“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
Black Friday is back but it’s not what it used to be. U.S. shoppers returned to physical stores over the Thanksgiving holiday weekend, the first one in years in which online retail sales didn’t increase from the prior year. The rebound marks a reversal from 2020, when the pandemic accelerated a years’ long shift of holiday spending occurring online at the expense of in-store shopping. It also shows retailers were able to secure spending on the key Black Friday selling day, analysts say, even though discounts weren’t as prevalent this year and they spent weeks nudging customers to shop earlier in the season.
The country’s largest mall, the Mall of America in Bloomington, Minnesota, said nearly 100,000 people had come as of early afternoon Friday, more than double last year but a bit shy of 2019 numbers. The staffing issues that have hit many retailers and restaurants, however, also affected Mall of America. It had to trim the hours it was open.
Still, Black Friday retail sales surged 29.8% through mid-afternoon, according to Mastercard SpendingPulse, which tracks all types of payments, including cash and credit cards. That was above its 20% growth forecast for the day. Steve Sadove, senior adviser for Mastercard, says the numbers speak to the “strength of the consumer.”
Overall holiday sales are expected to grow this year. The National Retail Federation predicts a sales increase of 8.5% to 10.5% for all of November and December, after 8% growth in those months in 2020.
*Government Affairs Roundup brought to you by Silver Cross Hospital*
Government Funding
Funding runs dry Friday, though no one expects a shutdown. With a new bipartisan appropriations agreement still a way off, lawmakers will need to pass a stopgap. We’re told Senate Democratic leaders are coalescing around a proposal to extend funding into late January or February, though some of their House counterparts were pushing for a shorter time frame. Republicans, meanwhile, had been eyeing March, so there are still negotiations to do here.
No deal in sight as Congress nears debt limit deadline
Congress is only a couple of weeks away from hitting the Dec. 15 deadline to raise the federal debt limit, and Senate Majority Leader Charles Schumer (D-N.Y.) and Minority Leader Mitch McConnell (R-Ky.) don’t appear to be anywhere close to a deal.
Democrats insist that Schumer will not burn up a week of Senate floor time to use the budget reconciliation process to raise the debt limit with only Democratic votes. Republicans say there’s no way that McConnell will be able to round up 10 Republican votes to quash an expected filibuster from conservatives such as Sen. Ted Cruz (R-Texas) and allow Democrats to pass debt limit legislation with a simple majority under regular order.
At the same time, both leaders want to avoid another standoff that could threaten the nation’s credit rating and have stepped back from the combative rhetoric they were using in September and early October. McConnell walked over to Schumer’s office on Nov. 18 for their first in-person sit-down meeting since Democrats took over the Senate in January. Afterward he told reporters: “We agree to kind of keep talking, working together to try to get somewhere.” But the big problem, according to senators and Senate aides, is that there aren’t any easy ways forward.
Sen. Pat Toomey (R-Pa.) has proposed that Democrats use the budget reconciliation process to raise the debt limit, in which case Republicans would “yield back time and not drag it out” so that it could be done in a few days. The problem with this option is that it would require two long series of votes on amendments — known as vote-a-ramas — to first amend the 2022 budget resolution to establish a new reconciliation instruction and then to pass the vehicle that would raise the debt limit. Expediting the process or skipping one or both of the vote-a-ramas would require getting unanimous consent from all 100 senators.
Another option would be for McConnell to let Democrats advance long-term legislation under regular order but insist the measure raise the debt limit to a specific number instead of merely postpone it until after the 2022 midterm elections. A big reason Republicans want Schumer to use the budget reconciliation process is that it would force vulnerable Democrats such as Sens. Raphael Warnock (Ga.) and Mark Kelly (Ariz.) to vote on a higher debt number instead of a suspension of the debt ceiling to a later date.
The benefit to Schumer is that it would allow him to avoid using the time-consuming budget reconciliation process and it would fulfill his demand that the debt limit be raised on a bipartisan basis because Republicans would have to agree to let the Senate proceed to a final up-or-down vote. The potential pitfall with this second option is that Cruz, Paul or Lee — or any other conservative — could object to a request to let the debt limit bill proceed to final passage. That means it would fall to McConnell again to round up 10 GOP votes to get the measure over a 60-vote procedural threshold.
When 11 Republican senators, including McConnell, did so in October, it prompted an angry backlash, including from former President Trump, who accused Senate GOP leaders of giving up leverage to stop President Biden’s agenda.
A third option would be for Schumer to agree to some spending reforms as part of a deal to raise the debt limit but Democrats have made clear since the 2011 debt limit standoff and the impasse over the 2012 “fiscal cliff” that they will not use the debt limit as a bargaining chip in spending negotiations.
Democrats note that the spending reforms were agreed to in the 2011 Budget Control Act were preceded by months of negotiations. It’s very hard to imagine Democrats suddenly agreeing to spending reforms in the next few weeks.
This opens the possibility that McConnell might agree to another short-term debt limit extension if Democrats promise to enter into longer-term negotiations on deficit reduction beginning in 2022.
The impasse is fueling predictions within the Senate that Treasury Secretary Janet Yellen will find a way to push the deadline for increasing the nation’s borrowing authority until January or February. A senior Senate Republican aide also predicted that Yellen would be able to keep the U.S. government solvent to give Schumer and McConnell more time to work out a deal. If the Treasury Department is unable to come up with additional “extraordinary measures” to keep the government funded past mid-December, it could eat up at least a week of floor time as lawmakers scramble to avoid the threat of a national default.
Judge halts Biden vaccine mandate for health workers in 10 states
A federal court on Monday temporarily halted the Biden administration’s COVID-19 vaccine mandate for health workers at hospitals that receive federal funding. The ruling by a Missouri-based federal judge applies to health care employees in the 10 states that sued to block the administration’s Nov. 5 rule. Those states are Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota and Wyoming. U.S. District Judge Matthew Schelp, a Trump appointee, appeared persuaded by the states’ argument that the mandate would lead to staffing shortages.
“The scale falls clearly in favor of healthcare facilities operating with some unvaccinated employees, staff, trainees, students, volunteers and contractors, rather than the swift, irremediable impact of requiring healthcare facilities to choose between two undesirable choices — providing substandard care or providing no healthcare at all,” Schelp wrote in a 32-page order.
The ruling handed a temporary win — while the case proceeds — to vaccine-opposed workers at health care facilities that receive Medicaid or Medicaid funding in the 10 states. The state challengers sued in federal court just days after an agency of the Department of Health and Human Services put their vaccine rule in place. The states argued that the mandate encroaches on states’ rights and exceeds the agency’s authority, and that its enactment failed to follow proper procedures.
The Biden administration has argued that the rule is necessary to slow the spread of COVID-19 among millions of health care workers and Medicare and Medicaid patients.
Five ways Senate could change Biden’s spending plan
President Biden’s climate and social spending plan is facing an overhaul in the Senate, where Democrats are splitting with their House counterparts on key provisions. Though House Democrats stress that they are in agreement on large parts of the bill, Senate Democrats aren’t being shy about outlining how they plan to change the bill once it comes up.
“There are going to be some changes,” Sen. Jon Tester (D-Mont.) told NBC’s “Meet the Press” after the House passed the bill. Any changes in the Senate will force the bill to go back to the House, where they’ll have to decide if they can live with the updated draft.
In addition to policy splits between House and Senate Democrats, details of the bill also need to pass muster with the Senate parliamentarian. And Republicans are able to force amendment votes during a chaotic floor debate where they could get changes into the bill if they are able to peel off one Democratic senator.
Here are five areas where the Senate is expected to make changes to the bill:
Medicare
Progressives are hoping to broaden Medicare’s expansion once the spending bill comes to the Senate floor. The House bill expands Medicare to cover hearing benefits. But that falls short of the broader expansion initially envisioned by the Biden administration, which wanted to expand Medicare to cover hearing, vision and dental.
Biden acknowledged that expanding Medicare to cover all three would be a “reach,” and Democrats initially discussed scaling down the dental coverage to a voucher program to offset costs before dropping the idea altogether. But Senate Budget Committee Chairman Bernie Sanders (I-Vt.) indicated he would try to get vision and dental back into the bill, saying that “the American people overwhelmingly demand that we expand Medicare to cover dental, eyeglasses and hearing aids. That’s what we must do.”
Sanders could force an amendment vote on adding the broader expansion into the Senate bill, but he’s likely to face pushback within his own caucus from Democrats who have raised concerns about the price tag.
Democrats are also facing challenges to their plan to let Medicare negotiate prices for certain drugs. Senate Majority Leader Charles Schumer (D-N.Y.) announced earlier this month they had reached a deal to allow Medicare to negotiate drug prices in limited instances, prevent drug companies from raising prices faster than inflation and cap out-of-pocket costs for seniors on Medicare at $2,000 per year. But Republicans are planning to challenge part of the deal with the Senate parliamentarian, an unelected referee who provides guidance on whether legislative text complies with the strict rules on what can be passed under budget reconciliation.
Paid leave
The House included roughly $200 billion for four weeks of paid family and medical leave starting in 2024 in the bill it passed earlier this month, which Democrats view as a necessary first step because the United States is one of the few developed countries to not prove paid leave. But the program faces challenges in the Senate, where Sen. Joe Manchin (D-W.Va.) has pushed back over its inclusion, arguing Congress should work on a bipartisan bill separate from the Democratic spending package.
Even as Manchin has appeared unmoved, Sen. Kirsten Gillibrand (D-N.Y.) told CBS’s “Face the Nation” that she and Manchin are still talking and that “Joe Manchin has come a long way on paid leave.” Manchin has previously floated a paid leave program that could be funded through a payroll tax split between the employer and employee. But he’s also suggested that a program structured that way wouldn’t comply with Senate rules, though aides and Gillibrand have both pushed back.
SALT
House and Senate Democrats are also split over how to tackle making changes to the state and local tax (SALT) deduction cap. The climate and social spending bill passed by the House includes language to raise the cap from $10,000 to $80,000 through 2030. The cap would then revert back to $10,000 in 2031.
Sanders and Sen. Bob Menendez (D-N.J.) are pitching a different strategy: keeping the $10,000 limit in place but exempting those who make under $400,000. Menendez, in a recent interview with NPR, argued that their proposal was “better” than the House version because it prevented millionaires and billionaires from getting a higher SALT deduction.
“Number one, it’s revenue-neutral, meaning it won’t cost a penny to the federal Treasury. It will allow full deductibility to middle-class working families,” Menendez said.
Immigration
The House legislation includes a provision that grants 6.5 million foreign nationals a temporary parole status that would give them five-year work and travel permits. But that’s narrower than offering permanent residency, which would pave the way toward citizenship. Senate Democrats previously pitched the Senate parliamentarian on two plans that would provide permanent residency to millions of immigrants, but they were rejected for not complying with the rules for what can be included in legislation passed under reconciliation.
Still, House Democrats and some immigration groups are urging Senate Democrats to add the broader policy back into the legislation when it hits the Senate floor. Nearly half of the House Democratic Caucus signed on to a letter urging their counterparts to add a pathway to citizenship in the bill, arguing the “role of the Parliamentarian is an advisory one, and the Parliamentarian’s opinion is not binding.”
Senate Democrats don’t have the votes to formally overturn the parliamentarian, but advocates instead are urging them to put someone in the chair who would ignore the parliamentarian. Senate Democrats could also try to add the immigration language back into the bill as an amendment, but that would likely fall short.
The parliamentarian also hasn’t yet issued guidance on the parole language in the House bill, setting up the prospect that Democrats could still get another blow on the House-passed immigration provisions.
Climate
Senate Democrats have already jettisoned some climate proposals because they didn’t unite the entire conference, including a carbon tax and a key program meant to incentivize companies to transition to clean energy. But the climate provisions of the bill could face further cuts as Democrats try to win over Manchin, who comes from a leading coal-producing state and has sway as the Senate Energy Committee chairman.
Democrats are hoping to get Manchin’s support for a methane emission fee after it cleared the House intact. Sen. Tom Carper (D-Del.), who chairs the Senate Environment and Public Works Committee, noted that they had received input from Manchin, who has voiced concerns about a methane fee, and others and hoped it “finds favor” once on the floor where Republicans could try to peel off Manchin to strip it from the bill or water it down.
A separate electric vehicle (EV) tax credit is also facing pushback from Manchin because it includes a larger tax credit for consumers who purchase union-made electric vehicles. The EV tax credit has strong supporters in the Senate, including Michigan Sens. Gary Peters (D) and Debbie Stabenow, who is the No. 4 Senate Democrat.
Democrats are hoping to work out a compromise with Manchin, who announced his opposition while at a Toyota event in his home state earlier this month.
Illinois budget allows Gov. J.B. Pritzker to spend billions in federal COVID-19 aid without legislative input
During the brief debate over a $42 billion state spending plan introduced in the closing hours of this year’s spring session, the Illinois legislature’s Democratic majority outlined less than $3 billion in spending in the coming year from a massive infusion of federal coronavirus relief money.
With the state in line to receive $8.1 billion from President Joe Biden’s American Rescue Plan, Democrats said they wanted to spend the money judiciously and avoid creating programs that would continue to demand funding after the one-time federal cash influx was gone. They said this year’s plan for the relief money called for $1 billion in infrastructure spending, with the remainder going to items such as hospitals, violence prevention, and tourism and business recovery.
Left unmentioned as lawmakers were approving the budget, however, was the creation of a state fund that gives Gov. J.B. Pritzker authority to spend billions of dollars from the federal aid without first getting approval from lawmakers.
In the end, the state’s spending plan for the budget year that began July 1 counts on using at least another $2 billion from the pandemic relief funds to make up for “lost revenues,” leaving less than $3.6 billion to budget out over the next three years. The Pritzker administration says the governor is allowed to unilaterally dip into the large pool of money under federal rules that weren’t yet finalized as lawmakers were approving the budget.
Using the funds this way also is necessary in efforts to put the state’s finances on a stable long-term trajectory as Illinois emerges from the pandemic, the administration says, noting that its financial maneuvers have led to credit upgrades from two Wall Street ratings agencies and an improved outlook from a third.
Allowing the governor to tap into the money without an appropriation by lawmakers ensured “flexibility for the state to adapt to the rules as understanding of them evolved over the course of the year,” Pritzker spokeswoman Jordan Abudayyeh said. But members of the General Assembly’s Republican minority are calling for greater transparency and more input from lawmakers on how the money is spent.
After the Democrats’ final budget plan was introduced May 31, there was no discussion in committee or on the House floor about creating a fund that would allow Pritzker to spend a portion of the federal money without an appropriation from the legislature, said state Rep. Tom Demmer of Dixon, a lead budget negotiator for the House GOP. Neither was the provision mentioned in an even briefer debate before the Senate voted on the budget package in the early morning hours of June 1.
When budgets are introduced just hours before a final vote, “you don’t see this kind of thing,” Demmer said. “And it turns out, they create this fund that really gives the governor authority to make multibillion-dollar decisions without any notification or input from the General Assembly.” Lawmakers aren’t scheduled to return to Springfield until after the new year, and Democrats seldom need Republican votes to pass legislation. But Demmer has introduced a proposal that would require the governor to inform legislative leaders in both parties before he spends money from the special fund and ultimately get approval from lawmakers for any outlay. The money would have to be repaid from the general fund if legislators don’t approve.
Pritzker’s plans for the additional $2 billion in spending were easy to overlook.
A June 21 document from the governor’s budget office breaks down $2.8 billion in COVID-19 relief spending in the current year makes but no mention of the other money. Neither does the administration’s initial August report to the federal government on the state’s recovery plan.
“These reports focused on identified projects that will be funded by state fiscal recovery funds while other amounts are still preliminary,” Abudayyeh said in an emailed response to questions. “Additional reporting on expenditures of revenue replacement dollars will be provided to U.S. Treasury pursuant to their reporting requirements which are still evolving.”
There was a mention of “$2-$3 billion to replace lost revenues to the state to fund essential government services” in a news release from the governor’s office the day he enacted the spending plan. The governor’s budget office also provides monthly reports on spending of the federal relief funds to the Legislative Budget Oversight Commission and testifies before the bipartisan panel quarterly.
Using a Treasury Department formula that takes into account pre-pandemic growth, the governor’s office determined the state revenues were roughly $3 billion less in 2020 than they would have been absent the coronavirus-induced slowdown, Abudayyeh said. The federal rules permit the state to use the relief money to make up for that lost revenue, as long as it’s spent on government services that are allowed in the American Rescue Plan.
States can’t use the relief money to pay off most debts or make deposits into pension plans — both major drawbacks for chronically cash-strapped Illinois. But budgeting $2 billion in coronavirus aid to cover allowable expenses essentially frees up that much cash to pay down debts for which the federal funds can’t be used.
As a result, the state expects to be able repay $1 billion remaining from the $3.2 billion it borrowed from a special Federal Reserve program designed to help governments weather the pandemic and more $900 million borrowed from other accounts within the state treasury. Those moves will increase overall expenditures from the state’s general fund this year to $44 billion.
Demmer said that without the additional $2 billion from the federal pot, Democrats would’ve had to either reduce spending in other areas or hold off on repaying debts. “It seems like it could be a shell game to cover the borrowing because without that, it doesn’t work,” Demmer said. But from the perspective of ratings agencies that grade the state’s creditworthiness, that’s an acceptable use of the relief money.
“With this initial allocation, the state appears to have avoided the use of (American Rescue Plan Act) aid for any material ongoing program costs in this budget,” Fitch Ratings wrote in a note last week. Fitch is the one major ratings agency that has not upgraded the state this year. It has maintained its rating of the state’s credit at one notch above junk bond status, noting that yawning gaps in pension funding and other structural issues remain. Despite those challenges, Fitch also maintains a positive outlook for the state’s finances.
The firm gave Pritzker high marks for planning to use a projected surplus in the current year to help pay down the state’s bill backlog and shore up its rainy-day fund, cautioning that revenue estimates, while “realistic,” are “subject to pandemic-driven uncertainty.” As for its spending plans for the federal aid, Fitch wrote that lawmakers “focused on one-time investments rather than recurring operating needs,” adding that the firm “will carefully assess the state’s plans” for the remaining funds.
As of Tuesday, Pritzker had directed $500 million in federal relief money to the special fund under his authority. Of that, nearly $144 million had been spent to reimburse the state’s general fund “for operational costs of Department of Corrections and Department of Juvenile Justice” during the previous budget year, Abudayyeh said.
Senator Connor seeks small businesses to feature ahead of the holidays
In an effort to support and promote small businesses ahead of the holiday season, State Senator John Connor (D-Lockport) is launching a social media campaign to feature local small businesses. “Small businesses bring so much life to our communities,” Connor said. “Through the challenges of the pandemic, they worked to provide necessary services to keep our economy running.”
Connor encourages small business owners interested in being featured on his social media pages to provide information about their businesses by filling out the form found here. Businesses invited to participate include restaurants, retail shops and businesses that provide personal services, like spas and salons.
“As we enter the holiday season, I hope residents will remember to shop small,” Connor said. “Now more than ever, supporting our small businesses is vital. Please join me in helping our local businesses get back on their feet.”
Questions can be directed to Senator Connor’s Crest Hill office by calling 815-207-4445 or visiting SenatorConnor.com.
Stay well,
Mike Paone
Vice President – Government Affairs
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct