Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
Last call to check your calendars and see if you can join us for our April member breakfast on Tuesday, April 30th. We’re changing things up a little this month and hosting a breakfast rather than a luncheon. Our featured speaker will be A.J. Wilhelmi, President/CEO of the Illinois Health & Hospital Association. A.J. will be giving a “State of Healthcare” update focusing on a number of topics. We’re happy to have him back with us at the chamber as he was a former chamber board chair and Illinois State Senator! Here is the information and rsvp link:
https://members.jolietchamber.com/events/details/2024-member-breakfast-april-30-state-of-healthcare-with-a-j-wilhelmi-6949
As always, interesting and important information is below for your review. Please feel free to share back thoughts on the vote to ban noncompete agreements.
*Government Affairs Roundup brought to you by CITGO*
FTC Vote to Ban Noncompete Agreements
The Federal Trade Commission (FTC) voted 3-2 on Tuesday to prohibit noncompete agreements that restrict tens of millions of employees from joining competitors or initiating rival businesses after leaving their current jobs. From entry-level fast food workers to high-ranking CEOs, the FTC estimates that about 30 million individuals, constituting 18 percent of the U.S. workforce, are subject to such agreements.
Under the final ruling, new noncompete agreements for all employees would be banned, and companies would be obliged to inform current and former employees that these agreements will not be enforced. Existing noncompete agreements for most employees would need to be nullified, although a departure from the original proposal allows such agreements to persist for senior executives.
In her prepared statement, FTC Commissioner Rebecca Slaughter (D) condemned noncompete agreements, asserting that they unfairly constrain workers from pursuing better opportunities, forcing them to remain in undesirable jobs.
The implementation of the new rule is scheduled 120 days after its publication in the Federal Register. However, its future is uncertain due to anticipated legal challenges from pro-business groups opposing the ruling.
While business groups argue that noncompete agreements are essential for safeguarding proprietary information and intellectual property, the ruling would not prohibit alternative methods such as nondisclosure and confidentiality agreements. They also question the FTC’s authority to enact a comprehensive, retroactive ban.
Although Congress has not explicitly empowered the FTC to ban noncompete agreements, bipartisan bills have been proposed to reform such agreements, including the Workforce Mobility Act and the Freedom to Compete Act.
The U.S. Chamber of Commerce intends to challenge the ruling in court, denouncing it as an overreach that undermines the competitiveness of American businesses.
While dissenting commissioners acknowledge concerns regarding noncompete agreements, they argue that the FTC lacks the authority to issue such a rule without explicit authorization from Congress. FTC Commissioner Andrew Ferguson (R) emphasized the importance of ensuring that regulatory actions are grounded in congressional authority, deeming the final rule unlawful due to the absence of such authority.
Governor Pritzker Shares Proposal to Address Pensions
Governor J.B. Pritzker proposed a bold overhaul of Illinois’ pension funding, aiming for full funding at 100% by fiscal year 2048, a notable shift from the previous target of 90% by 2045. As the spring session of the General Assembly nears its end, Governor Pritzker’s administration prepares to tackle the state’s persistent pension underfunding.
However, Pritzker acknowledges the potential hurdle of a legal battle surrounding a 14-year-old law that created a less generous pension system for new employees. With influential teachers’ unions urging lawmakers to reconsider this law, the governor emphasizes the need to address concerns about compliance with federal Social Security laws.
In February, Pritzker signaled his intent to tackle the Tier 2 pension issue, acknowledging the uncertainty of its cost implications. His administration’s broader plan to fully fund pensions by 2048 involves extending the timeline and reallocating funds from retiring debts toward pensions, aiming for a balanced approach to address Illinois’ longstanding pension debt.
While discussions on the pension plan continue, public employee unions, such as the Illinois AFL-CIO, emphasize the importance of comprehensive reforms. The Tier 2 pension system, introduced in 2010 to mitigate pension liabilities, faces criticism for its lower benefits and potential legal issues, prompting calls for reform.
In 2010, the General Assembly created the new Tier 2 system, which nixed the Tier 1 practice of 3% compounded annual cost of living adjustments for retirees, raised the age for retirees to get full benefits from 62 to 67 and changed eligibility for full benefits from five years of service to 10 years.
Tier 2 also caps the maximum salary a pension can be based on and changes the calculation of the base salary to discourage a practice known as pension “spiking,” wherein those close to retirement age would seek raises to substantially increase their pension under the Tier 1 system.
Because it takes a decade to “vest” in the Tier 2 pension system, those who made late-career switches to government employment have begun to be eligible for retirement only in the last few years.
Illinois continues to grapple with a severe pension crisis, marked by a funding ratio of just 44% and an unfunded liability surpassing $140 billion. Addressing this crisis requires thoughtful consideration of proposed reforms and their long-term financial impact.
Illinois House passes ‘Healthcare Protection Act’
A bill known as the Healthcare Protection Act, aimed at modifying Illinois’ health insurance regulations, has passed the Illinois House and is now bound for the Senate. This measure, estimated to cost state taxpayers an additional $30 million annually, targets a small segment of state-regulated insurance plans, including those for state employees.
Governor J.B. Pritzker hailed the bill’s passage as a significant step toward curbing predatory insurance practices and empowering patients and their doctors. He plans to advocate for the legislation across the state as it moves to the Senate, emphasizing its potential to save lives and reduce healthcare expenses for millions of Illinoisans.
The bill proposes various changes, including the banning of step therapy and prior authorization for crisis mental health care, enhancing network adequacy, and imposing limits on rate hikes for large group insurance companies. State Representative Anna Moeller highlighted the importance of ensuring access to inpatient care during acute mental health crises, regardless of insurance restrictions.
However, during House debate, Representative C.D. Davidsmeyer raised concerns about the bill’s financial implications and its impact on taxpayers, particularly those not covered by the affected insurance plans. He also questioned its effects on taxpayer-subsidized health insurance for non-citizens, which currently costs Illinois nearly $700 million annually.
State Tax Credit for Affordable Housing
Housing and labor advocates propose that Illinois could foster the creation of approximately 1,100 new units of affordable rentals annually by instituting a state tax credit modeled after the longstanding federal tax credit.
The federal tax credit, established in 1986, has facilitated the development of an estimated 3.7 million affordable housing units nationwide and is typically a crucial component of a developer’s financing. Despite its effectiveness, it often leaves a gap in financing for developers, according to Allison Clements, executive director of the Illinois Housing Council.
Amid an affordable housing crisis exacerbated by the looming expiration of federal COVID-era programs, Clements emphasizes the importance of establishing a permanent replacement to sustain affordable housing production. Housing Action Illinois reports that Illinois currently faces a shortage of approximately 289,000 affordable rental units statewide, with Chicago accounting for 44% of the deficit, or about 126,000 units.
Mark Denzler, president and CEO of the Illinois Manufacturers’ Association, underscores the link between affordable housing and employment, emphasizing the need for investment in workforce stability as housing costs rise.
Twenty-five other states have already implemented state tax credits similar to the federal credit, which not only aids in addressing the housing shortage but also enhances Illinois’ competitiveness in attracting workers.
Advocates are rallying for the Build Illinois Homes Act in Springfield to incorporate the tax credit into next year’s state budget. While the credit wouldn’t require new state expenditure, it would result in a revenue loss due to the tax credits claimed by developers. Typically, developers sell these tax credits to investors to fund the projects.
Clements estimates that the credit would cost the state approximately $20 million annually in revenue for the initial six-year period, equivalent to about 0.3% of Gov. J.B. Pritzker’s proposed $52.7 billion budget. This funding could support the development of 1,150 affordable units yearly.
Tax credits are only issued upon project completion, ensuring accountability and preventing exploitation of tax breaks without tangible results. If approved, the credit would be implemented in 2025, with a quarter of the funding allocated to Chicago projects and the remainder to the rest of the state.
Joliet Chamber Joins U.S. Chamber & Others in Letter to EPA on CARB In-Use Locomotive Regulation
The Joliet Chamber of Commerce alongside chambers from across the country joined the US Chamber in urging the EPA to deny the California Air Resources Board’s (CARB) application to exempt its In-Use Locomotive Regulation (Regulation) from the Clean Air Act. Provided below is an excerpt from the letter.
The overreach of the CARB Regulation is stunning. It would mandate zero-emissions locomotives in some cases by 2030 and across-the-board by 2035, even though the technologies necessary to achieve these reductions do not exist.
Despite moving 40% of the nation’s long-distance freight by ton-mile, the sector accounts for only 0.6% of U.S. GHG emissions. Moreover, railroads are an essential freight transportation option for American businesses — including those in manufacturing, agriculture, retail, and energy production — in which scale of operations is critical to competing in the global market.
Allowing the Regulation to move forward would cause enormous and destructive impacts to America’s supply chains and economy, and likely increase greenhouse gas emissions.
- California Regulation Would Be National Regulation. A very large portion of the locomotive fleet moves through the state of California each year, so railroads operating as far away as Montana, Pennsylvania, North Carolina, and even Maine and Florida would be forced to comply with California’s standard.
- The CARB Regulation Threatens the U.S. Supply Chain. Railroads are developing new technologies to reduce emissions, but there are no viable, zero-emission locomotives that could be deployed at scale to meet the demands of the CARB Regulation. Without proven technology in place, the logistical challenges of complying with this Regulation would be enormous and complicate critical supply chains for energy products, food, intermodal deliveries, and service to America’s ports.
- Freight Would Be Forced from Rail to Roads. It is hard to envision a scenario whereby trains would stop at the California border to change locomotives without significant impact on national supply chains, making diversion of freight off the rail network the most likely outcome.
- The CARB Regulation Would Drive Short Line Railroads Out of Business. In California alone, short lines handle more than 260,000 carloads per year. Nationally, short line railroads handle 20 percent of rail cars at origin and destination, serving virtually every industry. Short lines do not have the capacity to replace their entire locomotive fleets to comply with the deadlines.
- The CARB Regulation Would Harm the Largest Railroads and their Customers. Estimates suggest that Class I railroads would be required to deposit as much as $800 million per year, per railroad, for compliance with spending account provisions of the proposal. This capital drain could force major infrastructure improvements to be shelved, including those designed to reduce operations emissions and improve safety. Moreover, Union Pacific recently estimated that a fleet renewal as stipulated by the CARB Regulation would lead to more than $14 billion in cost increases passed on to consumers.
ANGEL INVESTMENTS – MINIMUM EMPLOYMENT THRESHOLD
Department of Commerce and Economic Opportunity
Angel Investment Credit Program (14 Ill. Adm. Code 531)
Text of Rulemaking: 48 Ill .Reg. 5851
Link to Flinn Report summary
Under current rules, for an angel investment in a business to qualify for the tax credit at least 51% of the business’s employees must be in Illinois and at least 75% of the business’s new positions must be in Illinois. Adapting to post-COVID-19 employment patterns, this rulemaking would change the eligibility threshold to require either the principal place of business or at least 51% of the jobs to be in Illinois. ■ Reflects Public Act 103-9, which added a higher tax credit (35% rather than 25%) for investments in qualified businesses that are minority- or women-owned or owned by a person with a disability and increased the yearly cap on tax credits from $10 million to $15 million.
Comments (through 6/3/24), requests for public hearing (through 5/3/24), or questions to:
Gina Arterberry
Department of Commerce & Economic Opportunity
607 E. Adams St. 12th Fl.
Springfield, IL 62701
217-524-8974
Gina.M.Arterberry@Illinois.gov
ADOPTED RULES
Group Day Care Homes
DCFS relaxed the restrictions on capacity for group day care homes (4+ children).
Rental Purchase Agreements
DOR is imposing two taxes on these agreements: a 6.25% occupation tax on the merchant and a 6.25% use tax on the consumer that is collected by the merchant.
Recurring Business
Regional Transportation Authority re: Transit Benefit Program
A new law that took effect at the start of this year expands transit benefit programs to more workplaces than ever before. Employers with 50 or more full-time employees located within a mile of fixed-route transit service inside the six-county Regional Transportation Authority (RTA) region – such as a CTA or Metra station, as well as CTA and Pace bus stops – are now required to offer their workers these benefits. Employers can enroll in these programs through their payroll service providers, as well as directly through the RTA.
The RTA has developed a communication toolkit with information on the new law, the RTA’s Transit Benefit Program, and promotional materials for your chambers.
The RTA has also created a searchable map to assist the business community in determining whether their place of business is within a mile of our region’s fixed-route transit.
Future of Natural Gas
The Future of Natural Gas Order was submitted by the ICC (Illinois Commerce Commission) on November 16, 2023. Please use the following link to access the decarbonization workshops Future of Gas Proceedings (illinois.gov) projected by the ICC. The topics that will be included in the sessions are listed below:
- Potential for decarbonization of the existing gas system, including possible technical constraints, hard to decarbonize end-uses, and methodologies for achieving decarbonization;
- If decarbonization requires a shift to electric distribution, the timing of such a shift;
- The role and scope of energy efficiency retrofits;
- Cost considerations;
- Stranded assets of the gas distribution system and planning methods to mitigate the issue;
- Strategies for identifying and managing infrastructure that is nearing the end of its useful life;
- The need for future integrated systems planning between gas and electric systems;
- The need for line extensions on the gas distribution system and the need for rulemaking to modify existing codified line extension allowances;
- The ability, costs, and timing of ramping up the electric distribution system to meet expanding load;
- Additional electric distribution infrastructure needed,
- Interaction with utilities’ existing electric multi-year rate and spending plans;
- Potential uses for any existing gas infrastructure which may not be needed after the transition;
- The effects of federal and state public policy that supports electrification of the gas system;
- Legislative and regulatory changes needed to effectuate any needed transition;
- Issues unique to propane and other liquid fuel customers; and
- Other issues determined by ICC staff as necessary for the most thorough discussion possible.
To ensure that you have an opportunity to have your voice heard around such an impactful topic/proposal check out one or more of the sessions scheduled to take place.
To ensure you are part of the conversation, you may want to attend, at minimum, a workshop on April 29 as they are seeking Community Feedback.
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct