Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
The usual federal and state updates are below in this message. Additionally, read all the way to the bottom for information for those that were EIDL borrowers.
Have you enrolled in Illinois Secure Choice? If you have five or more employees and do not already offer a retirement savings program, the Illinois Secure Choice Savings Program has been established for employees. The program is facilitated by the state of Illinois and administered by a professional financial services firm. Employers do not pay any fees, make contributions or have any fiduciary liability–they simply facilitate employee payroll deductions and keep their employee rosters current.
The state is requiring all businesses with five or more employees to sign up or report an exemption by November 1, 2023. Check our membership directory for a number of fellow members that you could speak with first to utilize their services before turning to this alternative.
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State Budget Update
A report detailing Illinois’ budget forecast is warning of a huge drop in state revenues. The Illinois Commission on Government Forecasting and Accountability said April receipts fell $1.8 billion compared to the same month the year prior. The COGFA report said while a substantial decline in revenues was anticipated, the extent of the decline is much steeper than the commission had projected. The news comes as lawmakers are putting together an annual spending plan as the spring legislative session winds down.
The main contributor to the falloff was personal income taxes, which fell $1.7 billion below last April’s levels, a drop of $1.5 billion on a net basis. Governor Pritzker floated tax cuts if state revenues continued to exceed expectations, but those are unlikely. Pritzker’s proposed budget for the next fiscal year is nearly $50 billion, an 11% increase over last year and an all-time high.
The COGFA report said the substantial declines in April erased nearly all of the growth accrued throughout the fiscal year. With two months remaining in the fiscal year, General Funds receipts in fiscal 2023 are now only $132 million above last year’s pace. In comparison, at the end of February, fiscal 2023 receipts were $2.5 billion higher than fiscal 2022 year-to-date levels, which shows the extent that revenues have fallen over the past two months.
New estimate represents 400% increase from Governor Pritzker’s February budget estimate
The estimated cost for Illinois to continue providing health care coverage to noncitizens who are otherwise ineligible for Medicaid benefits has been revised upward to $1.1 billion for the upcoming fiscal year. As of the end of March, the Illinois Department of Healthcare and Family Services estimated it would cost $990 million to fund the program that provides state-funded health care to individuals age 42 and older who would otherwise qualify for Medicaid if not for their citizenship status.
The new estimate, shared by IDHFS Director Theresa Eagleson in testimony to a Senate appropriations committee Wednesday night, is now $880 million beyond the $220 million estimate included in Gov. JB Pritzker’s February budget proposal. The administration also estimated the current-year expenditures for the program at $220 million, but it has cost over $400 million thus far with two months to go in the fiscal year.
IDHFS chief of staff Ben Winick told the committee that the original estimate relied on the Census Bureau’s American Community Survey data to estimate the eligible population, then assumed a certain percentage would enroll. But both the cost of providing care and the number of enrollees have far outpaced estimates. “Because of the unreliability of that data, the projections for enrollment are really just focused on month-over-month growth based on the trends that we’re seeing and not tied to the universe of eligibles,” Winick said.
The projections are now based on the program’s current month-over-month growth rate of roughly 10 percent. The number of enrollees is expected to grow to over 120,000 in Fiscal Year 2024. The previous estimate was 98,500 enrollees. Winick noted the program currently covers about 56,000 individuals while the department oversees health care for about 3.9 million people through its various programs statewide.
The department’s all-funds budget request as of February was $37.2 billion, with just over $9 billion from the General Revenue Fund. The Pritzker administration estimated that the IDHFS budget as proposed could cover about $300 million of the greater-than-expected costs.
“The governor’s focus remains on investing in priorities he outlined during his budget address,” Pritzker spokesperson Jordan Abudayyeh said in a statement. “His administration is working closely with the General Assembly to ensure that additional priorities fit within a balanced budget framework.” Department officials noted that they were looking into other ways to defray costs as well.
Because the individuals are not citizens, the federal government does not match the state’s contributions to the program. But Eagleson said the federal Medicaid program “does fund the emergency services for undocumented residents.”
Springfield progressives push to impose a wealth tax
Unhappy with the direction state budget talks are going, a group of Springfield’s leading progressive lawmakers announced a new drive to move two much-discussed ideas that repeatedly have been shot down in the General Assembly: imposing a wealth tax and slashing the fee retailers get for collecting state sales taxes.
In a Springfield press conference, officials including Sen. Robert Peters and Rep. Will Guzzardi, both Chicago Democrats, said their ideas would generate a combined nearly $700 million a year for school, housing and related programs at a time when state revenues have begun to decline and potential spending cuts may be on the way. “The revenues we have just aren’t enough to fund the critical needs we have,” Guzzardi said. “We want to make sure our tax system is more fair and invest in our communities.”
With what may be a long, hot summer approaching, “We need to have a real conversation about how to uplift our young people” instead of blaming them for crime woes, Peters said. “We have some particular concerns right now, and instead of putting the cost on the backs of working people (these bills) will start to ensure that those with more than enough in their pocket pay their fair share.”
Under one measure, the fee retailers get to collect sales taxes, now 1.75% of the take, would be capped at a maximum of $1,000 a year per retailer. The plan drew immediate strong blowback from the Illinois Retail Merchants Association. In an interview, IRMA President Robb Karr said his members actually are losing an average of 6 cents a transaction under the current payment scheme. Karr said he has “no idea” if the measure, which is similar to bills floated in previous years, will get anywhere this time. “They can do anything until they do their budget.”
The other bill would require anyone who has assets worth at least $1 billion to annually pay income taxes on any growth in their value, whether or not the asset is sold. Progressives long have pushed for such an idea nationally but have not made much progress.
Guzzardi likened the potential levy to the property tax, in that any increase in value results in a higher tax bill. A home is the primary asset of most families, Guzzardi said, and the same principle should apply to wealthy folks whose assets are in financial instruments. Guzzardi did not mention that the property tax is roundly detested by many, on grounds that it requires people to pay even if they don’t have the available cash to do so.
Spokespeople for Senate President Don Harmon and House Speaker Emanuel “Chris” Welch declined immediate comment.
Governor Pritzker Announces $15 Million in Funding for Community Revitalization
The Illinois Housing Development Authority (IHDA) announced $15 million in available grant funding to support affordable housing and community revitalization efforts across the state. Available under the second round of IHDA’s Strong Communities Program (SCP), the initiative provides funding to units of local government and land bank authorities for the acquisition, maintenance, rehabilitation and demolition of abandoned residential properties in their communities. The program is designed to support local revitalization efforts and attract further investment in communities that may lack the resources needed to tackle vacant, abandoned and deteriorated properties.
“In Illinois, we believe every single person deserves to live in a home that is safe and affordable,” said Governor JB Pritzker. “For far too long, many families have resided in homes that lack the essentials everyone is entitled to. Through this funding, we are making historic investments to ensure that we are living up to our values of accessibility and equity while also providing more Illinoisans with the safety and security they have long deserved.”
Created in August 2020, this round of the Strong Communities Program provides grants of up to $750,000 to help Illinois municipalities, counties and land banks address local affordable housing needs and community revitalization efforts. The program aims to return vacant residential properties to productive and taxable use through rehabilitation and provide funds for demolition in cases where properties are beyond repair and negatively impacting neighboring residences. As a result, SCP will help to increase property values, create jobs, help reduce crime, generate additional tax revenue and attract further community investment.
“Housing is more than shelter, it’s part of the foundation of our wellbeing when we know that we have an affordable place to call home,” said Lt. Governor Juliana Stratton. “The Strong Communities Program will broaden access to affordable housing through development in the neighborhoods where it is needed most, while creating jobs and opportunities for entrepreneurship.”
“As our infrastructure ages, it is imperative our housing stock receive the care and upgrades necessary to keep them viable,” said IHDA Executive Director Kristin Faust. “If the properties are abandoned or vacant, it is on the city or county to maintain them at the cost of the taxpayers. The Strong Communities Program is helping offset some of the cost burden to help local governments invest in their cities by revitalizing these properties.”
SCP program funds will reimburse applicants for costs related to the acquisition, rehabilitation and maintenance of abandoned residential properties and may also include reimbursements for tree, shrub and debris removal, lot treatment and greening and other reasonable construction costs associated with returning vacant, abandoned and deteriorated properties to productive use.
The grants are funded by the Rebuild Illinois capital plan and will leverage IHDA’s ongoing state- and federally-funded revitalization initiatives in underserved communities around the state. A total of $30 million in grant funding will be awarded through the program over two application rounds.
Debt Ceiling Update
There are just seven legislative days left on the schedule when both chambers in Congress are in session before June 1, which is the earliest the nation could default on its $31.4 trillion debt per Treasury Secretary Janet Yellen.
While the four congressional leaders are meeting again with President Joe Biden to discuss the debt ceiling on Friday, they’re not any closer to a deal than they were at the start of the week. Senate Majority Leader Chuck Schumer (D-N.Y.) told reporters after Tuesday’s meeting that talks on the staff level will get underway “to try and negotiate that process” ahead of the next meeting.
One option floated by Biden: The president said after Tuesday’s meeting that he was “considering” the use of the 14th Amendment, which states that the public debt of the United States “shall not be questioned,” as a means to circumvent the debt ceiling standoff he currently finds himself in with House Republicans. But even in floating such a move, the president also cast doubt on it, telling reporters that it would “have to be litigated and in the meantime without an extension it’d still end up in the same place.” Biden said he would look at the issue of invalidating the debt ceiling through the 14th Amendment “months down the road.”
Invoking the 14th Amendment to avoid defaulting on the nation’s debt would be a controversial and untested move. Still, it gets a (provisional) stamp of approval from one of the highest-profile constitutional lawyers in Congress, Rep. Jamie Raskin (D-Md.), who added the caveat that it depends on exactly what Biden does to address debt.
“We have virtually no precedent under the validity of the public debt provision,” Raskin, an emeritus constitutional law professor at American University, said. “But look, the MAGA Republicans are putting [Speaker Kevin] McCarthy in a position, who is now putting Biden in a position where he’s going to be forced to choose between either violating the Constitution and violating the laws of the country which require him to pay the bondholders and pay the Social Security recipients, or he’s going to have to violate the debt limit statute.”
He added, “I think the main thing is that the President do everything in his power to try to dislodge the political stalemate. But if not, there is a pretty clear constitutional command there.”
Lawmakers are already bracing for canceled Memorial Day plans, whether with family or marching in a local parade. At the House Democratic Whip team meeting Tuesday night, Rep. Debbie Dingell (D-Mich.) told her colleagues to “get used to the idea of working Memorial Day.”
Cannabis Banking Act Reemerges
A trio of cannabis advocates who have been lobbying Congress for federal reform expressed optimism that the SAFE Banking Act – which could open the broader banking system to cannabis companies – will be passed by federal lawmakers this year or next. The three spoke on a panel at MJ Unpacked in New York City.
The latest version of the legislation was introduced in both the U.S. House and Senate on Wednesday, with bipartisan support. “I think we’re getting closer and closer, because people behind closed doors are like, ‘I get it,’” said Toi Hutchinson, the executive director of the Marijuana Policy Project. “Even if they don’t want to do a vote for cannabis, banking becomes a small business issue.”
That political element, Hutchinson said, has allowed cannabis advocates to slowly bring in more GOP support in Congress for SAFE Banking. She said it’s “likely” that the measure will pass this current term. But, she noted, “We need to get that magic number of 60” to avoid a filibuster and get SAFE through the Senate, which is still a tough hurdle to clear.
The other major reform that all three panelists warned is on the way, for good or ill, is the cannabis rescheduling process that President Joe Biden launched last year when he also issued federal pardons for those federally convicted of nonviolent cannabis crimes.
The process, said cannabis attorney Andrew Kline, is currently ongoing at the Department of Health and Human Services and the U.S. Food and Drug Administration. The outcome could have major consequences. Kline said he expects the review to be completed before the next presidential election in 2024.
Perhaps the biggest possible effect, Kline noted, is if the Biden administration moves cannabis from its current spot as a Schedule 1 narcotic to Schedule 2. That wouldn’t fix the 280E issue in the federal tax code, which means the enormous federal tax burden will remain in place. But if the administration chooses the slightly less restrictive Schedule 3, that erases 280E as a problem for cannabis companies, Kline said. That could be a game-changer for businesses of all stripes and sizes.
“People need to be paying attention to this rescheduling process, because we have an opportunity to get it to Schedule 3, which will fix 280E, but it is not a certainty,” Kline said. “And if we reschedule to Schedule 2 and we don’t fix 280E, my sense is Congress is going to do nothing for a long time.”
Michael Bronstein, the president of the American Trade Association of Cannabis and Hemp, echoed the importance of the rescheduling review underway, and emphasized that it’s something the industry knows will have an outcome, unlike other attempts to force federal cannabis legalization through court cases, for instance.
Completely descheduling, or legalizing cannabis altogether by removing it from the list of federally controlled substances, isn’t realistically an option, Kline and Hutchinson both said. “The president doesn’t support descheduling … so it’s not going to happen,” Hutchinson said. “There will be a lot of advocates who will be irritated at fixing the 280E problem without doing criminal justice reform, and that’s where I’m like, we need both/and. It’s not either/or.”
If marijuana was lowered to Schedule 3, that would still let state prohibition and anti-cannabis laws remain in place, Hutchinson further noted. “What happened to Britney Griner in Russia can happen to you in Texas,” Hutchinson said. But descheduling completely, Kline said, is almost certainly off the table because the FDA will still assert that marijuana has a “potential for abuse,” which is the standard for putting any drug on the list of controlled substances.
Inflation slowed in April to lowest rate since 2021
Consumer prices rose 0.4 percent in April to hit an annual increase of 4.9 percent, according to inflation data released Wednesday by the Labor Department. That’s the lowest annual inflation rate since April 2021. The consumer price index (CPI), which measures everything consumers spend money on from rent to gasoline, showed inflation accelerating slightly in April, in line with expectations but falling on an annual basis.
Economists had been expecting prices to accelerate by 0.4 percent in April, up from 0.1 percent in March, and projected annual inflation to hold steady at 5 percent.
“Overall, the April inflation report is encouraging and suggests that the economy is cooling in a gradual and controlled manner that is allowing prices to stabilize without sharp job losses,” wrote Julia Pollak, chief economist at ZipRecuiter, in a Tuesday analysis. “We expect to see further cooling in inflation in the coming months as the recent tightening of credit conditions plays out in the real economy,” she added.
Inflation has now fallen in ten consecutive months, which may give the Federal Reserve room to pause interest rates hikes. The Fed has raised interest rates ten times in consecutive meetings since last March to bring down inflation in one of the fastest cycles of quantitative tightening on record. Inflation has been falling somewhat steadily since the middle of last year, when prices in the CPI topped out at a 9.1-percent annual increase in June.
Many economists have been concerned that higher interest rates, which slow the economy in a general way by making financing more expensive, may be too blunt an instrument to deal with inflation caused by profit margin expansion driven by changing business models.
US adds 253,000 jobs in April, above expectations
The U.S. economy added 253,000 jobs in April, surpassing analyst forecasts of 180,000 new jobs, according to Labor Department data released Friday. The unemployment rate remained low at 3,4 percent, down from 3.5 percent the previous month.
The jobs report reveals that the economy is slowing, but the labor market remains robust. The U.S. added 236,000 jobs in March, 311,000 jobs in February and a stunning 504,000 jobs in January.
NEW ASSISTANCE PROGRAM FOR COVID EIDL SMALL BUSINESS BORROWERS
The U.S. Small Business Administration (SBA) is providing additional measures to accommodate COVID Economic Injury Disaster Loan (EIDL) borrowers who are experiencing short-term financial difficulties. The program, known as the Hardship Accommodation Plan, allows eligible borrowers to make reduced loan payments for six months. However, it’s important to note that interest on these loans will continue to accrue, which may increase or create a balloon payment at the end of the loan term.
- Borrowers must pay at least 10% of their monthly loan payment amount for six months, with a $25 minimum payment.
- Borrowers can make larger loan payments during the Hardship Accommodation Plan period.
- After the six-month period ends, borrowers will be required to make regular monthly payments.
- Borrowers may be able to renew the Hardship Accommodation Plan, if necessary.
To qualify and enroll for the Hardship Accommodation Plan, borrowers must meet the following criteria.
- Borrowers can enroll in the Hardship Accommodation Plan 60 calendar days before their first payment due date.
- If you owe less than or equal to $200,000, you can enroll in the program through the MySBA Loan Portal (lending.sba.gov). Visit the Loan Summaries section and look for the Hardship Accommodation Plan.
- If you owe more than $200,000, you will need to contact the COVID-19 EIDL Servicing Center at 833-853-5638 or firstname.lastname@example.org (and include “Hardship Accommodation Plan” in the subject line). You will be contacted by a loan specialist regarding requirements.
For more COVID EIDL assistance, get in touch with the SBA’s servicing center at 833-853-5638 (TTY: 711) or email email@example.com.
Executive Vice President
Joliet Region Chamber of Commerce & Industry