“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
We will announce and congratulate all of those who officially won their races next week as part of our roundup. This week, unofficial election results show no seats in the Illinois House or Senate have changed party hands, although a few races remained too close to call according to the Associated Press. If their leads hold, Democrats would keep their 78-40 advantage in the House. Their 40-19 margin in the Senate was guaranteed.
Together, the state Democratic Party and the Illinois House Democrats’ campaign arm reported $5.56 million in their campaign coffers through September after spending $7.67 million in the past quarter, according to the State Board of Elections. The state Republican Party and the House Republicans’ campaign group had $1.07 million on hand combined after together spending $3.35 million in that quarter, records show.
Finally, in case you didn’t already know, Donald Trump will be returning to the White House. More below on perceived legislative priorities during his second stint in office.
*Government Affairs Roundup brought to you by CITGO*
Fall Veto Session
Democratic legislators spent their first day back after the election meeting briefly in House and Senate chambers. The big legislative move was that state Rep. Stephanie Kifowit filed a bill addressing pensions, HB5909. State Sen. Robert Martwick filed an identical one in the Senate, SB3988. The bills are a product of the We Are One Coalition, which is a group of unions formed after the Tier 2 pension system law was passed and focuses on making sure public sector workers’ retirements are secure.
State Budget Office Releases Early Projections
The Illinois Governor’s Office of Management and Budget (GOMB) has issued a key report on the state’s projected financial challenges, highlighting a substantial budget deficit for fiscal year 2026 and extended deficits over the next five years.
For fiscal year 2026, which starts July 1, GOMB forecasts a $3.2 billion deficit, largely due to stagnant revenue growth against rising expenses. The state’s revenues are expected to remain flat at approximately $53.4 billion, while spending is set to increase, driven by higher healthcare costs, educational funding, and mandated spending obligations. For instance, K-12 education is projected to receive an additional $350 million, while pension contributions are expected to grow by $440 million, and healthcare costs could surge by $1.1 billion, partly due to rising medical inflation and the phasing out of one-time federal reimbursements from the pandemic. This imbalance between revenue and expenditures has led the GOMB to warn lawmakers that funding for new programs will be extremely limited.
Revenue stagnation can be attributed partly to the Illinois Department of Revenue’s recent “true-up” process, which inflated revenues temporarily by rectifying prior overpayments to local governments. This correction added around $1 billion to general revenues for fiscal years 2024 and 2025, but the effect will not carry over to fiscal year 2026. Additionally, economic factors, such as anticipated Federal Reserve rate cuts, are expected to lower state investment income, contributing to revenue slowdown. Illinois is also completing a five-year transition of motor fuel tax allocations from the General Revenue Fund to the Road Fund, which will further limit general revenue growth.
The GOMB’s five-year projection paints a bleak picture, forecasting Illinois’ annual spending to increase from $53 billion currently to $63 billion by 2030. This escalation in spending is expected to generate cumulative deficits totaling $22.2 billion, with shortfalls estimated at $3 billion in 2026, $4.1 billion in 2027, and increasing to $5.2 billion by 2029. These deficits reflect not only the long-term effects of increased funding for healthcare, education, and public safety but also the absence of the one-time COVID-19 funds that helped stabilize budgets in previous years. Illinois received approximately $33 billion in federal relief funds during the pandemic, which helped offset declining revenues and cover pandemic-related expenses.
To address these challenges, the GOMB is likely to consider spending controls and possibly new revenue sources. However, much of the state’s spending is tied to mandatory obligations, such as debt service, pensions, and Medicaid, limiting options for across-the-board cuts. Only about 40% of state spending is considered discretionary. GOMB’s recommendations include continued investment in education and economic development, prioritizing the rainy-day fund, and debt reduction.
Critics, such as Wirepoints President Ted Dabrowski, argue that Illinois is facing financial strain because it relied too heavily on temporary federal windfalls and stimulus effects without implementing long-term structural reforms. Dabrowski warns that the state may turn to tax hikes or deeper service cuts to manage these deficits, a strategy that he suggests has already led to increased taxpayer burdens and contributed to outmigration.
Despite these pressures, Illinois has maintained some fiscal stability under Governor J.B. Pritzker’s administration, achieving budget surpluses in recent years through conservative revenue estimates and one-time federal assistance. This approach has allowed the state to build a record $2.2 billion rainy day fund and reduce outstanding debts. However, GOMB’s forecasts suggest that a return to balanced budgets will be increasingly challenging as one-time revenue sources disappear and expenses continue to rise. The upcoming legislative session will see intensified debate as Pritzker and lawmakers work to address these anticipated deficits in the context of a slowing economic climate and limited fiscal flexibility.
Controversial Illinois Swipe Fee Law Faces Legal Challenge
Illinois is currently the only state moving forward with a controversial law aimed at limiting banks from charging interchange fees on tax and tip revenues. However, the law, known as the Interchange Fee Prohibition Act, faced a legal challenge recently when a coalition of organizations, led by the Illinois Bankers Association, petitioned a federal judge for an injunction to prevent the law from taking effect next year.
The law, signed by Governor J.B. Pritzker, is intended to benefit Illinois retailers by capping both the interchange fees banks can charge on certain transaction amounts and the discounts retailers receive for collecting and remitting sales taxes. Gov. Pritzker has described the measure as a win for retailers, which he believes will help ease financial burdens for businesses and consumers alike.
The Illinois Retail Merchants Association has praised the law, claiming it will provide significant relief for Illinois workers, families, and businesses by reducing the fees levied by financial institutions. Doug Kantor, General Counsel for the National Association of Convenience Stores, also defended the law, arguing that the U.S. credit card industry already collects the highest fees in the world. “There is no justification for delaying the Illinois law from taking effect,” Kantor stated.
Despite the support from the retail sector, the banking industry is pushing back. Charlotte Taylor, an attorney with the law firm Jones Day, argued on behalf of banks that the legislation interferes with their right to charge fees for services provided. “Banks are offering a service by marketing cards to consumers and taking on the liability associated with credit transactions. The state of Illinois is essentially saying that for every 10 cents on every dollar, you won’t get paid, which is an extreme interference,” Taylor said in court.
The Office of the Comptroller of the Currency (OCC), which is part of the U.S. Department of the Treasury and regulates national banks, also weighed in against the law. In its brief, the OCC criticized the legislation as “ill-conceived, highly unusual, and largely unworkable.”
The legal challenge is drawing attention beyond Illinois, as it raises questions about federal banking regulations. The Center for Legal Action, representing the American Free Enterprise Chamber of Commerce, filed an amicus brief arguing that the Illinois law would disrupt principles established by the National Bank Act of 1863. This historic legislation, passed during the Civil War, was designed to ensure uniformity in the banking system across the United States.
The Electronic Payments Coalition also condemned the Illinois law, describing it as a troubling example of a state government engaging in self-serving behavior.
Unless the courts intervene, the Interchange Fee Prohibition Act is scheduled to take effect on July 1, 2025. The outcome of this legal battle could set a precedent for other states considering similar measures, making the federal court’s decision one to watch closely.
Former Governor Pat Quinn Advocates for ‘Millionaire Tax’ to Fund Property Tax Relief
A week after the November 5 election, former Illinois Governor Pat Quinn is pushing for a renewed effort to implement a “millionaire tax” aimed at providing property tax relief. Speaking at the Illinois Capitol in Springfield on Tuesday, Quinn emphasized that the recent election results indicate strong voter support for a graduated income tax structure, specifically targeting high earners.
Voter Support for a Graduated Income Tax
Quinn, who served as governor until early 2015, highlighted that 60% of voters supported an advisory ballot question proposing a 3% income tax surcharge on individuals with annual taxable incomes over $1 million. The goal of this surcharge would be to fund property tax relief. However, this ballot question was purely advisory, meaning it would require further legislative action—and potentially voter approval of a constitutional amendment—to enact such a tax.
Currently, Illinois operates under a flat income tax system. For a graduated tax system to be implemented, voters would need to approve an amendment to the state constitution. This effort was attempted in 2020 but was ultimately rejected by a majority of voters. Quinn believes that if the question is posed again in the 2026 election, with clearer details on tax rates, income thresholds, and the specific use of funds, it could gain broader support.
Proposed Allocation of Surcharge Revenue
Quinn envisions the revenue from the millionaire tax being deposited into an existing, yet unfunded, property tax relief fund. According to his plan, the money would then be distributed to counties and allocated to taxpayers eligible for a homestead exemption.
“We have a specific way that the voters have identified exactly how to put money into the property tax relief fund,” Quinn explained. “It’s a fair approach rooted in the principle that taxes should be based on the ability to pay, a concept as old as the Bible.”
Quinn is confident that a more detailed amendment could succeed where the previous attempt failed. He believes that voters are ready to back a proposal that directly ties new tax revenue to property tax relief, despite potential opposition from well-funded campaigns. “We can win the referendum no matter how much the big shots spend against it. Our proposal reflects what the people want,” he stated.
Opposition and Skepticism from Republican Leaders
Not everyone is convinced. Senate Republican Leader John Curran of Downers Grove expressed doubts that voters would support a constitutional amendment if it faces strong opposition, similar to the campaign that defeated the 2020 proposal. Curran believes voters would once again reject the measure if it reaches the ballot.
While Quinn acknowledges other potential methods for reducing property tax burdens, he remains convinced that his proposed surcharge is the most effective solution. Drawing on his experience in organizing ballot initiatives and teaching property tax law, Quinn argued, “The only way to really get the ball rolling in the right direction for taxpayers is through refunds and rebates, and that’s exactly what this law proposes.”
Looking Ahead to 2026
With the next opportunity to present a constitutional amendment to voters in 2026, Quinn and his supporters are gearing up for a renewed campaign. The question remains whether Illinois voters will embrace a tax overhaul that targets millionaires in favor of property tax relief or if history will repeat itself with another rejection at the polls.
Legislative Agenda Under Trump: Tax Overhaul, Border Security, and Education Reform
With the prospect of full GOP control of government under President-elect Donald Trump, congressional Republicans are gearing up for an ambitious legislative agenda. At the top of their list is a sweeping tax package, along with measures to bolster border security, repeal parts of the Inflation Reduction Act, and expand school choice.
House Speaker Mike Johnson (R-La.) and other GOP leaders, including Senate figures like Sen. John Thune (R-S.D.) and Sen. John Cornyn (R-Texas), have been coordinating with Trump for months to ensure a smooth legislative rollout in the first 100 days. This time, Republicans hope to avoid the legislative stumbles that plagued Trump’s initial term, particularly with hard-line conservatives in the House Freedom Caucus previously derailing key efforts like the repeal of the Affordable Care Act.
1. Extending and Expanding Trump-Era Tax Cuts
The GOP’s primary focus will be on extending the 2017 Tax Cuts and Jobs Act (TCJA), Trump’s signature legislative achievement. Key provisions of the TCJA are set to expire at the end of 2025, and Republicans are determined not only to make these cuts permanent but also to introduce new tax incentives.
In a speech at the America First Policy Institute, Speaker Johnson outlined plans to restore immediate expensing for research and development, strengthen incentives for Foreign Derived Intangible Income (FDII) to promote U.S. ownership of intellectual property, and reinstate the 100% expensing provision that began phasing out after 2022. Johnson also emphasized support for a “strong Child Tax Credit” with work requirements, contrasting GOP priorities with Democratic proposals.
However, the tax policy details could spark intra-party debates, especially around the controversial $10,000 state and local tax (SALT) deduction cap imposed under the TCJA. Trump has hinted at potentially reversing the SALT cap, a move that could face resistance from fiscal conservatives but would appeal to Republicans from high-tax states.
2. Funding Border Security and Immigration Enforcement
A significant part of the GOP’s agenda focuses on border security. House Majority Leader Steve Scalise (R-La.) has highlighted plans to allocate substantial resources for completing the Trump Border Wall, enhancing detection technologies, and increasing Border Patrol staffing. In a letter to House GOP colleagues, Scalise emphasized using executive actions to reinstate policies like “Remain in Mexico” and ending “catch and release” to tighten border controls.
Speaker Johnson has also suggested using the tax code as a tool to deter illegal immigration, though he has not provided specifics on how these provisions would work.
3. Targeting the Inflation Reduction Act for Cuts
Republicans are setting their sights on rolling back portions of President Biden’s Inflation Reduction Act (IRA), particularly those related to climate initiatives. Scalise has criticized the IRA as a collection of “harmful slush funds,” and Johnson pledged to dismantle Green New Deal-inspired regulations to restore American energy dominance.
However, the GOP is not looking to completely repeal the IRA. Johnson has signaled a more measured approach, telling CNBC he would use a “scalpel, not a sledgehammer” to adjust the law, retaining provisions that have been beneficial. This cautious stance reflects the interests of some Republicans whose districts have benefited from green energy tax credits included in the IRA.
4. Expanding School Choice and Curbing Higher Education Costs
House Republicans are poised to push for expanded school choice, allowing families to use public funds for private education options. The Educational Choice for Children Act, which advanced out of the House Ways and Means Committee, would incentivize charitable donations to fund scholarships for K-12 students.
Speaker Johnson has also expressed a desire to reform higher education by holding universities accountable for rising costs and addressing perceived “woke” policies. The House GOP recently passed the End Woke Higher Education Act, which includes measures like requiring colleges to adopt free speech policies to receive federal funding. Scalise has also underscored the GOP’s intent to hold universities accountable for incidents of antisemitism.
5. Leveraging Budget Reconciliation for Swift Legislative Action
To expedite their legislative priorities, GOP leaders plan to use the Senate’s budget reconciliation process, which allows certain budget-related bills to bypass the filibuster and pass with a simple majority. This strategy is intended to prevent potential Democratic obstruction and push through critical elements of their agenda swiftly.
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
[email protected]
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