Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
Plenty to share today on the update side. Today’s Roundup brings you up to speed on budget negotiations, unemployment insurance trust fund replenishment negotiations (please participate in our testimonial campaign ( https://docs.google.com/forms/d/e/1FAIpQLSey_SvwBp5xIth4p2DhEPxmmamLbP4IAensk6yaW2-RzyrnDg/viewform?usp=sf_link ), gas tax proposal, and the recent crime bill. Also, interest rates will be on the rise and what’s going on with Daylight Savings time?
Don’t forget to RSVP for our next Legislative Coffee. We’ll be virtually meeting with IDOT Secretary Osman and a few others to talk about all of our ongoing regional transportation topics. Join us on March 23rd!
*Government Affairs Roundup brought to you by CITGO & Silver Cross Hospital*
Illinois Budget Update
A lead House budget negotiator gave an update Thursday on budget negotiations as the General Assembly approached three weeks until its April 8 adjournment. Unsurprisingly, Majority Leader Greg Harris said, there’s lots of interest groups lining up to receive a cut of the state’s remaining federal American Rescue Plan Act, or ARPA, funds.
The state received $8.1 billion in President Joe Biden’s ARPA stimulus package, and about $3.5 billion remains, Harris said. As of now, about $2 billion of that is expected to go toward the deficit in the state’s unemployment insurance trust fund, but that number could change.
The trust fund has borrowed about $4.5 billion from the federal government to remain solvent amid the crush of claims brought on by the COVID-19 pandemic. Illinois will owe about $40 million of interest to the fed on that borrowing by September.
While allocating the ARPA funds still leaves a deficit of $2.5 billion, Harris said business and labor interests continue to negotiate further reductions to the deficit, a process that has historically included reductions to unemployment benefits, increased premiums on employers that pay into the fund, or some type of infusion of private or other state or federal funds.
While negotiations continue, Harris said, the parties are once again considering going to the private bond market as they did during the financial crisis of 2008. If they come to an agreement to pay the deficit down by November, he said, it could help save the state from accruing further interest.
One of the largest ARPA requests outside of $2 billion trust fund sum was from the Illinois Hotel & Lodging Association, which asked for $250 million to help hotels rehire staff. “We’ve got a lot of major statewide requests,” Harris said. “You have hotels, hospitality industry, arts, culture, museums, other business groups, affordable housing, there are a lot of really worthy ideas out there asking for a share of it.”
“So I think the first step is we have to see how much we’re going to appropriate to the unemployment insurance trust fund, and then look at all the other different options, and there’s going to have to be some judgments made.”
One consideration is how much lawmakers want to keep in reserve for next fiscal year. “We’re also keeping our eye on the fact that we’re seeing these other variants of COVID starting to be out there,” he said. “So the question we’re gonna have to ask ourselves is what do we want to keep in reserve?”
Elsewhere on the budget front, Harris said, appropriations hearings have wrapped up, which begins the process of tweaking the governor’s proposal to reflect General Assembly priorities. One thing lawmakers are looking at is a way to relieve pressures of high gas prices. The governor proposed a stay on the statutory gas tax increase, and Harris said multiple proposals are being considered for gas tax relief, without going into specifics.
Governor Pritzker’s 2023 budget proposal affects transportation, other priorities in northeastern Illinois
Governor J.B. Pritzker recently released his fiscal year 2023 (FY23) state budget proposal and highlighted a projected $1.7 billion surplus for fiscal year 2022 (FY22). As the COVID-19 pandemic persists, the governor’s proposal prioritizes the state’s continued economic and fiscal recovery.
Governor Pritzker’s proposal would appropriate $112.5 billion for the operating budget, including $45.4 billion in general funds and $46.5 billion in the capital budget. The Chicago Metropolitan Agency for Planning (CMAP) analyzed how the proposed budget affects transportation and other policy priorities in the region and across Illinois.
Fiscal sustainability
The state has made changes in recent years to bolster its general funds, including increases to personal and corporate income tax rates, as well as administrative changes to the collection and disbursement of sales tax revenues. In FY23, total state-sourced revenues are projected to be $41.8 billion, a 4 percent increase compared to FY22.
In addition to projecting increased revenues, the budget forecasts total general funds appropriations in FY23 will fall to $45.4 billion, compared to $47.0 billion in FY22. FY23 expenditures include programmatic and fiscal governance proposals, such as a contribution to the Pension Stabilization Fund, funds for property tax rebates for homeowners, and funds for local governments to accompany a proposed one-year freeze on the local grocery tax. Due to projected budget surpluses, the proposal also includes contributions to the Budget Stabilization Fund, or “rainy day fund.”
Transportation funding
As proposed, the state operating budget allocates $3.78 billion to the Illinois Department of Transportation (IDOT) in FY23 — an increase of about $59.7 million or 1.6 percent compared to $3.72 billion in FY22. While most funding would continue at levels similar to recent years, proposed appropriations for programs that promote safety would increase by over $11 million or 12 percent between FY22 and FY23.
Additionally, funds appropriated to IDOT to cover costs of personnel, benefits, contractual services, and other operations increased from $1.18 billion in FY22 to $1.25 billion in FY23 — an increase of $66.4 million or 5.6 percent. It will continue to be important to ensure IDOT has sufficient staff capacity to manage projects and administer funds as federal and state funding for transportation investments grows. Lastly, an appropriation of $17.6 million to support reduced transit fares in northeastern Illinois continues to fall short of the cost of the program.
IDOT also receives a majority of the appropriations for capital spending in the proposed budget. The governor proposed directing $26.7 billion of capital funds to IDOT, or 57.4 percent of the total capital budget. This is a reduction of $1.8 billion or 6.3 percent compared to the $28.5 billion enacted in FY22. However, 70 percent of the $4.1 billion in new capital appropriations is for IDOT’s five-year, multimodal transportation improvement program, funded largely by motor fuel taxes, vehicle registration fees, and federal funds. In FY22, less than 60 percent of the new capital appropriations was for IDOT.
Key projects in the proposed capital budget include:
- road and bridge improvements along Interstate 55 and Interstate 80, which will support the movement of freight through northeastern Illinois
- new, energy-efficient rail cars for the Metra and CTA rail systems, as well as upgrades to existing transit lines that will support the new rail cars
- nearly $150 million for public port districts, including $21.5 million awarded to support projects at the Illinois International Port District
Motor fuel tax revenues
The governor’s FY23 budget proposal includes a one-year freeze on a statutorily required increase of the motor fuel tax (MFT) rate. In 2019, Rebuild Illinois doubled the base MFT rate to 0.38 cents per gallon, tied future annual increases to inflation, and directed incremental MFT revenues to the Transportation Renewal Fund, which provides funds for state and local transportation investments, as well as to the Regional Transportation Authority. These changes recognized the importance of multimodal projects and provided an ongoing funding source for transit projects in Illinois and the northeastern Illinois region.
The Governor’s Office of Management and Budget estimates the FY23 MFT increase would be equivalent to 2.2 cents per gallon, or $135 million in relinquished revenues. However, given that construction costs continue to grow at a rate exceeding inflation, as shown in the chart below, continuing to index the MFT rate to inflation is critical to ensuring transportation revenues keep pace with transportation costs. If the rate increase would have been 2.2 cents, CMAP analysis indicates that a one-year freeze compounded over time could result in nearly $4.3 billion in lost MFT revenues statewide between 2023 and 2050.
Overall, the FY23 budget assumes the MFT will generate $2.5 billion. However, as past CMAP analysis shows, enhanced vehicle fuel efficiency will affect future revenues that rely on motor fuel use alone. The recently enacted Climate and Equitable Jobs Act directs the state to study potential losses in MFT revenue as electric vehicles become more common. Additional steps — such as the implementation of a road usage charge — should be taken to ensure dedicated and sustainable funding for transportation.
Federal infrastructure priorities
The Infrastructure Investment and Jobs Act (IIJA), passed in November 2021, reauthorizes and increases funding for key transportation programs and federal infrastructure priorities. As everyone awaits the passage of a federal appropriations bill that would officially fund IIJA, the governor’s budget proposal is one of the first indications of how federal funds may be used in Illinois.
The state anticipates receiving $15.8 billion to support multimodal transportation investments over the five-year program, including $9.8 billion for highway development, $1.4 billion for bridge replacement and repairs, $4.0 billion for public transportation improvements, and $616.0 million for airport infrastructure development. Additional funding is expected for electric vehicle charging and fueling infrastructure grants. However, the total federal funding from IIJA that will flow to the state is still being evaluated. Therefore, the governor’s FY23 proposed budget includes placeholder values for anticipated resources and infrastructure investments.
Key authorizations for expending the first year of IIJA funds identified in the proposed FY23 budget include $115.1 million to the Illinois Environmental Protection Agency (IEPA) for lead service line replacement loans and planning grants, $100 million to the Department of Commerce and Economic Opportunity for broadband expansion efforts, and $30.2 million to the Department of Innovation and Technology in state and local funding for cybersecurity programming to address risks and threats.
Beyond the purview of IIJA, the FY23 budget proposal also demonstrates a continued focus on climate policy in Illinois. In addition to increased funding and staffing goals for the IEPA, the Illinois Department of Natural Resources (IDNR), and the Illinois Department of Agriculture, the governor proposes to double the level of funding for IDNR’s Open Space Lands Acquisition and Development grants to $56 million, which will help local government agencies acquire and/or develop land for public parks and open space.
Next steps
Following the announcement of Governor Pritzker’s proposal, the Illinois General Assembly has begun to consider the FY23 budget. Documents prepared by the Governor’s Office of Management and Budget are available online, including the capital budget, operating budget, and an interactive budget review tool.
Illinois Primary Update
The Republican and Democratic fields for Illinois governor for June’s primary began to take shape Monday with the passage of a deadline for candidates to submit paperwork to secure the state’s top elected job. Downstate venture capitalist Jesse Sullivan and two others were the last of eight Republican gubernatorial hopefuls to file for the June 28 ballot, while Democratic Gov. JB Pritzker picked up a challenge from West Side nurse Beverly Miles, who finished last in a four-way election in 2019 for 28th Ward alderman.
Candidates for statewide office had to secure 3,250 signatures of registered voters in order to qualify for a place on the primary ballot. Sullivan joins a list of GOP gubernatorial hopefuls that also includes state Sen. Darren Bailey, R-Xenia; Aurora Mayor Richard Irvin; Bull Valley businessman Gary Rabine; former state Sen. Paul Schimpf, R-Waterloo; and Emily Johnson, a political neophyte from Wheaton. Also filing Monday were Republicans Keisha Smith, of Country Club Hills, and Max Solomon, of Hazel Crest.
The stage is set for a high stakes battle to challenge Illinois’ billionaire governor, with billionaire hedge fund owner Kenneth Griffin pledging to use his fortune to defeat Pritzker. Griffin has endorsed Irvin and, so far, invested $20 million in his campaign. By far, among Republicans, Irvin has the biggest political piggy bank on that one Griffin donation alone. As of December, state election reports show Sullivan had the second-largest campaign account at more than $9 million. Bailey reported more than $700,000 at year’s end and an additional $1 million contribution from Lake Forest shipping magnate Dick Uihlein last month. Rabine, meanwhile, put $1 million of his own money into his campaign earlier this month, campaign records show. And Schimpf reported a campaign war chest of less than $81,000 at the end of 2021, state records show. Johnson, who doesn’t appear to have established a campaign fund, heads a slate of candidates for a group dubbing itself We Are the People Illinois! that embraces discredited election fraud conspiracies. The group’s website says the organization includes more than 200 supporters “who have come together to investigate the fraud in the 2020 Election.”
Update on Negotiations for Unemployment Insurance Trust Fund Replenishment
Probably the biggest question as lawmakers near a scheduled April 8 adjournment is if and how the state, business and labor will bail out an unemployment insurance trust fund that’s now roughly $4.5 billion in the hole to the federal Treasury.
Three-party negotiations have continued almost daily of late, with business making an offer earlier this week that union officials are expected to respond to.
Neither labor nor business wants to carry much of the load itself in the form of either higher taxes on employers or reduced benefits for workers. They’d rather that Gov. J.B. Pritzker pick up the tab by allotting most or all of the $3.5 billion the state still has from the last federal COVID relief bill, known as the American Recovery Plan Act.
Governor Pritzker has indicated he’ll put much of that on the table, likely in the $2 billion to $3 billion range. The lower figure was included in a placeholder bill that the Senate approved and sent over to the House for discussion last week. But Pritzker hasn’t said how much. And meanwhile, the trust fund needs to repay not only the $4.5 billion but build its reserves back an additional $1 billion, meaning that business and or labor will have to provide the rest.
Increasingly of concern is an April 1 federal deadline. If the state doesn’t act before then, federal rules will limit and perhaps prevent any cuts in benefits. Some Republicans say they believe labor is trying to slow-walk things for the rest of the month to improve its ultimate bargaining leverage.
Other sources, including some that are very well placed, dispute that and say all sides are on track to a deal before the end of March. They even suggest Pritzker may be able to sweeten the pot a bit by reallocating some other, as yet unspent ARPA funds. Bottom line: They’re close. But it’s not a done deal yet.
Gas Tax Vacation Update
Let’s not forget the one-year delay Governor Pritzker wants in hiking the gasoline tax by 2 cents a gallon. The idea is in trouble, but not yet dead. The problem is that proceeds from the levy, worth about $130 million a year, are supposed to go toward infrastructure work, especially roads. A powerful coalition that includes everyone from the International Union of Operating Engineers to the Illinois Chamber of Commerce is lobbying against any delay.
Some suggest the tax might somehow be restructured, or that Pritzker will find another way to make the state’s road-construction fund whole. Maybe. But as of the moment, the remaining elements of the $1 billion in tax cuts Pritzker wants as part of his proposed fiscal 2023 budget look like a lot better bet.
Crime Bill Follow Up
If you have not noticed yet, there’s a volatile political issue: crime, and what ruling Springfield Democrats will do about it.
House Speaker Emanuel “Chris” Welch has promised to roll out a package that deals with matters such as organized retail theft and carjacking. But the issue is politically explosive, with Democratic progressives trying to protect institutional changes they pushed through last year and Republicans from House GOP Leader Jim Durkin to gubernatorial candidate Richard Irvin talking lots and lots about crime.
Talk has been that a package is on the way. But it’s getting late in the abbreviated session. It remains to be seen whether trying to ram something through in a few days at the end of the session would backfire. One issue that we have discussed is the concern of businesses that they will not be able to remove any problematic individuals from the premises unless they pose a direct threat. This portion of the new bill goes into effect on 1/1/2023.
Fed to raise interest rates
The Federal Reserve on Wednesday increased its baseline interest rate range, launching the first in what will likely be a series of rate hikes meant to fight inflation.
The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for setting monetary policy, increased the federal funds rate by 0.25 percentage points to a range of 0.25 to 0.5 percent. The federal funds rate is the benchmark interest rate banks charge on loans to each other and used to set borrowing costs on credit cards, automobile loans, and mortgages.
Fed officials signaled for months that they would hike rates in March and begin pulling back stimulative interest rates after two years of rapid economic growth and high inflation.
The hike comes almost exactly two years after the Fed slashed rates to near-zero levels and began buying billions of dollars of Treasury bonds and mortgage-backed securities each month to stimulate the economy through the COVID-19 recession.
The U.S. economy has since recovered all but 2.1 million of the more than 20 million jobs lost during the onset of the pandemic, grew by 5.7 percent in 2021, and powered consumer spending well above pre-pandemic levels.
Economists credit unprecedented stimulus from both the Fed and Congress along with quick development of effective COVID-19 vaccines for the swift recovery of the U.S. economy.
Even so, the economy’s rapid rebound came with a spike in consumer prices. As vaccines and stimulus powered a surge in consumer demand, pandemic-driven supply constraints, labor shortages, manufacturing backlogs, shipping bottlenecks and shutdowns abroad pushed prices higher.
The Surprise Vote on Daylight Saving Time
The U.S. House of Representatives is considering whether to take up the Senate’s bill to make daylight saving time permanent. The bill already has bipartisan support in the House. But it is certainly not a priority — what we know about timing: It’s unclear when – or if – the lower chamber will take up the legislation as leaders punt the effort to the back burner in favor of other pressing matters, including responding to Russia’s invasion of Ukraine.
Most Americans would probably agree with this sentiment: House members appear to be caught off-guard with the Senate’s unanimous consent to pass the bill on Tuesday.
Where does Biden stand on the issue? “I was trying to think of a joke. I couldn’t think of one,” White House press secretary Jen Psaki says, when asked if the administration has a position on eliminating Daylight Saving Time. She does note that President Biden is more of an evening person.
COVID EIDL Borrowers to Receive Additional Deferment on Loan Payments
Existing COVID Economic Injury Disaster Loan (EIDL) borrowers will receive an additional deferment of principal and interest payments for a total of 30 months deferment from inception on all approved COVID EIDL loans.
The extended deferment period will provide additional flexibility to small business owners impacted by the pandemic, especially those in hard-hit sectors managing disruption with recent variants, as well as recent supply chain and inflation challenges amid a growing economic recovery.
Since its inception, the COVID EIDL program, a federal disaster relief loan, has allocated more than $351 billion in relief aid to 3.9 million borrowers, including to the smallest of small businesses from historically underserved, disadvantaged communities
Key information regarding deferment:
- This deferment extension is effective for all COVID-EIDL Loans approved in calendar years 2020, 2021, and 2022. Loans now have a total deferment of 30 months from the date of the Note. Interest will continue to accrue on the loans during the deferment.
- Borrowers may make partial or full payments during the deferment period but are not required to. The SBA recommends using www.pay.gov.
- The SBA will not send monthly SBA Form 1201 payment notices; however, the SBA will send regular payment reminders via email.
- Existing COVID EIDL Borrowers can find account balances and payment due dates in the SBA Capital Access Financial System (CAFS) and learn how to set up an account in the CAFS system by logging in at Capital Access Financial System (sba.gov).
- Deferments may result in balloon payments. The deferment will not stop any established Preauthorized Debit (PAD) or recurring payments on the loan. COVID-EIDL Borrowers with an SBA established PAD must contact their SBA servicing center to stop recurring payments during the extended deferment period. COVID-EIDL Borrowers who have established a PAD through Pay.Gov or any other bill pay service are responsible for terminating recurring payments during the extended deferment period.
- After the deferment period ends, COVID-EIDL Borrowers will be required to make regular principal and interest payments beginning 30 months from the date of the Note.
For more information visit: https://www.sba.gov/article/2022/mar/15/sba-administrator-guzman-announces-key-policy-change-existing-covid-economic-injury-disaster-loan?utm_medium=email&utm_source=govdelivery
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct