Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
The legislative session is scheduled to end this Friday, but the Illinois General Assembly is still trying to wrap things up on Governor Pritzker’s proposed $52+ billion budget. It looks like they’ll be extending their stay as they have until the end of the month.
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Countdown to the End
Despite disagreements on how to achieve a balanced budget, both legislators and the governor’s office agree that we won’t face a repeat of the 2015 impasse that lasted 793 days. “There’s a lot of debate about parts of the governor’s February proposal, but over the past five years, we have consistently enacted balanced budgets that meet public expectations: investing in education, healthcare, the rainy-day fund, and pension payments,” Deputy Gov. Andy Manar recently remarked.
Big-ticket items: A key part of the budget is $350 million for K-12 education. Additionally, the Medicaid omnibus bill passed last year will cost nearly $300 million in 2025. Both are substantial expenses.
Healthcare issues are also a major topic in Democratic caucus meetings. A bill discussed, particularly the effort to exclude abortion services from the Birth Equity Initiative (HB5142), is causing significant debate. The issue isn’t about opposing abortion but managing rising healthcare costs.
Other considerations: Lawmakers also need to address the $182 million requested by the Pritzker administration to fund welcoming centers and other services for migrants, especially as Chicago prepares for the Democratic National Convention.
Funding the budget: Governor Pritzker has proposed a revenue package to generate $1.1 billion for the next fiscal year, primarily by extending current tax laws set to expire.
“It’s just math,” says Manar: “If we’re going to continue to invest in evidence-based funding for K-12, cover the Medicaid omnibus bill, and support all our priorities, we need new revenue. That’s what the governor proposed.” Governor Pritzker is also open to other new revenue ideas.
Off the table: The Chicago Bears won’t receive the $1 billion in state funding for their lakefront stadium proposal, and Chicago shouldn’t expect the $1 billion it claims for public education either. The current funding formula doesn’t allow for those amounts to be disbursed all at once.
Pritzker Administration Says All Revenue Options Still on the Table
Last week I shared that the governor’s office instructed agency directors to prepare for potential $800 million budget cuts. However, all aspects of the governor’s plan to raise $1.1 billion in revenue to avoid these cuts remain under consideration. With a few days left before the General Assembly adjourns on May 24—and two weeks before more votes are needed for an immediately effective budget—the last-minute budgeting process is nothing new.
So far, discussions between the governor’s office and Democratic leaders have introduced at least one potential addition to the revenue mix, which could raise another $30-$50 million beyond what Governor JB Pritzker had planned.
Revenue Proposals:
$526 million – Extending an Expiring Cap:
Nearly half of the proposed revenue increase comes from making a corporate tax deduction more generous. Currently, corporations can carry forward $100,000 in net operating losses, but under the governor’s plan, they’d be able to carry forward $500,000. This measure would generate revenue because the $100,000 cap was set to expire, meaning no cap would exist without action. By implementing this new cap, revenue would increase by $526 million.
$200 million – Increasing the Tax on Sportsbooks:
Illinois sportsbooks currently pay a 15% tax on net revenues. Governor Pritzker proposes raising this rate to 35%, with the additional revenue going to the General Revenue Fund. While sportsbooks argue this could reduce profit boosts and other incentives, Pritzker emphasizes the tax targets the operators, not the bettors.
$175 million – Shifting Expenses to the Road Fund:
An accounting measure would move some public transit spending to the Road Fund, freeing up $175 million in the General Revenue Fund. This aligns with the 2016 “lock box” amendment, which restricts motor fuel and transportation-related fees to transportation projects.
$101 million – Capping the ‘Retailers Discount’:
The proposal caps the retailers’ discount at $1,000 per month, generating $101 million. The Illinois Department of Revenue states this cap affects only the largest 2-3% of retailers. However, the Illinois Retail Merchants Association opposes the reduction, arguing that retailers bear significant administrative costs for tax collection.
Other Proposals:
Grocery Tax: Pritzker’s plan does not include the state’s 1% grocery tax, which was suspended due to record inflation. A measure by Rep. Ryan Spain would offset lost local revenue with state funds, costing an estimated $325 million.
Miscellaneous Proposals:
$25 million: Redistributing real estate tax revenues to the General Revenue Fund instead of the Open Space Land Acquisition and Development Fund, which supports parks and recreation projects. Opposition is strong, with House Bill 4502, preventing such “fund sweeps,” passing the House.
$93 million: Increasing the state’s standard deduction from $2,425 to $2,550.
As budget negotiations continue, the governor remains open to new revenue ideas to meet the state’s financial needs while avoiding significant budget cuts.
Illinois Legislature Approves Amendment to Biometric Privacy Law
The Illinois House passed legislation on Thursday aimed at curbing potential excessive damages under the state’s biometric privacy law, over a year after the Illinois Supreme Court suggested revisiting the law.
Enacted in 2008, Illinois’ biometric privacy law requires companies to obtain consent before collecting and storing biometric data such as fingerprints or retina scans. This law is considered the strictest in the country, as it allows individuals to sue for violations. High-profile cases include Facebook’s $650 million settlement for its facial tagging feature and Google’s $100 million settlement over its facial grouping tool on Google Photos.
In February 2023, the Illinois Supreme Court, in a split opinion on a case involving White Castle employees using fingerprint scanners, suggested legislative review. The court ruled that damages accrue each time biometric data is collected without consent, potentially leading to excessive damages. Justice Elizabeth Rochford emphasized that these concerns should be addressed by the legislature.
The new legislation amends the law to specify that a violation—and subsequent damages—occur only once when biometric information is collected or disclosed without consent, rather than with each occurrence.
Nine Republicans joined Democrats to pass the measure in the House with an 81-30 vote. The Senate passed the bill last month, and it now awaits Governor J.B. Pritzker’s consideration. “Governor Pritzker will give the final legislation careful review,” said spokesperson Alex Gough.
“This bill addresses the court’s invitation to clarify the assessment of damages under the Act,” said Rep. Ann Williams, the bill’s main House sponsor. Rep. Abdelnasser Rashid emphasized that the bill maintains critical privacy protections while providing clarity for small businesses.
Despite initial opposition from major business groups, including the Illinois Chamber of Commerce and the Illinois Retail Merchants Association, the Technology & Manufacturing Association praised the bill, urging Pritzker to sign it into law. Lobbyist David Curtin highlighted the challenges faced by small and midsize manufacturers due to the original law.
State Rep. Dan Ugaste, one of the Republicans who opposed the measure, argued it didn’t go far enough to protect businesses from penalties for unintentional violations. He also raised concerns about the liability of data centers.
Northwestern University law professor Matthew Kugler noted that the amendment could result in lower settlements by removing the possibility of exponentially growing damages. However, cases involving large numbers of individuals, such as those against major tech companies, may still see significant settlements.
Damages under the law are $1,000 for negligent violations and $5,000 for intentional or reckless violations. The recent White Castle case, which could have resulted in $17 billion in damages, settled for $9.4 million pending final approval.
University of Chicago law professor Lior Strahilevitz expects that the amended legislation will lead to fewer cases with smaller groups of plaintiffs and lower potential damages, making them less attractive to plaintiffs’ attorneys. However, large cases involving major tech companies with millions of customers will likely continue to result in substantial settlements.
Illinois Officials Push for Stricter Oversight of Prescription Drug Middlemen
Illinois lawmakers are pushing for greater oversight of pharmacy benefit managers (PBMs), influential intermediaries in the health insurance industry who negotiate drug prices between insurers and pharmaceutical manufacturers. These “middlemen” determine which drugs are covered by insurance plans, significantly impacting drug availability and pricing for patients and pharmacies.
PBMs face growing scrutiny for allegedly driving up drug prices. Local pharmacy owners testified at recent hearings that PBMs squeeze them with high wholesale prices and low reimbursement rates, often leading to financial losses. Over 40 percent of Illinois’ local pharmacies—around 300—have closed since 2013, according to the National Community Pharmacists Association.
Michelle Dyer, owner of Michelle’s Pharmacy in Macoupin County, highlighted the financial strain on pharmacies: “On almost every brand name medication that you fill, you lose money,” she told the House Health Care Availability and Access Committee.
A recent audit revealed inadequate state oversight of PBMs, noting that the Illinois Department of Healthcare and Family Services (HFS) failed to collect necessary documents to monitor PBMs effectively. HFS Director Elizabeth Whitehorn, appointed in January, promised new rules requiring PBMs to disclose potential conflicts of interest, aiming to submit these rules by June.
Three PBMs—CVS Caremark, Express Scripts, and Optum RX—dominate 80 percent of the U.S. market. The consolidation of PBMs, many of which are now owned by drug manufacturers, has raised concerns about reduced competition and increased costs.
Newly appointed Illinois Insurance Director Ann Gillespie, a former CVS Caremark employee, indicated her support for regulating the industry. She emphasized the impact of corporate consolidation on healthcare access and expressed willingness to develop additional regulatory tools with the General Assembly.
House Bill 4548, currently under consideration, aims to enhance regulation by requiring PBMs to disclose drug costs and preventing them from steering patients toward their own pharmacies. The bill also proposes consistent monitoring of PBMs and mandates fair reimbursement rates for pharmacies.
The Federal Trade Commission (FTC) is also investigating six of the largest PBMs for antitrust violations. FTC Chair Lina Khan reported that companies are not cooperating with the probe, a claim disputed by CVS Health. Illinois House committee chair Rep. Natalie Manley criticized PBM executives for not attending a recent hearing, stressing the need for transparency and accountability.
With ongoing hearings and legislative efforts, Illinois is poised to join other states in seeking stricter oversight of PBMs to ensure fair pricing and access to prescription drugs.
Another Property Tax Relief Study
Governor J.B. Pritzker might soon have another chance to create a task force to study Illinois’ property tax system, following the advancement of a measure through both legislative chambers. However, some lawmakers argue that this initiative will be unproductive.
State Representative Mary Beth Canty, D-Arlington Heights, advocated for Senate Bill 3455, which proposes a task force comprising members from the Illinois Department of Revenue and the Department of Commerce and Economic Opportunity to evaluate the state’s property tax system.
In contrast, State Representative Brad Halbrook, R-Shelbyville, criticized the proposal by highlighting a similar study from 2019. Canty was unable to provide results from that previous study.
“People are leaving this state in droves because of high property taxes, high income taxes, and the like… In 2019, the gas tax doubled. We don’t know the results of the 2019 task force that had 88 members, and yet here we are proposing another bill,” said Halbrook. “This isn’t rocket science. We could assemble 10 people and have an answer by tomorrow morning on what needs to be done to reform this system. This bill will do nothing and go nowhere.”
In 2020, the Illinois Property Tax Relief Task Force missed its deadline, and Illinois Republicans refused to endorse a draft report, citing a lack of substantive changes to the property tax system. Canty argued that previous studies did not sufficiently address the perceived inequities in the property tax system. Halbrook pressed her on what these “inequities” were.
“In Cook County, the property tax assessment model differentiates between residential and commercial properties,” Canty explained. “There is a belief that this system is inequitable. We want an independent study to determine if that’s true and, if so, provide recommendations for adjustments.”
Halbrook reiterated that Illinois has some of the highest property taxes in the nation. State Representative Tom Weber, R-Fox Lake, who participated in the 2019 task force, noted that despite many good initiatives, none came to fruition. “Over 70% of our property taxes go to school districts. We need to involve them and understand where that money is going,” Weber said. “Without property taxpayers involved, this will be another waste of time.” Weber added that there is little appetite in the legislature for passing meaningful property tax relief.
State Representative Will Guzzardi, D-Chicago, pointed out that even the Chicago Chamber of Commerce, not typically aligned with big-government initiatives, supported the measure. “I understand we didn’t fix everything in 2019. If we take that to mean we should stop trying to fix the property tax system and just accept it as it is, then we should vote ‘no’ on this bill. But if we believe there’s more to learn and ways to improve the system, this bill offers a clear roadmap to meaningful reform, and I urge an ‘aye’ vote,” said Guzzardi.
The bill has passed both houses and now awaits the governor’s consideration.
Proposal to End Tipped Worker Subminimum Wage Stalled
Legislation to eliminate the subminimum wage for tipped workers statewide appears unlikely to pass before lawmakers adjourn this week, but the coalition pushing the measure vowed Tuesday to continue efforts to bring the rest of Illinois in line with the city of Chicago.
“We have more work to do. We’re going to do that over the summer. We’re going to do it in good faith,” state Sen. Lakesia Collins, a Chicago Democrat, said, standing alongside members of the coalition One Fair Wage at a Springfield news conference.
With the spring legislative session scheduled to adjourn Friday, the bill has not been called to a vote in either chamber, underscoring the difficulty of making the policy statewide after Chicago eliminated the subminimum wage last year.
Illinois House Hearing on Small Business Savings Accounts
The House Revenue & Finance Committee held a subject-matter hearing on HB 4669, a bill that provides for small business savings accounts (SBSAs) for capital expenses.
If passed, small business owners could contribute up to $50,000 per year to small business savings accounts, allowing them to defer state income taxes on 50% of the contributions until they were ready to reinvest the funds for equipment, building improvements, or other authorized capital expenses.
Suburban Chicago Leaders Voice Opinion on Local Government Distributive Fund
On Monday, nearly 50 mayors, village presidents and other municipal leaders representing nearly 4.5 million suburban Chicago residents, gathered outside the quad of Elmhurst University to call on the Illinois General Assembly to raise the Local Government Distributive Fund and roll back on a myriad of unfunded mandates passed in the last decade.
The Local Government Distributive Fund (LGDF), is a partnership between Illinois and its local governments created to distribute a portion of the state income tax, established in 1969; between 1993-2011, 10% of the total income tax collected was dedicated to the LGDF, by 2017 the rate had been reduced to 6.06%.
“For decades local government leaders knew they could rely on LGDF as a predictable and sustainable source of funding, even as other revenue fluctuated from month to month,” Palos Hills Mayor Jerry Bennett said.
Due to instability caused by the 2008 financial crisis, the state reduced LGDF income promising the reduction would be temporary, Bennett said. Income tax represents nearly 30% of the state budget’s expected total revenue in 2024, roughly $33 billion; last year the state increased the LGDF income tax rate to 6.47%, meaning local governments could expect to split about $2.13 billion in individual and corporate income tax.
In 2025, the state of Illinois expects to bring in $109.7 billion in appropriated funds, with income tax once again representing nearly 30% of total revenue; if increased to 10% the LGDF would receive $3.29 billion, $1 billion more than the current rate.
“My community of Hazel Crest has lost over $10M in LGDF since 2011, while at the same time, we’ve faced over 1,600 unfunded mandates since I was elected in 2013,” Hazel Crest Mayor Vernard Alsberry said Monday.
As of March, 155 bills were introduced by the 103rd Illinois General Assembly that would create new unfunded mandates, according to a March 19 report by the Illinois Municipal League (IML), a government sector lobbying group representing municipal leaders.
“Unfunded mandates enacted into law cumulatively increase municipal operating costs,” Illinois Municipal League CEO Brad Cole said in the report. “As members of all political parties continue to campaign on reducing property tax costs statewide, the costs of unfunded mandates must be recognized as a direct and significant contributor to the growing property tax burden in Illinois”
To supplement the reduced income from the LGDF and increased burden of unfunded mandates, municipalities fill the gap by increasing property tax rates, Alsberry said. In 2023 the median residential tax bill in Cook County increased by 15.7%, “the largest percentage increase in the last 30 years,” according to the county treasurer’s office.
“Each one of us here, and every other citizen in the State of Illinois, relies on the critical services provided by local governments,” Wheaton Mayor Phil Suess said Monday. “We are here this morning to reach out to our partners in the General Assembly and urge them to work with us to prioritize continued investment in our communities.”
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
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