Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”

Chamber members:

The first of our monthly membership luncheons for March was today as we hosted our Joliet Mayoral Candidate Panel at the Clarion Hotel & Convention Center in Joliet. See below for more information on listening opportunity. A questionnaire with answers from the candidates will be posted on our website next week.

Info has been shared on our second event to be held at the same location on Wednesday, March 22nd with the candidates for the five Joliet City Council Districts. Again, questionnaires will be sent to candidates and answers will be shared for those not able to participate in person. We will once again be partnering with WJOL for a live broadcast and follow-up podcast.

http://members.jolietchamber.com/events/details/2023-member-lunch-march-22-city-of-joliet-council-candidates-panel-6729

In Springfield, both chambers of the Illinois General Assembly returned this week and with deadlines to move bills out of committee at the end of this week, action should be heavy. In the House and Senate, there are 6,545 bills filed for consideration.

*Government Affairs Roundup brought to you by CITGO & Silver Cross Hospital*

Joliet Mayoral Candidates Forum
Thanks to our partnership with WJOL 1340 AM, you can all listen to the three mayoral candidates discuss their vision for the future of Joliet. Today’s luncheon was very successful and we hope all in attendance walked away as more informed voters. Listen here: https://www.wjol.com/podcast/

$575 Million Increase in State Revenue Estimates
With two months to go before the adjournment of Illinois’ spring legislative session, Governor JB Pritzker’s state budgeting task may have gotten easier Tuesday. The Commission on Government Forecasting Accountability increased its revenue estimate for the current fiscal year by $575 million – yet another positive development in a monthslong streak of revenue growth.

The commission is a bipartisan, bicameral group of lawmakers and is staffed by nonpartisan economic analysts. “You can see in every single month so far this fiscal year we’ve actually had a gain where we’ve generated more revenue in this fiscal year compared to the same time a year ago,” Eric Noggle, senior revenue analyst for COGFA, said at the commission’s Tuesday meeting.

All told, COGFA anticipates revenues for the fiscal year that ends June 30 to exceed original estimates by $5.5 billion, rising to a record $51.9 billion. Much of that surplus has already been appropriated. Lawmakers allocated at least $3.6 billion supplemental spending package in its January lame duck session, and Pritzker proposed spending another $490 million by the end of the fiscal year when presenting his proposal for next year’s budget last month.

COGFA is also projecting stronger revenues in the upcoming Fiscal Year 2024 than the most recent estimate from GOMB. The $50.4 billion COGFA estimate marks an increase of $465 million beyond the revenues the governor proposed.

Noggle noted that COGFA’s estimate was higher than GOMB’s because the commission had an extra half of January and all of February to factor into its projections. Because base revenue growth remained strong over that span, the commission was able to increase the estimate. That drove up the current year base revenues, which in turn drove up estimates for next fiscal year.

In recent years, lawmakers have directed surpluses to retiring debts early, increasing payments to the state’s pension system and to long-term savings. For the upcoming fiscal year, Pritzker has proposed added spending across state government – especially on childcare and education – while adding an extra $200 million to the pension fund.

Tuesday’s update could give the governor additional breathing room to usher his budget through the General Assembly and – if the past is any guide – potentially increase pension contributions or long-term savings.

Noggle said the expected growth was driven by strong performances in the state’s base tax revenue sources – corporate and personal income tax and sales tax driven higher by inflation. The good revenue news in COGFA’s March update was the continuation of a nationwide state revenue boom which the Pew Charitable Trusts predicted last month could be reaching an “inflection point.”

That report was highlighted by the Illinois Department of Revenue in its testimony to a House committee last week. Pew calculated Illinois’ post-2020 revenue growth at 10.8 percent over what it was expected to be based on pre-pandemic trends. That put Illinois at the third-best growth of all states.

Still, IDOR, GOMB and COGFA are all in general agreement that a recession is on the horizon – or at least they are relying on outside economic forecasts that predict such a scenario. While IDOR’s presentation last week noted a recession could occur in the first two quarters of the current calendar year, COGFA and GOMB had a different take.

“So far, we’re just not really seeing that looking at our income tax data and our sales tax data and the jobs numbers,” COGFA Chief Economist Benjamin Varner said at the Tuesday meeting. “Now, tax receipts obviously probably lag economic activity a little, but so far, we think the slowdown is probably going to be a little later in the year.”

COGFA’s report noted other factors that could change the state’s revenue outlook moving forward. Among them are the possibility of another COVID-19 resurgence, a worsening of the war in Ukraine, and the impacts of inflation and further possible interest rate hikes by the Federal Reserve. But the report also noted that its $575 million upward revision was “very cautious,” based on the fact that final income tax receipts could drastically alter the revenue landscape.

Final payments were “especially strong” in the previous fiscal year due to an influx of capital gains taxes amid a booming stock market. But that pace has slowed, leading to the cautious approach, COGFA said.

“The market conditions have been not as strong in tax year 2022, so we’re anticipating final income tax payments to drop during this last quarter of Fiscal Year 2023,” Noggle said. “But we still have had strong wages, we’ve had strong personal income…And so we think that they’re going to offset each other a little bit. The question is how much is there going to be a decline in the remainder of Fiscal Year 2023?”

All three fiscal forecasting entities have also agreed on another thing in recent months: forecasting has been difficult in an era marked by the COVID-19 pandemic and unprecedented levels of government stimulus. “We keep expecting that slowdown’s going to happen,” Noggle said at the end of the COGFA meeting. “But it just hasn’t happened yet.”

Measure to increase Illinois’ rainy-day fund passes committee
Illinois lawmakers are looking to address issues within the state’s rainy day fund, which currently could pay down only 11 days’ worth of bills at the comptroller’s office.

House Bill 2515 would set up automatic deposits into the budget stabilization fund, also called the state’s rainy day fund, from future budgets if the state keeps up with bill payments. The transfers would be triggered when the accounts payable from the general fund is estimated to be less than $3 billion, and the governor has estimated growth in general revenues of over 4%.

Comptroller Susanna Mendoza is pushing to implement automatic deposits into the state’s rainy day fund. She explained the measure before the House State Government Administration Committee.  “The stated purpose in law says that the rainy day fund or, more specifically, the budget stabilization fund would be used to reduce the need for future tax increases,” Mendoza said.

State Rep. Mark Walker, D-Arlington Heights, said outside factors could change how this measure would operate if passed into law.  “There are some times where we have extremely high inflation for multiple years, where the cost inflations start catching up to our revenue inflations, and I need that to be addressed,” Walker said.

Mendoza said that because of the language in the bill, they should still be able to make deposits even in a time of high inflation. “Adding the marker that the accounts payable has to be under $3 billion on top of the 4% growth, that’s where I’m looking at can we afford to do this,” Mendoza said. “If both of those markers are met, even during times of high inflation, I would argue that we could do it.”

The bill also would implement a 6-month review by the Commission on Government Forecasting and Accountability, which could trigger savings if growth exceeds 4% in the middle of the fiscal year. The bill also calls for automatic deposits into the Pension Stabilization Fund.

The measure advanced out of committee unanimously.

Power grid operator warns of shortages ahead
The power grid operator serving northern Illinois and points east to the Mid-Atlantic is sounding the alarm about potential electricity shortages over the coming seven years, driven in part by state policies like Illinois’ clean-energy law that are forcing power plants to close.

PJM Interconnection, in a Feb. 24 report prompting legislative hearings in Pennsylvania and Ohio, warned that the combination of fewer fossil fuel-fired power plants and higher demand caused by new data centers, the electrification of vehicles and buildings switching from gas to electric-powered heating could lead to shortages during normal peak times as the decade proceeds.

The report explicitly cites Illinois’ Climate & Equitable Jobs Act, or CEJA, enacted in 2021, as a contributor to the issue. The law, PJM estimates, will lead to the retirement of 5,800 megawatts of power production by 2030 — equivalent to two dual-reactor nuclear stations plus a single-reactor plant. That lost capacity is equal to 56% of the capacity of all five of the nuclear stations operating in northern Illinois.

Illinois’ aggressive decarbonization timetable represents the largest policy-driven cause of plant closures among several other federal and state initiatives that will result in retirements in other parts of PJM’s footprint. PJM covers all or parts of 13 states in the eastern half of the U.S., as well as Washington, D.C.

PJM estimates that more than 20% of power plants currently operating in its region will retire by 2030. Meanwhile, the vast majority of the new generation pending in PJM’s application process is renewable power.

Historically, planned wind projects have been more likely to fall by the wayside due to financing and other constraints than they are to break ground and produce power, PJM says. In addition, because wind power rises and falls with the breeze, multiples of new wind capacity are needed to compensate for the same level of production potential from retiring coal and natural gas plants, PJM says.

“Retirements are at risk of outpacing the construction of new resources, due to a combination of industry forces, including siting and supply chain, whose long-term impacts are not fully known,” according to PJM’s report. Adds the grid operator, “For the first time in recent history, PJM could face decreasing reserve margins should these trends continue.”

In prepared testimony before a Pennsylvania Senate committee on Feb. 27, PJM Vice President Asim Haque said, “The amount of generation retirements appears to be more certain than the timely arrival of replacement generation resources and demand response, given that the quantity of retirements is codified in various policy objectives, while the impacts to the pace of new entry of the Inflation Reduction Act, post-pandemic supply chain issues and other externalities are still not fully understood.”

If new wind and other clean power sources aren’t developed at far higher clips than in the past, reserve margins throughout the region would fall to 8% by the middle of 2028, PJM projects. That could lead to supply being “insufficient to cover peak demand expectations,” PJM says in the report. In that case, rolling brownouts could be necessary during heat waves or cold snaps, when power demand spikes.

Commonwealth Edison isn’t worried. The utility, which is charged with keeping the lights on in northern Illinois, says in an email, “We expect that the generation capacity in ComEd’s region will be sufficient to meet peak demand through 2030, and PJM’s report does not say otherwise.”

ComEd notes that the Chicago region exported power to help other parts of PJM during Winter Storm Elliott in December without the need for most of the plants slated to close. But ComEd offers this significant caveat: If electrification takes off in the Chicago area in the next seven years, and economic growth is stronger than projected, there could be a reliability problem.

“Unexpected growth in those areas may result in the need for additional renewable generation, which CEJA incentivizes, and we’re pleased to see interest in renewables gain momentum,” the utility says. “We estimate that solar power on our system, including rooftop and community solar systems, will grow more than five times from almost 500 megawatts today to 2,700 megawatts by 2030.”

So far, a PJM spokeswoman said, neither the Illinois General Assembly nor the Illinois Commerce Commission have invited PJM to testify on its report or the potential coming supply crunch.

New Rebuild Illinois online dashboard provides up-to-date look at historic capital program
The Illinois Department of Transportation announced the launch of a new webpage dedicated to keeping the public informed of the progress delivering Governor Pritzker’s historic, bipartisan Rebuild Illinois capital program. The online dashboard offers up-to-date cumulative data on accomplishments for improving roads and bridges since the 2019 passage of Rebuild Illinois.

“Rebuild Illinois is delivering lasting, positive improvements to transportation and infrastructure throughout our state,” said Illinois Transportation Secretary Omer Osman. “Our new dashboard is a simple, effective way to share with you details on this transformational capital program in a convenient, transparent format that’s easy to understand.”

On the dashboard, the public can find information on number of projects awarded, miles and bridges improved and safety improvements completed, as well as the total amount of investment that has been made possible by Rebuild Illinois. The data can be looked up annually or by each quarter of each fiscal year, showing the impact of Rebuild Illinois on roads and bridges under IDOT’s jurisdiction as well as accomplishments on the local system overseen by counties, municipalities and townships.

The page will be updated on a quarterly basis, adding accomplishments as the year progresses.

Click here to access the dashboard or visit https://idot.click/rbi-accomplishments.

The largest capital program in state history and the first in a decade, Rebuild Illinois is investing $33.2 billion into all modes of the state’s transportation system, with $25.4 billion identified for roads and bridges, creating jobs, enhancing quality of life and promoting economic growth up and down the state.

Accomplishments through 2022 of Rebuild Illinois included approximately $9.95 billion of improvements statewide on 4,656 miles of highway, 440 bridges and 656 additional safety improvements.

Opposition expressed to ‘rent control’ bills in Springfield
Rent control is seemingly an annual issue at the Illinois statehouse, and although past efforts have failed, the discussion is starting up again. One measure creates the Rent Control Act, which provides that no more than 12 months a landlord may increase the rent by a rate no greater than 15%.

The Illinois Realtors Association lists about a half dozen pending rent control legislation before Illinois’ 103rd General Assembly. Mike Hagenson, chair of the Neighborhood Building Owners Alliance Rent Control Task Force, said rent control laws could lead to an increase of rundown properties around the state.

“Landlords do not have the ability to raise rents above a certain threshold, and so if they can’t recoup what’s needed for a capital improvement, they may not have money in their budget to continue upkeep the units, and over time they deteriorate more and more,” said Hagenson. Hagenson also said rent control will prevent people from moving to Illinois because he said new construction will cease. “As new construction falls off a cliff, new residents will be shut out and cities and the state won’t be able to grow their revenue base,” said Hagenson.

The National Multifamily Housing Council notes that rent control gained traction at the federal level with tenant advocates urging President Joe Biden to issue an executive order mandating rent caps on mortgages backed by Fannie Mae and Freddie Mac. They are also tracking similar measures at the state level. “Whether or not these measures are enacted, they will get media attention and, as such, pose a reputational threat to the apartment industry at a minimum,” the council wrote.

Stay well,

Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct