Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
Monday is the day that many have been waiting for as the indoor mask mandate comes to an end. There is also a new report out on state finances, as well as concern from halting the gas tax increase. Today’s roundup also looks at impacts of the Russian invasion.
Don’t forget about our March luncheon on the 9th as we welcome Joliet Mayor Bob O’Dekirk as he delivers his State of the City address. This is your opportunity to hear what happened in 2021 and what is on the horizon for the year 2022.
More information here: http://jolietchamber.chambermaster.com/events/details/2022-member-lunch-march-9-state-of-the-city-6381
*Government Affairs Roundup brought to you by CITGO & Silver Cross Hospital*
Illinois Indoor Masking Requirement to End Monday, February 28, 2022
Due to the continued decrease in COVID-19 cases and hospitalizations, and increase in available ICU beds, the Illinois indoor mask requirement will end Monday, February 28, 2022, at 12:01 a.m. Since the Governor announced his plan to lift the indoor mask requirement, the number of people in the hospital with COVID-19 has been cut in half and the number of ICU beds available increased by 24%. Illinois’ weekly COVID-19 case rate has also decreased by 70%,
More than 8 million people in Illinois are fully vaccinated with an average of approximately 16,000 COVID-19 vaccines administered each day, including more than 4,600 first doses daily.
“Throughout this pandemic, we’ve taken action to save lives and keep our economy open – and I’m proud that Illinoisans have done the hard work that has our made our state a leader in the Midwest,” said Governor JB Pritzker. “Today, our hospitals are much better positioned to handle emergencies and more than half of all eligible adults have been boosted; this is the progress we needed to make to remove our state indoor masking requirements. As individuals, I encourage everyone to make the best choices going forward to protect your health, along with that of your family and community – and most importantly to treat each other with kindness and compassion.”
“We are now entering the third year of the COVID-19 pandemic and while our focus continues to be on preventing severe illness and ensuring our health care systems aren’t overwhelmed, we are also looking forward to how we will coexist with COVID-19,” said Illinois Department of Public Health Director Dr. Ngozi Ezike. “We each have a role to play in staying healthy and we have many tools that can help protect us from severe illness due to COVID-19. Our tools include readily available safe and effective vaccines, monoclonal antibody and oral antiviral treatments, at-home testing, as well as the personal health actions people can take such as avoiding crowds, hand washing, and continued mask wearing as may be recommended.”
Masks will still be required where federally mandated (including on public transit), health care facilities, congregate settings, long term care facilities, and daycare settings. Additionally, private businesses and municipalities may choose to implement their own masking requirements. Schools are urged to continue following state and federal guidance to help keep students and staff safe in the classroom. The Governor will review the results of lifting the indoor mask mandate before making any announcement regarding the school mask mandate.
In the last four months of 2021 following the reinstatement of Illinois’ mask mandate on August 30, 2021, Illinois had fewer COVID-19 hospitalizations per capita and fewer COVID-19 deaths per capita than the entire Great Lakes region. In the same period, Illinois out-tested the entire Midwest on a per capita basis, providing residents with significantly better access to testing than any of its neighbors. Even with a much greater testing capacity, Illinois saw fewer reported COVID-19 cases per capita during this time than neighbors such as Iowa and Missouri.
Illinois remains a standout in the Midwest for its vaccination rates. Illinois is home to the highest percentage of residents who have received a COVID-19 vaccine as well as the highest percentage of vaccinated and fully vaccinated 5–17-year-olds.
Vaccines continue to be readily available at pharmacies across the state, many local health departments, doctor offices, federally qualified health centers, and other locations. To find a COVID-19 vaccination location near you, go to www.vaccines.gov.
State revenues $4.6 billion higher for current fiscal year than initially projected
A House revenue committee on Thursday heard projections of an Illinois economy that is steadily moving back toward a level of pre-pandemic normalcy, which means revenue spikes realized due to temporary changes in consumer spending habits and federal stimulus packages are expected to subside.
Illinois Department of Revenue Director David Harris characterized the COVID-19 pandemic as a “black swan event” which sent state revenues tumbling by $400 million in 2020. “A black swan is very rare, and rare events can happen and upset the financial apple cart,” Harris told the House Revenue and Finance Committee. But in response to that so-called black swan event, consumers nationwide shifted to purchasing more goods than services, and the federal government provided direct financial payments to Americans and expanded unemployment insurance benefits.
That sparked a near two-year period of substantial state revenue growth, partially because Illinois taxes goods, but not most services, so the redistribution of spending correlated directly to a rise in sales tax revenue. As well, unemployment benefits are taxable by the state, and many individuals who collected enhanced federal benefits saw greater income levels than before the pandemic.
Corporations have made out OK as well, according to Harris. “To give you an example, in December alone, just in December, we received $961 million in corporate income tax receipts,” he said. “That’s in one month. In a given year, a normal year would be $3.5 billion or thereabouts in corporate income tax receipts for the entire year.”
The windfalls in the big three revenue sources – individual and corporate income tax and sales tax – created unprecedented, at least in modern times, flexibility for Gov. JB Pritzker to craft a budget for the upcoming year that dedicates surpluses to paying down old debts. Negotiations on a final budget continue in the General Assembly.
Specifically, revenues for the fiscal year ending on June 30 are expected to be about $4.6 billion greater than were projected when the governor signed the budget into law last year, according to a presentation by the Commission on Government Forecasting and Accountability.
COGFA expects state coffers will have taken in $48.5 billion by the end of the fiscal year, up from a $44.4 billion projection in the budget that lawmakers approved in May. The base state revenue sources actually grew by $4.6 billion, however, because the governor’s office amended its planned use of federal funds to offset General Revenue Fund spending downward by $500 million due to the surplus.
The updated FY 22 estimates include a $1.6 billion increase in personal income tax from initial expected levels, a $1.2 billion increase in corporate income tax, and a $926 million increase in sales tax revenue. The revenues for January alone were $1.2 billion greater than the prior year, according to COGFA.
Upcoming budget year
Harris and other fiscal prognosticators projected that Fiscal Year 2023, which begins July 1, will continue to see a solid revenue performance, but it will also begin a period of leveling, where the last two years of fiscal breathing room trend back to normal.
COGFA’s FY 23 revenue estimate is $671 million lower than its updated FY 22 estimate, not including federal funding. Federal American Rescue Plan Act funding accounts for $1.5 billion of the FY 22 budget but no such expenditures are anticipated for FY 23 in terms of GRF replacement funding. But representatives of IDOR, COGFA and the Governor’s Office of Management and Budget noted the picture for the upcoming fiscal year could change quickly as tensions continue amid the Russian invasion of Ukraine, which was escalating quickly at the time of the Thursday morning hearing.
“Will Russia’s invasion of Ukraine be a black swan event that causes disruptions that ripple across revenue streams? We do not know,” IDOR director Harris said. “But again, the trends so far are positive. And the forecasts presented today for FY 23 are positive ones.”
Republican lawmakers also inquired about inflation, and the budgeteers said projections generally anticipated “several months” of continued upward inflation before the trend reverses, and their current projections anticipate the inflation rate to be 7.9 percent. Sustained Russian sanctions could impact anything from energy prices to the cost of wheat, so projections will be updated as needed, according to IDOR.
As the projections stand now, according to House Majority Leader Greg Harris, who is a chief budgeteer in the chamber, the governor and the General Assembly will have the flexibility to pay down old debt and prepare the state for future fiscal downturns. Rep. Harris, who is not related to the IDOR director, said the preferred course is to use the major windfalls for one-time expenditures.
Included in the governor’s plan is an infusion of $600 million to the “rainy day” fund from the surplus in the current fiscal year, as well as $279 million from the upcoming fiscal year. That fund had been spent down to almost nothing during the budget impasse of 2015 to 2017. The governor also proposed dedicating $898 million to pay down overdue health insurance bills. His proposal also includes spending $300 million of the surplus to pay down pension debt, with $200 million added to the statutory payment in the upcoming budget.
The House committee, and Harris at the news conference, also discussed the state’s plan for the remaining American Rescue Plan Act funding. Illinois directly received $8.1 billion from President Joe Biden’s stimulus plan, and about $3.5 billion remains, Rep. Harris said.
He added that a working group made up of both parties as well as business and labor interests is currently discussing the plan for retiring $4.5 billion in debt to the federal government that the state incurred to keep its unemployment system running at the height of the pandemic. That borrowing has accrued $36 million of interest due by Sept. 30, according to the U.S. Treasury.
Republicans at the Thursday hearing suggested the governor reapportion his planned $1.5 billion in ARPA spending for FY 22, using it to pay down trust fund debt instead of replenishing state coffers for COVID-19-related spending. Rep. Harris said the working group is coming up with a “menu of options” for paying down the backlog which could include ARPA funds. Generally, such a solution includes some combination of decreases to benefits, increases to employer premiums or some infusion of state, federal or private funding.
While Pritzker’s proposed FY 23 budget is largely not reliant on ARPA funds, one major proposed expenditure – $250 million for violence intervention funding – would be funded primarily by a $235 million lump sum from ARPA. Rep. Harris said the intervention funding is often “short-term,” but the state will monitor the violence prevention program’s efficacy over the next few years as ARPA funding remains available and consider future expenditures in future budget years.
The governor’s plan to pay down debt with the one-time surplus this year could free up funds in the future, he said. “Tens and tens of millions or hundreds of millions of dollars have been going out to repay debt that could otherwise be going to fund programs like that in future years,” he said of recently enacted budgets. “So being fiscally responsible now, it’s going to pay us a lot of dividends in the coming years.”
Pritzker’s gas tax relief plan faces opposition
Governor JB Pritzker’s plan for pausing a scheduled automatic increase in the state’s motor fuel tax is facing opposition from several quarters, including engineering companies that design road and bridge projects. On Thursday, officials from the American Council of Engineering Companies of Illinois said pausing the scheduled increase could have long-term consequences that could endanger funding for future transportation projects.
“We’re open to working with all parties to find options for relief,” ACEC Illinois president Kevin Artl said during a news conference. “But I think the history here in Illinois is that when you skip payments, it only makes things worse. And in this instance, skipping this adjustment will lead to a half a billion dollars in lost funds for infrastructure projects over five years.”
The automatic, inflation-adjusted increase in the tax was part of the funding package for the $45 billion “Rebuild Illinois” capital improvements plan that lawmakers approved in 2019. Proceeds of the tax are used for transportation projects such as road and bridge repairs.
Administration officials have estimated this year’s increase would be a little more than 2 cents per gallon. But in his budget proposal for the upcoming fiscal year, Pritzker called for a one-year pause in that increase, which would save consumers about $135 million over the year.
That was part of a nearly $1 billion package of tax relief measures that Pritzker offered to help soften some of the impact of inflation on Illinois consumers. Administration officials have said the one-year pause in the tax increase would not affect funding of any future projects or the state’s ability to repay bonds that are backed by motor fuel tax revenues. But P.J. Fitzpatrick, with the firm HR Green Inc., said the inflationary increases in the motor fuel tax were an important element of the Rebuild Illinois program because without it, revenue from the tax could not keep up with the rising cost of construction projects
“HR Green works on quite a few IDOT-related projects, in addition to some local agency projects. And some of the projects we’ve worked on have experienced some delays in funding over the years,” he said. “This delay in funding has created what we’ll call a backlog of projects, and that backlog prior to the Rebuild Illinois program was created because as inflation increased, the funding stayed flat and the ability to fund those projects didn’t exist.”
Other groups that benefit from state transportation funding have come out against the proposed tax freeze as well, including road construction companies and the International Union of Operating Engineers Local 150, which represents road construction workers.
State lawmakers are still working on a budget package for the upcoming fiscal year, and they have not yet acted on Pritzker’s proposed one-year pause on the gas tax hike.
“There’ve been different groups who’ve had differing opinions pro and con on that,” House Majority Leader Greg Harris, D-Chicago, said during a separate news conference Thursday. “So that’ll be one of the topics both the House and the Senate are going to discuss. Do you keep it as the governor introduced in his budget? Do you do a modification? Or is there a better alternative somewhere?”
Artl noted one option that’s been floated in the General Assembly is to replace some the revenue that would have come from an increase in the gasoline tax with a portion of the revenue from the state sales tax on motor fuel purchases.
State law already provides for an incremental shift of the sales tax charged on motor fuel from general revenues to the road fund. For the upcoming budget year, road fund’s share of motor fuel sales tax will increase from 16 percent to 32 percent, making for a $109 million increase to the road fund.
Artl said the engineering profession would prefer to leave the motor fuel tax program in place. “At the end of the day, we wanted the adjustment for inflation in the package in Rebuild Illinois because we learned the lessons of the past,” he said. “And when you don’t have that automatic index to reflect the current state and cost of living, you automatically fall behind.”
White House Lays Out Broad Changes to Address Supply-Chain Shortfalls
The Biden administration on Thursday outlined dozens of measures the federal government can take to strengthen freight transportation and infrastructure following almost two years of supply-chain turmoil that has frustrated American businesses and helped fuel inflation.
The recommendations from the U.S. Department of Transportation are included in one of seven reports published by government agencies today in response to an executive order President Biden signed in February 2021 to address supply-chain weaknesses, from shortfalls of critical components like semiconductors to port congestion that has delayed deliveries of billions of dollars’ worth of retail merchandise.
The administration has sought to intervene to help resolve some of the bottlenecks, particularly at a Southern California port complex swamped by sea containers amid a long queue of vessels waiting to unload imports. The congestion across the country has worsened as ports, railroads, trucking companies and warehouses have struggled to handle a 20% increase in inbound trade flows.
Bottlenecks have eased in some places in recent weeks, which logistics-sector officials say is possibly the result of a seasonal slowdown tied to the Lunar New Year holiday in Asia during which factory output subsides. The domestic supply chain remains fragile, executives at shipping companies say, with little sign that the import surge might wane before the second half of the year.
The administration report identifies near-, medium- and long-term policies aimed at improving the flow of goods from ports to distribution facilities and delivery to homes. They range from investing in port infrastructure and roads to working more closely with local governments and private companies such as shipping and logistics firms, importers and exporters.
Some of the goals require legislative changes, such as a proposal to eliminate a law that exempts trucking companies from paying overtime to drivers. Others require broad changes in the global maritime industry.
One proposal would study ways to increase domestic shipbuilding and another would explore changing the standard for shipping containers around the world to match the size used in U.S. domestic shipping operations. “We need to have some ambition,” said a senior administration official.
The report notes the Covid-19 pandemic exposed long-standing weaknesses in the U.S. supply chain that will come under more strain in the coming years as government agencies forecast freight demand will increase 40% by 2045.
Transportation department officials said the nation’s reliance on a handful of ports to handle most U.S. imports and exports is a risk for future bottlenecks. They said alternative routes into and through the country will become more important as severe weather events caused by climate change become more frequent and threaten infrastructure and the flow of goods.
Impact of the Russian Invasion
Russia’s invasion of Ukraine threatens to restrict global energy supplies, with the resulting rise in oil and natural-gas prices likely to hit Europe hard and potentially ripple out to the U.S. and other global markets. It’s the last thing the global economy needs: Another “supply shock,” or a sudden shortage of key products—in this case oil, natural gas and other commodities—that is likely to exacerbate a global inflation problem and make matters harder for the Federal Reserve and other central banks, which are trying to prevent consumer prices from rising out of control.
The global economy is still recovering from a series of supply shocks over the past two years, having suffered shortages of grains and meats, durable goods and other products.
Oil prices are topping $100 a barrel for the first time in nearly eight years, meaning the commodity is set to squeeze American households, push up inflation, dent the economic recovery and create a new headache for the Federal Reserve as it moves to raise interest rates.
Russia and Ukraine may not have strong ties to the global economy, but investors are already betting that a disruption in energy supplies will result in higher inflation, weaker growth and a devilishly difficult task for central banks.
Federal Reserve governor Christopher Waller said he could support raising the central bank’s benchmark interest rate next month by a half-percentage point if economic data in the next few weeks show evidence of accelerating price pressure, adding his voice to the debate over the size of the likely increase. Fed officials have in recent days signaled near-unanimous support to raise interest rates at their March 15-16 meeting despite the uncertainty created by Russia’s invasion of Ukraine.
Building Blocks of Success: IDOT announces March dates for Disadvantaged Business Enterprise program workshops
The Illinois Department of Transportation is hosting free virtual workshops in March as part of its continuing Building Blocks of Success series for firms interested in participating in the Disadvantaged Business Enterprise program, strengthening their skills and bidding on state construction projects.
The workshop dates and topics are:
• March 16, 10 a.m. to noon: Force Account (T&M) Work
• March 17, 10 a.m. to noon: Contracts
• March 21, 10 a.m. to noon: Materials A to Z
• March 22, 10 a.m. to noon: Getting Paid
• March 24, 10 a.m. to noon: Daily Documentation
Future topics covered include understanding insurance and bonding requirements, scheduling work, avoiding pitfalls, steps needed to be certified as a DBE firm and more.
Building Blocks of Success will continue through April. Workshop information, including dates and times, is available through Eventbrite at bit.ly/DBEworkshops. Advance registration is required.
Questions can be directed to IDOT’s DBE Resource Center at (312) 939.1100.
As part of Gov. Pritzker’s historic and bipartisan Rebuild Illinois program, IDOT is helping to deliver the largest capital program in state history. IDOT strives to promote diversity, equity, and inclusion in the implementation of this program, including contracting and workforce participation.
Administered by IDOT, the DBE program provides minorities, women and other eligible small businesses opportunities to participate in highway, transit and airport contracts that are federally and state funded. For more information on becoming a certified DBE and learning more about IDOT resources that are available, visit www.idot.illinois.gov/dbe.
Executive Vice President
Joliet Region Chamber of Commerce & Industry