“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
Nothing like a last-minute addition to the roundup to create some buzz. Read below for more information on the suggestion coming from the Civic Federation about the advancement of taxing services in Illinois. Plenty of additional information as well on some federal issues, EV incentives, and an update on our local invasive carp project at the Brandon Road lock and dam.
*Government Affairs Roundup brought to you by CITGO*
Civic Federation Calls for Expanding Sales Tax to Services to Address Illinois Budget Shortfall – Report Attached
The Civic Federation is urging Illinois lawmakers to take bold action in response to the state’s ongoing financial challenges, recommending a significant overhaul of the sales tax system. As the state faces a projected $3.2 billion budget shortfall for the upcoming fiscal year, the organization advocates extending the sales tax to include services—excluding business services—while simultaneously lowering the tax rate.
Illinois’ financial struggles are partly due to the expiration of federal pandemic-era funding that had expanded Medicaid, along with recent cuts to federal support. The Civic Federation’s 29-page report, released just ahead of Governor JB Pritzker’s budget proposal, emphasizes the need for long-term financial planning rather than short-term fixes.
“A balanced budget is a moment-in-time exercise,” says Joe Ferguson, CEO of the nonpartisan government research organization. “This is a multiyear conversation. Most of the necessary measures to steer us in the right direction are already clear.”
The report highlights Illinois’ sluggish economic and population growth compared to national trends and peer states. Despite having strong infrastructure and a capable workforce, the state’s fiscal policies are seen as hindering economic expansion and employment opportunities.
Currently, Illinois maintains a flat income tax, which results in a lower overall tax burden compared to states with a graduated tax structure. The state also imposes high sales tax rates but applies them to a limited range of consumer goods, excluding most services.
The state’s base sales tax rate stands at 5% (excluding the additional 1.25% allocated to local governments). The overall sales tax burden represents 2.10% of total personal income, below the national average of 2.52%. Illinois taxes only 29 out of 176 potential service categories, whereas other states, on average, tax 62 service types. The Civic Federation estimates that expanding the tax base to cover more services could generate approximately $2 billion in additional revenue.
Despite its potential fiscal benefits, expanding the sales tax to services has historically faced resistance in Springfield. Each affected industry is likely to lobby against the measure, making political feasibility a significant challenge. “The question of whether it’s politically possible is absolutely a matter of concern,” Ferguson noted. “Each of the 176 taxable services has its own constituency that will fight to protect its sector.”
Public sentiment may also pose a barrier. With voters increasingly sensitive to inflation and cost-of-living concerns, implementing a broader sales tax could face significant pushback. To address this, the Civic Federation suggests pairing the expansion with a reduction in the overall sales tax rate to soften the impact and increase political viability.
Discussions on sales tax reform are already circulating in the state Capitol, particularly in relation to addressing the transit system’s funding shortfall. However, Ferguson emphasized that this should be part of a broader fiscal strategy rather than a standalone measure.
Beyond taxation, the Civic Federation stresses the importance of cost containment. It advises limiting additional pension spending for post-2011 hires to the minimum required under Social Security standards. Pensions currently consume 19% of the state’s general fund, and the required contributions are projected to rise by 65% over the next two decades.
Despite these challenges, there are signs of progress. Governor Pritzker has improved the state’s financial standing by reducing unpaid bills and stabilizing operating finances, achieving budget surpluses in four of the last five fiscal years. He has also bolstered the state’s “rainy day” fund, though Illinois’ reserves remain at just 4% of general fund expenses—far below the national average of 13.5% and the preferred target of 16.7%.
Long-term financial planning and a comprehensive review of tax incentives, including corporate and individual exemptions, are also recommended.
As Illinois navigates its budgetary challenges, the debate over tax reform, spending priorities, and fiscal sustainability is set to intensify in Springfield. Whether lawmakers will embrace the Civic Federation’s recommendations remains to be seen.
Competing Visions for Mass Transit Overhaul in Springfield
The debate over how to keep Illinois’ mass transit systems financially stable is intensifying as pandemic-era federal funding runs out and ridership remains below pre-pandemic levels. Lawmakers in Springfield are tasked with addressing a looming $771 million funding shortfall before the regular session ends on May 31.
Organized labor has put forward a plan that includes reducing the requirement that rider fares account for 50% of the budgets for Metra, CTA, and Pace. It also suggests testing a road-usage fee as an alternative to traditional fuel taxes. Another major change in the proposal is granting the Regional Transportation Authority (RTA) control over fares, aiming to create a unified fare system across all transit services. While the plan would expand the RTA’s authority, it would not dismantle the individual boards of Metra, CTA, or Pace.
The bill, titled United We Move, was introduced by Illinois Sen. Ram Villivalam, D-Chicago, and is backed by over 30 unions representing 15,000 transit workers under the Illinois AFL-CIO and the Chicago Federation of Labor. The proposal seeks to increase the RTA board from 16 to 21 members, granting the governor the power to appoint five members—though it would also remove the governor’s ability to appoint three members to the CTA board, a potential concession to city officials.
“There should be state voices on the main board of RTA, which is inherently going to be a board that makes more of the decisions, given the centralization of responsibilities,” Villivalam stated. Neither the governor’s office nor the city has commented on the bill.
RTA Chairman Kirk Dillard has proposed a similar plan to strengthen the agency’s authority over fares, service standards, and capital projects, including the long-delayed universal fare system. He also recommended a 10% fare increase. However, neither plan calls for a full consolidation of transit agencies. In contrast, Villivalam previously introduced a separate bill that would create a Metropolitan Mobility Authority, which would merge Metra, CTA, and Pace into a single entity.
While proposals address governance and efficiency, none provide concrete solutions for closing the funding gap. Lawmakers have signaled that reform must precede discussions on securing additional revenue. Without new funding, transit agencies could face service cuts of up to 40%, leading to layoffs.
“We all have to get there on revenue,” said Bob Reiter, president of the Chicago Federation of Labor. “The first challenge is to resolve governance issues so we can focus on a sustainable funding system that meets the fiscal cliff while delivering the transit system riders need and deserve.”
Labor leaders consider the United We Move bill to be “roadmap legislation,” designed to drive discussions on coordination between Metra, CTA, and Pace, an issue that has long frustrated both riders and elected officials. “No legislator will vote for the level of service we have today,” Villivalam stated. “We need to determine what level of service is achievable with the funding available.”
A key element of the labor-backed proposal is reducing the farebox recovery ratio. Currently, transit agencies must generate 50% of their revenue from fares, a requirement that the bill seeks to lower to 25% initially, then 15%. Reiter argues the 50% mandate is unrealistic, noting that in other major cities, fare revenue accounts for significantly less:
New York: ~20% / Los Angeles: ~5% / Boston and Philadelphia: Up to 50% of funding comes from state governments, whereas Illinois contributes just 17%.
Reducing the farebox ratio, however, could spark opposition from downstate legislators, who may fear a loss of fiscal accountability. “Everybody sees lowering the farebox ratio as critical,” said Joe Schwieterman, a DePaul University professor and director of the Chaddick Institute for Metropolitan Development. “But if it’s lowered too much, it could raise concerns among downstate politicians.”
As Springfield lawmakers navigate these competing visions, the future of Illinois’ transit system remains uncertain. The General Assembly must decide whether to restructure governance, adjust funding mechanisms, or consolidate agencies—all while ensuring riders receive reliable, affordable service. The coming months will be pivotal in shaping mass transit’s future in the state.
Illinois Delays Brandon Road Invasive Carp Project Amid Federal Funding Uncertainty
Illinois has postponed the start of a $1.15 billion project aimed at preventing invasive carp from entering Lake Michigan, citing concerns over federal funding under the new presidential administration. A groundbreaking ceremony, originally scheduled for Tuesday, was canceled as officials await assurances that the federal government will provide its share of the necessary funds.
The Brandon Road Lock and Dam project near Joliet is part of a long-term effort involving Illinois, Michigan, and federal agencies to stop the northward migration of silver and bighead carp. These invasive species pose a significant threat to the Great Lakes’ native aquatic life, as well as the region’s $7 billion fishing and boating industries. If the fish breach current barriers, their unchecked reproduction and voracious appetite could devastate local ecosystems.
Although $340 million has already been allocated for the project’s first phase, Illinois officials remain hesitant to proceed without clarity on funding for subsequent phases. Governor JB Pritzker expressed concerns about the Trump administration’s ongoing withholding of $117 million in federal grants from the Bipartisan Infrastructure Law, which has already delayed 70 unrelated projects across the state.
In a letter to the U.S. Army Corps of Engineers, the project’s federal lead, Illinois Department of Natural Resources (IDNR) Director Natalie Phelps Finnie announced the state would delay closing on property rights for phase one until at least May. This delay, she said, is necessary to secure written assurances that federal funding will be available for the next phases of the project.
“We stand ready to move forward if the administration provides the certainty to fund this critical project,” she stated. Despite the postponement, an Army Corps spokesperson confirmed that site preparation and bedrock removal will continue on state-owned property.
A recent provision in the Water Resources Development Act of 2024 increased the federal government’s financial responsibility for the project, covering 90% of operation and maintenance costs after construction. However, Illinois and Michigan are still required to cover 10% of these costs indefinitely, potentially amounting to hundreds of millions of taxpayer dollars if federal contributions fall short.
Governor Pritzker underscored his commitment to protecting Illinois taxpayers from shouldering an unfair financial burden. “If the federal government does not live up to its obligations, Illinois could unfairly suffer the burden of hundreds of millions of dollars in liability,” Pritzker stated. “We cannot move forward until the Trump administration provides more certainty and clarity on whether they will follow the law and deliver the infrastructure funds we were promised.”
Environmentalists and policymakers have long viewed Brandon Road as a critical choke point for stopping the spread of invasive carp, which are currently only held back by unreliable electrical barriers near Romeoville.
Joel Brammeier, CEO of the Alliance for the Great Lakes, warned that delaying the project puts both the environment and economy at risk. “Any delay or halt of construction threatens the economy and environment… and opens the door to yet another invasive species doing irreversible damage to the Great Lakes,” Brammeier said.
Michigan officials echoed similar concerns. Scott Bowen, director of the Michigan Department of Natural Resources, emphasized the importance of moving forward without delay. “It is imperative that the work at Brandon Road continue in order to protect the Great Lakes commercial and recreational fishery, which is valued at $7 billion annually and supports more than 75,000 jobs,” Bowen stated.
The Army Corps awarded the first construction contract in December for $15.5 million to Miami Marine Services, in partnership with Milwaukee-based Michels Construction Inc., to begin riverbed rock removal at Brandon Road. Illinois and Michigan had previously signed a partnership agreement with the Army Corps, unlocking $226 million in federal funds and $114 million in state funds for phase one.
Work at the lock and dam has already led to weekday closures since January 28, which will continue through March 25 to minimize disruptions to navigation. The project involves installing a series of deterrent technologies, including:
- Bubble barriers to remove small fish trapped under barges
- Acoustic deterrents emitting sound waves to repel carp
- Electric barriers for additional protection
- A flushing lock system to push any remaining carp larvae and eggs downstream
Silver and bighead carp, originally introduced in the U.S. in the 1960s for aquatic vegetation control, escaped into the Mississippi River basin after severe flooding in the 1980s and 1990s. Since then, they have spread to 31 states, outcompeting native species due to their rapid reproduction and lack of natural predators.
Their feeding habits make them difficult to catch using traditional fishing methods, and their tendency to leap when startled by boat motors poses risks to recreational boaters. If they reach the Great Lakes, they could disrupt ecosystems and threaten billions in tourism revenue.
As Illinois awaits a federal funding commitment, work at Brandon Road will continue on a limited basis. However, full-scale construction remains on hold until the Trump administration provides clarity on funding obligations. Without decisive action, the long-term battle against invasive carp remains uncertain—posing ongoing risks to both the economy and ecosystems of the Great Lakes region.
Illinois Expands EV Incentives Amid Federal Uncertainty
As uncertainty looms over the future of federal electric vehicle (EV) tax credits under the Trump administration, Illinois is charging ahead with a new round of state incentives, offering $4,000 per vehicle to encourage EV adoption.
Incentives play a crucial role in persuading traditional car buyers to switch to EVs, particularly as demand moves beyond early adopters. While EV sales nationwide grew by 7% last year—down from a 49% surge the previous year—analysts still see incentives as a key factor in sustaining market growth.
“They’re icing on the cake compared to the federal incentive,” said John Crane, CEO of Hawk Auto Group, which operates 11 dealerships with 15 brands in the Chicago area including Joliet. “A lot of these cars that are priced at $60,000 have almost 20% incentives when you combine state, federal, and manufacturer rebates. Each one is a key component.”
However, concerns over potential cuts to the $7,500 federal tax credit remain. “If it dropped to $3,750, that could increase monthly payments by about $100,” Crane noted. “If manufacturers don’t make up the difference with additional incentives, that directly affects affordability. People buy cars based on their monthly payments, and if it’s too high, they won’t make the switch.”
Illinois’ EV incentive program was established under the Climate & Equitable Jobs Act in 2021, predating the federal incentives introduced in the Inflation Reduction Act of 2022. The state allocates a limited amount of funding for rebates each fiscal year within a set application window.
For 2024, Illinois has earmarked $14 million for EV rebates—enough to support approximately 3,500 vehicles at $4,000 each. A $1,500 rebate is also available for e-motorcycles, with applications open through April 30. Additionally, ComEd has allocated nearly $9 million to provide rebates of up to $3,750 for residential EV chargers.
EV adoption in Illinois is steadily growing. As of mid-January, there were 126,321 EVs on the state’s roads, marking a 35% increase from the previous year. Governor JB Pritzker has set an ambitious goal of reaching 1 million EVs by 2030.
Meanwhile, national EV sales showed renewed momentum, growing by 15% in the fourth quarter—double the rate of growth seen over the full year, according to Kelley Blue Book. Crane also reported above-average EV sales at his dealerships in December, suggesting a continued interest in EV adoption despite federal uncertainty.
As Illinois pushes forward with its EV incentives, the question remains whether federal support will continue or diminish. For now, state-level incentives are proving essential in keeping the transition to electric vehicles on track.
Judge Expands Injunction on Illinois ‘Swipe Fee’ Law to Out-of-State Banks, Excludes Credit Unions
A federal judge has expanded an injunction against Illinois’ new “swipe fee” law to include out-of-state banks but declined to extend it to credit unions, marking a significant legal development in the ongoing dispute over the legislation.
The Interchange Fee Prohibition Act, passed last spring as part of Illinois’ state budget package, is the first law of its kind in the nation. It bans credit and debit card companies from charging processing fees on the tax and tip portions of transactions, starting July 1. The fees will still apply to the price of goods and services.
Retailers argue the law will bring much-needed relief from hidden processing fees, while banks and credit card companies contend it imposes costly and impractical compliance burdens.
Banking groups filed a lawsuit in August, claiming the law conflicts with federal banking regulations and forces financial institutions to implement expensive system changes to separate transaction fees from tax and tip amounts.
In December, Judge Virginia Kendall of the Northern District of Illinois issued a preliminary injunction blocking the law from applying to federally chartered banks, citing concerns that state laws cannot override federal banking regulations. However, she declined to extend the injunction to state-chartered banks or credit card companies at that time.
On Thursday, Judge Kendall expanded the injunction to out-of-state banks operating in Illinois, agreeing with their argument that federal law preempts state regulations in their case. However, she declined to extend the injunction to credit unions, meaning they remain subject to the new law when it takes effect in July.
Retailers, who pushed for the law as part of a budget negotiation deal, celebrated the ruling as a step toward holding credit card companies accountable. “This ruling ensures that credit card companies and processors must comply with the law,” said Rob Karr, CEO of the Illinois Retail Merchants Association (IRMA). “By limiting swipe fees on tax and tip portions, Illinois will provide real relief to consumers and businesses suffering under the opaque swipe fee system.”
Meanwhile, banking groups condemned the ruling, arguing it will disrupt the payments system and create widespread confusion. “This ruling highlights the fundamental flaws of this misguided state law,” said Ben Jackson of the Illinois Bankers Association and Ashley Sharp of the Illinois Credit Union League in a joint statement. “We will continue to fight to protect consumers, businesses, and financial institutions from the chaos this law will cause.”
The swipe fee ban was part of a broader budget deal struck between state lawmakers and retailers last spring. As part of that deal: Lawmakers capped a monthly sales tax deduction for retailers at $1,000, generating $101 million in state revenue to close a budget gap. In return, at the request of IRMA, lawmakers passed the ban on swipe fees for taxes and tips.
What’s Next? The case remains unresolved as the legal battle continues. IRMA’s request to formally intervene in the lawsuit was denied last month. The next hearing in the case is set for March 6 in Chicago. For now, the injunction shields federally chartered banks and out-of-state banks from the law, but state banks, credit unions, and card companies remain subject to it unless further legal action changes the outcome.
Congress Reintroduces Main Street Tax Certainty Act
Congress has reintroduced legislation to make the 20% Small Business Deduction permanent and stop a massive tax hike on small business at the end of this year. This is a federal level top advocacy priority.
On Jan. 23, Sen. Steve Daines (MT) and Rep. Lloyd Smucker (PA-11) reintroduced the Main Street Tax Certainty Act, which would stop a massive tax hike on Main Street scheduled to happen at the end of this year.
The 20% Small Business Deduction was created as a part of the 2017 tax law to level the playing field between small businesses and larger corporations. If Congress fails to act, taxes will increase on over 30 million small businesses at the end of 2025.
An economic impact report conducted by EY (Ernst & Young) found that permanently extending the deduction would create 1.2 million new jobs each year for the first ten years and 2.4 million annually every year thereafter. It would also result in a $750 billion GDP increase in the small business sector over the first ten years and a $150 billion increase annually after that.
Beneficial Ownership: Supreme Court Decision, Congress Introduces Bill to Repeal
Small businesses still do not have to report as of right now. Although the Supreme Court granted the government’s motion to reinstate beneficial ownership reporting, another federal judge blocked the rule. While this litigation is ongoing businesses are not currently required to file beneficial ownership information with FinCEN. Meanwhile, the U.S. Senate and House have reintroduced legislation to permanently relieve small businesses of the reporting requirements.
“The Supreme Court’s decision is a setback for small business. Hopefully, Treasury recognizes the chaos that will ensue by requiring 32 million small businesses to imminently file their BOI information while the constitutionality of the reporting requirements is determined,” said Beth Milito, Vice President and Executive Director of NFIB’s Small Business Legal Center.”
Repealing the CTA will end the burdensome beneficial ownership requirements for more than 32 million small businesses and protect their privacy. Sen. Tommy Tuberville (AL) and Rep. Warren Davidson (OH-08) reintroduced legislation to repeal the CTA on Jan. 15.
This is a step in the right direction for small business amidst the disappointing Supreme Court decision. Our hope is that Congress can pass the legislation that would repeal the CTA and permanently relieve small businesses of the beneficial ownership requirements.
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
[email protected]
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