Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
Governor Pritzker made the FY ’25 budget official last Wednesday, downplaying Democratic divisions as he signed a sweeping $53.1 billion budget that relies on $1.1 billion in revenue. The signing was pretty low-key with little to no fanfare and came a week after the Illinois House barely cleared a revenue measure with a 60-45 vote.
We’ll be hosting five of our local legislators for a breakfast on Thursday, June 27th to recap the spring session and how the budget maneuvering all went down from 8 to 9:30 am at the Clarion. Join us to hear from Deputy House Majority Leader Natalie Manley, State Representative Larry Walsh, Jr., State Representative Dagmara Avelar, State Senator Rachel Ventura, and State Senator Meg Loughran Cappel. Check your chamber email and the web calendar for details on registration.
*Government Affairs Roundup brought to you by CITGO*
“Slating” Candidates Back on Ballot
A Sangamon County Circuit Court judge has permanently enjoined a recently signed law that eliminates “slating” for General Assembly races in the 2024 election, ruling it unconstitutional.
Last month, the Illinois General Assembly made significant changes to a child welfare bill, altering it to address election law. The new law prohibits the slating of candidates for the November general election ballot if they did not participate in the March primary. The law was swiftly passed by both chambers and signed by Governor J.B. Pritzker within three days.
Several candidates, including Leslie Collazo, who is challenging incumbent state Rep. La Shawn Ford, D-Chicago, did not run in the primary. Collazo stated she was unaware there wasn’t a Republican candidate until it was too late. She felt “cheated” when the new law was enacted as she was preparing to file her petitions to be slated.
In response, candidates sued, leading to a preliminary injunction from a Sangamon County judge, pending final judgment. A hearing was held on the same day as the filing deadline for slated candidates for the November ballot. By Wednesday, the judge issued a final judgment in favor of the plaintiffs.
Judge Gail Noll stated that the General Assembly could have made the revisions effective for future elections, allowing everyone to be aware of the new rules. She declared the revisions unconstitutional for the 2024 election, as they burden the plaintiffs’ right to vote and appear on the ballot.
Jeffery Schwab of the Liberty Justice Center, representing Collazo and other candidates, said the ruling permits plaintiffs to seek ballot access under the original rules. He noted that while objections could theoretically be raised, the Illinois State Board of Elections (ISBE) could not uphold them based on the new act for the 2024 election. Schwab emphasized that the judge’s declaratory release prevents election boards from using the act to deny plaintiffs’ ballot access.
ISBE stated it would adhere to any court order regarding the law. On Wednesday, ISBE spokesman Matt Dietrich confirmed the board would not appeal as it took no position in the lawsuit.
Collazo welcomed the judge’s decision, highlighting that it provides more choices for Illinois voters in 2024. She criticized the legislature and Pritzker for enacting the law hastily and without transparency. Collazo emphasized the need for accountability and transparency in government actions.
The law was described as an “ethics” bill by the governor and House Ethics and Elections Committee chairman, state Rep. Maurice West, D-Rockford. However, it wasn’t debated in West’s committee. Collazo argued that the timing and manner of the bill’s passage indicated it wasn’t genuinely about ethics.
Schwab noted that candidates are now aware they must run in the primary for future ballot access. He agreed that eliminating the slating process could be beneficial in future elections, but not in the middle of the current election cycle. Schwab highlighted the historical abuse of slating by former Illinois House Speaker Michael Madigan, D-Chicago, and suggested the sudden implementation of the new law appeared to be an attempt to “rig” the election.
There are 78 active statehouse races affected by the new law. Schwab questioned the immediate effect of the law, implying it was intended to prevent candidates from running against incumbents in specific races.
New Rule May Push Illinois Consumers to “Swipe Twice” if Paying with Credit Card
By the signing of the budget and revenue package proposed to Governor Pritzker, consumers paying by card might have to swipe once for their purchases and again for the sales tax.
This change comes as part of a deal with the Illinois Retail Merchants Association (IRMA). In exchange for capping the credit ($1,000 a month) retailers receive for collecting and remitting sales taxes, the agreement limits the interchange fees that financial institutions can charge on the sales tax portion of transactions.
During a Senate committee hearing before the measure passed last month, Ashly Sharp from the Illinois Credit Union League criticized the change as flawed and impractical. “This could mean two swipes for a single transaction: one for the purchase of goods or services subject to interchange, and another for the tax or gratuity not subject to interchange,” Sharp explained.
Sharp highlighted that enacting this measure would require a massive overhaul of payment processing systems to comply, noting that the penalties for noncompliance are severe and could lead to miscalculations and potential fraud. “Why would card networks continue to process transactions where they’re prohibited from charging fees?” Sharp questioned. “Card processing has evolved into a quick and painless process, but it’s never completely free.”
Governor Pritzker’s Budget Director, Alexis Sturm, acknowledged the concerns and assured that they would be addressed. “That is a request from the retail merchants, and we will be working through the legislation that passed,” Sturm said last week.
IRMA expressed satisfaction with the agreement, stating, “We are pleased the Governor’s office and legislators agreed to limit the fees financial institutions can charge on the sales tax portion of transactions. This important change will give retailers across Illinois some much-needed breathing room, and we thank the Governor and legislators for their constructive engagement on this issue.”
Pritzker emphasized that the change was the best outcome for the state’s retailers, who will also see a cap on the discount they receive for collecting and remitting sales taxes. “In order to make sure we were right sizing what retailers get in a payment from the state in a world where most of it is pushing a button on a computer to get a result,” Pritzker said, adding that there is nothing “hyper unusual” about it.
However, retailers argue that the process involves more than just pushing a button. IRMA President Rob Karr informed a recent House committee that it requires manpower, infrastructure, and other costs for businesses to calculate, collect, and remit sales taxes to state and local governments. Additionally, retailers must stay vigilant to avoid potential audits from the Illinois Department of Revenue.
Ultimately, it’s essential to consider the broader implications of a significant change to the payment system. This change affects over seven million Illinois cardholders, hundreds of thousands of merchants, and thousands of card-issuing banks, credit unions, and processors. Was such a sweeping reform that was part of a hasty deal the best course of action given its potential ripple effects on global commerce?
Over the Past 20 Years, the State’s Reliance on Income Tax has Doubled
Illinois has only been collecting income tax for 55 of its 206 years, yet it could soon account for over 60% of the state’s general fund revenue.
A recent report from the Illinois General Assembly’s Commission on Government Forecasting and Accountability estimates that the state will collect nearly $31.4 billion in income tax revenue in the next fiscal year, starting in July. This marks a significant increase in reliance on income tax revenue, which has nearly doubled since 2004 when it made up only 30.3% of the general fund.
This growing dependence concerns some lawmakers and finance watchdog groups. “To be at 60% for income tax is extraordinary because it’s a more volatile mode of taxing compared to others like sales tax,” said Joe Ferguson, president of the Civic Federation. “It’s a general concern because it reflects a tax structure that historically hasn’t aligned well with the economy.”
Governor J.B. Pritzker’s office attributes the growth in income tax revenue to fluctuations in the state’s income tax rate over the past two decades. The personal income tax rate was 3% until 2010, then increased to 5% from 2011 to 2014, dropped to 3.75% from 2015 to 2017, and has been at 4.95% since then.
Pritzker’s office views the robust income tax base as a positive sign. “This change reflects the growth of Illinois’ tax base and the current strength of the state’s economy,” said Pritzker spokesman Alex Gough. “As the economy grows and wages rise, so will revenue from the income tax.”
However, questions arise about sustainability in economic downturns. “In poor economic times, options include raising the income tax rate, cutting state services, finding new tax revenue, or a combination of all three,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. He noted that the state’s narrow sales tax base, which doesn’t reflect the modern service-based economy, is problematic.
Ferguson echoed this, mentioning that the Civic Federation is researching the impact of including service-based businesses in the state’s sales tax collections. He attributed the current exclusion to political factors. “Professional services have lobbyists, and changes often happen in times of crisis. The state managing long-term issues well deprives us of the political necessity to change,” Ferguson said.
State Rep. Anna Moeller, a Democrat from Elgin and COGFA board member, is less concerned. “The increase in our income taxes shows that people are more prosperous,” she said. “That’s a good indicator of the general well-being of Illinois residents.”
According to the Illinois Department of Revenue, Chicago and suburban Cook County workers contributed 41.2% of the state’s income tax revenue in 2021, amounting to over $11 billion. The average Cook County worker paid $4,840 in income taxes.
Workers in the collar counties of DuPage, Kane, Lake, McHenry, and Will accounted for 28.4% of the state’s total income tax revenues in 2021, with an average payment of $5,162 per worker, totaling more than $7.6 billion.
Downstate workers provided 19.7% of the state’s income tax revenue in 2021, contributing nearly $4.2 billion. The average downstate worker paid $2,778 in income taxes. Out-of-state workers generated almost $2.9 billion in income tax for Illinois in 2021, which was 6.8% of the state’s total. They paid an average of $4,612 each.
State Sen. Don DeWitte, a Republican from St. Charles and COGFA board member, believes the governor should reduce the state’s reliance on income taxes. “As state budgets have grown massively under Gov. Pritzker, he relies more on income taxes to fund spending as other revenue sources dry up,” he said. “This trend is unsustainable, and the people of Illinois should be the governor’s priority, not his piggy bank.”
Stalled Proposal Would Have Frozen the Gas Tax Increase for Two Years
Illinois has one of the highest gasoline taxes in the country, prompting some lawmakers to propose a two-year freeze on further increases. Currently, the gas tax in Illinois stands at just over 45 cents per gallon and is set to rise to 47 cents in July.
“People who need to drive to work are looking for relief because inflation is eating into everyone’s budget,” said state Rep. Dan Caulkins, R-Decatur. Caulkins introduced House Bill 5852, emphasizing that his proposal is different from the approved plan to eliminate the grocery tax. Caulkins noted that communities rely on grocery tax revenue to help run their governments, whereas freezing the gas tax would not impact bridge and road projects funded by the gas tax. “This does not take any money out of the projects; we’ve got $5 billion in there,” said Caulkins.
In 2022, Governor Pritzker’s plan to pause a scheduled increase in the gas tax faced opposition, including from engineering companies that design road and bridge projects. Officials with the American Council of Engineering Companies of Illinois warned that pausing the automatic increase could have long-term consequences, potentially endangering funding for future transportation projects.
Illinois has had automatic annual gas tax hikes since 2019, when Pritzker and the General Assembly doubled the tax and tied future increases to inflation. Just six years ago, the gas tax in Illinois was 19 cents per gallon. Now, Illinoisans pay the second-highest gas taxes in the nation at more than 45 cents per gallon, behind only California. According to the Illinois Policy Institute, the average driver in Illinois is paying nearly $200 more annually in gasoline taxes than before Pritzker took office.
Recurring Business:
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Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct