CAPITOL RECAP: Governor's budget focuses on corporate tax changes

[February 20, 2021]  By Capitol News Illinois

SPRINGFIELD – Gov. JB Pritzker outlined a $41.6 billion budget proposal Wednesday, Feb. 17, 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.

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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.

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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.

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MADIGAN TO RESIGN: Former House Speaker Michael J. Madigan, 78, announced Thursday, Feb. 18, he will step down from the state House of Representatives after 50 years in office.

“I leave office at peace with my decision and proud of the many contributions I’ve made to the state of Illinois, and I do so knowing I’ve made a difference,” Madigan wrote in a lengthy emailed statement.

He initially said in a statement he plans to resign by the end of the month, but the letter he submitted to the House clerk said teh resignation was effective immediately. His current term, which he won in November, would have ended in January 2023.

Madigan, who was the longest serving state House speaker in the country, failed to earn enough support to win another term as speaker, resulting in the election last month of Speaker Emanuel “Chris” Welch.

Madigan’s support within the Democratic caucus began to fracture after federal prosecutors revealed last July that utility giant Commonwealth Edison admitted its executives were bribing associates of Madigan in a yearslong scheme in order to ensure legislation favorable to the company.

Although he has not been charged and he denies wrongdoing, Madigan was forced on the defensive after Republican lawmakers launched a special committee to investigate his involvement in the scheme. That committee ended with a partisan finding that Madigan did not commit conduct unbecoming of a lawmaker.

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TOURISM COMMITTEE: Officials from the hotel, restaurant and convention industries told a state Senate panel Thursday, Feb. 18, that they need a clear plan for how they will be allowed to reopen as the COVID-19 pandemic wanes, warning that without such a plan, many will go out of business permanently.

“We need to know … a strategy, we need to know the metrics as we move forward because we cannot, we cannot lose another summer here in the state of Illinois,” Sam Toia, president and CEO of the Illinois Restaurant Association, told the state Senate’s newly-formed Tourism and Hospitality Committee during its first virtual hearing.

Michael Jacobson, president and CEO of the Illinois Hotel and Lodging Association, agreed, saying that without such a plan, hotels risk losing not just another season, but another year.

“What our industry needs is clarity,” he said. “Meeting planners are making their plans right now for events booked this summer and beyond. … Because of how long these planners book in advance, we cannot take a day-by-day approach to these restrictions. Otherwise, we are putting months and months of future business at risk of leaving our state.”

According to the “Restore Illinois” reopening plan, the state can only move into Phase 5 when “testing, tracing and treatment are widely available throughout the state. Either a vaccine is developed to prevent additional spread of COVID-19, a treatment option is readily available that ensures health care capacity is no longer a concern, or there are no new cases over a sustained period.”

“Our goal is to meet and construct a safe plan to get tourists into hotels, restaurants and our cultural institutions,” Committee Chairwoman Sara Feigenholtz said in a statement after the meeting. “There is a path to do this safely, and Illinois must look at the modeling and metrics of other states in order to kick-start a struggling industry.”

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TEACHING STANDARDS APPROVED: A legislative panel on Wednesday, Feb. 17, 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.

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Capitol News Illinois file photo of Gov. JB Pritzker.

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.

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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 Monday, Feb. 15. 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.

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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.

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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.”

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VACCINE UPDATE: The 83,673 COVID-19 vaccine doses administered over the previous 24 hours, a one-day record, propelled the state past 2 million vaccinations since the effort began. More than 78 percent of the 2.6 million doses delivered to the state have been issued. That brought the rolling seven-day average of doses administered as of Friday, Feb. 19, to 59,460.

More than 500,000 Illinoisans, or 4 percent of the population, are now fully vaccinated, according to the Illinois Department of Public Health. Approximately 12 percent of the state’s population has received at least one dose of the vaccine, according to a database compiled by the New York Times. Illinois was in 22nd of all states for percentage of population having received one vaccine dose as of Friday, per that database.

Of the vaccine doses administered, nearly 67 percent have been to white people, according to demographic data released by the Illinois Department of Public Health. Approximately 7.72 percent of doses have gone to Hispanic and Latino Illinoisans, 7.55 percent to Black Illinoisans, 5 percent to people of Asian descent, 2.59 percent “other,” 9.8 percent unknown, and less than 0.5 percent American Indian or Alaska native and native Hawaiian or Pacific Islander.

As well, 40.3 percent of recipients are 65 years of age or older, and nearly 60 percent are between 16 and 64 years old. Females have received 62 percent of the doses administered with males at about 37 percent and less than 1 percent unknown or other.

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COVID-19 UPDATE: The rolling seven-day average case positivity rate was 2.8 percent Friday, Feb. 19, as the state reported 2,219 new confirmed or probable cases of the disease among 85,963 test results reported over the previous 24 hours.

The number of people hospitalized for COVID-19 fell below 1,600 as of Thursday night for the first time since October. That number has decreased nearly every day this month. That also marks a full 50 percent decrease in one month’s time and a near-75 percent decrease from the second-wave peak of Nov. 22.

COVID-19 patients occupied 366 intensive care unit beds at the end of Thursday, also a low since early October. There were 190 ventilators in use by COVID-19 patients at the end of Thursday, a number that has also steadily declined from second-wave highs.

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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.

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.