters to be held in-person and temporarily halting jury trials in criminal and civil cases and affecting criminal defendants’ right to a speedy trial.

In May, the Illinois Supreme Court issued an order that directed circuit courts to return to normal operations on June 1 and gave local judges discretion to allow for remote or in-person hearings.

In-person civil and criminal jury trials have slowly resumed with social distancing and other public health guidelines in place in nearly all counties, except Cook County where in-person jury trials are still on hold.

The Feb. 11 order states that certain criminal hearings, such as initial appearances or non-substantive status hearings, can be held remotely, even if the person charged with a crime objects to a remote hearing.

VACCINE QUESTIONS: State senators questioned public health officials regarding the state’s COVID-19 vaccination efforts in a Thursday, Feb. 11, hearing, one day after Gov. JB Pritzker announced that the state would expand vaccine eligibility under Phase 1B by Feb. 25.

Illinois Department of Public Health Director Dr. Ngozi Ezike and Deputy Director Andrew Friend testified before the committee in a more than three-hour hearing, noting the state faces significant challenges in meeting vaccine demand with limited federal supply.

“Our greatest challenge is that we don’t have enough doses to satisfy all of the people that need it, want it, and that are eligible,” Ezike told the committee.

Ezike said the state is currently recieving approximately 280,000 vaccine doses per week, a number that she expects will steadily increase as the federal government works to ramp up production.

Until then, Ezike stressed continued patience and noted the state will aim to distribute the vaccine as quickly as it arrives.

Some senators questioned why the state saw a lag when compared to other states in its initial per capita vaccination efforts.

Illinois had previously ranked as low as 47th in vaccines issued per capita three weeks ago according to data from the New York Times. The state has since improved to 29th nationwide, according to that database, and is now issuing vaccines at a quicker pace than it is receiving them.

Friend attributed the initial lag in numbers to requests from local public health departments to stay in Phase 1A of the vaccine distribution plan longer than other states.

Phase 1A included frontline health care workers and long-term care residents, while Phase 1B initially included non-health care frontline workers, people aged 65 and older and inmates. The Phase 1B expansion projected to occur on or before Feb. 25 will include residents aged 16 and older with underlying conditions, comorbidities and disabilities.

Friend said the state is fully prepared to administer vaccines at a mass scale as soon as supply thresholds from the federal government are increased. Mass vaccination efforts can begin once the state reaches approximately 900,000 dose deliveries per week, he said.  

“Until we get to that point, we’re busy building that capacity and capability across the state so as that vaccine increases, we can get it to as many people as possible,” Friend said.

GOP PANS TAX CREDIT FREEZE: House Republican lawmakers criticized Gov. JB Pritzker on Friday, Feb. 12, ahead of his budget address next week, calling on the governor to reinstate busines tax incentives he froze last month.

In a Friday news conference, state representatives Mike Murphy, R-Springfield, Jeff Keicher, R-Sycamore, and Keith Wheeler, R-Oswego, called on Pritzker to resume offering tax credits to new businesses through the 2019 Blue Collar Jobs Act, a bipartisan economic reform package pushed by House Republicans and signed into law as part of Pritzker’s first-year operating budget.

The legislation involved expansions of certain tax credits that businesses could take for relocating to Illinois or expanding existing facilities in the state.

Pritzker announced that he would be delaying tax credits offered under the legislation at the beginning of the General Assembly’s lame duck session last month, a decision that he said would help close the state’s budget deficit moving into the next fiscal year.

House Republicans criticized that decision Friday, stating that tax credits offered by the Blue Collar Jobs Act are what the state needs to spur economic growth amid the COVID-19 pandemic. They criticized the governor’s decision to freeze the tax credits that were hailed as a bipartisan compromise in 2019.

The House Republicans said the tax incentives offered through the program would be a key factor in alleviating the state’s budget woes and sparking an economic turnaround moving forward.

Keicher and Murphy pointed to the current success of the Data Center Tax Incentive as an example of how tax credits can spur economic growth in the state. Keicher said writing the incentives into law was a key factor in Facebook’s decision to build a new $800 million regional data center in DeKalb, which he described as “a shot in the arm” for his district. 

Wheeler said House Republicans would explore options for a legal challenge to the governor’s decision to unilaterally freeze tax incentives passed by lawmakers under the Blue Collar Jobs Act.

DCFS AUDIT: A performance audit of the Department of Children and Family Services released by the state auditor general this month found substandard practices for caring for LGBTQ youth at the agency.

Illinois Auditor General Frank Mautino’s office found DCFS did not fully implement its own procedures for LGBTQ youth, is unreliable in maintaining consistent information on LGBTQ youth in custody and does not properly monitor or provide oversight to private agencies contracted by DCFS who may deal with LGBTQ youth.

The 154-page report found dozens of issues divided into 15 subjects—from department computer systems, to matching and placement of LGBTQ youth and licensing standards for foster homes— and issued 16 recommendations to DCFS to improve its performance.

Those recommendations include: developing a single, centralized case management system to track all youth in DCFS care; ensuring the matching and placement process formally assesses a youth’s sexual orientation and gender identity when determining need; and recruiting more foster homes affirming of LGBTQ youth.

The audit primarily used data from the 2017 and 2018 calendar year. According to DCFS, they have addressed or are in the process of addressing many of the concerns listed in the report. The department says they are currently developing a new Comprehensive Child Welfare Information System to serve as a singular case-management system to be operational tentatively by July.

The agency’s response also indicated it began the process of revamping mandated training for child welfare workers and foster parents to address LGBTQ youth concerns In 2020, with the revisions scheduled to be finalized and trainings made available by this year. This includes adding consideration of sexual orientation, gender identity and gender expression when matching a youth to a placement.

The department has also created a LGBTQI+ Services team that operates under the agency’s Office of Affirmative Action.

JOBLESS CLAIMS: New claims for unemployment benefits continued to fall last week while overall unemployment remained at historically high levels, according to data reportred Thursday, Feb. 11.

The Illinois Department of Employment Security said Thursday that 34,259 Illinois workers filed first-time unemployment claims during the week that ended Saturday, Feb. 6. That was down from 40,008 the previous week, but a 250 percent increase over the number recorded during the same week a year ago.

In addition, according to the U.S. Department of Labor, 6,038 Illinoisans filed first-time claims for Pandemic Unemployment Assistance, a federally-funded program that provides benefits to independent contractors, self-employed individuals and others not covered by traditional employment. That was a 46 percent decline from the prior week.

During the week that ended Jan. 30, there were 298,615 people receiving continuing unemployment benefits, down 4.7 percent from the prior week.

The federal agency also reported that during the week ending Jan. 23, another 158,051 people in Illinois filed claims for Pandemic Emergency Unemployment Compensation, another federally-funded program that provides extended benefits to people who have exhausted their state benefits. That was down 6.3 percent from the prior week.

Nationally, the U.S. Department of Labor reported a seasonally-adjusted 793,000 first-time claims for regular unemployment last week, down about 19,000, or 2.4 percent from the prior week.

HEALTH INSURANCE REOPENING: Gov. JB Pritzker announced Thursday, Feb. 11, that enrollment in the Affordable Care Act health insurance marketplace will reopen on Monday, Feb. 15, and remain open through May 15.

The Affordable Care Act, also known as Obamacare, offers subsidized health insurance plans for people who do not have access to affordable health coverage through their employer and who do not qualify for Medicaid.

Enrollment is typically open only during October and November for the following year, but President Joe Biden signed an executive order opening a special enrollment period in response to the COVID-19 pandemic in states that participate in the federal marketplace.

During the special enrollment period, people already enrolled in an ACA plan will also be allowed to change their plan.

In Illinois, the marketplace is known as Get Covered Illinois. People interested in signing up or changing their coverage can visit www.getcoveredillinois.gov.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government and distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

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