December 13, 2011

This Week In Springfield, the Illinois General Assembly briefly returned to address the lingering income tax relief package not finalized before Thanksgiving.

INCOME TAX RELIEF

TWIS readers will recall that during the second week of the Fall Veto Session, the Senate passed an income tax relief proposal. That proposal failed in the House for numerous reasons expressed by both Democrats and Republicans. At that time, the leaders announced their intent to negotiate a compromise and return for final action. This week, the Assembly returned to consider the proposal negotiated by the legislative leaders and their surrogates. The initial proposal that failed during the regularly scheduled Veto Session was one bill. The proposal considered this week, was broken into two proposals.

The first component was S.B. 397 (Sen. Toi Hutchinson, D- Chicago Heights/Rep. John Bradley, D- Marion). S.B. 397 contained corporate income tax relief provisions including: (1) an increase in the exemption on the inheritance tax deduction from $2 million to $3.5 million for anyone dying on or after January 1, 2012 and before January 1, 2013 and to $4 million for anyone dying on or after January 1, 2013; (2) reinstatement of the Net Operating Loss (NOL) beginning January 1, 2012 with a cap of $100,000; and (3) a five year extension on the expiration or sunset of every exemption, credit and deduction set to expire in 2011, 2012, or 2013.

In addition to the noteworthy items listed above, S.B. 397 also contained an EDGE tax credit for Sears Holding Corporation and Champion Laboratories and a change in the income apportionment rate for the Chicago Mercantile Exchange (CME). In all cases, these proposals were necessary to keep these entities in Illinois in the face of aggressive and, in most cases, more generous offers from other states.

S.B. 397 as amended by House Amendments 3 and 7 passed the House 81-28-7 and the Senate 44-9.

The second component of the tax relief package was contained in S.B. 400 (Sen. Toi Hutchinson, D- Chicago Heights/Rep. Barbara Flynn Currie, D- Chicago). S.B. 400 contained an increase in the personal exemption from $2,000 to $2,050 in 2013. From 2014 on, the personal exemption is increased by a cost-of-living adjustment. This adjustment is determined by the rate of inflation as determined annually in the Consumer Price Index (CPI). S.B. 400 also contained an increase in the Earned Income Tax Credit (EITC) from the current 5 percent to 7.5 percent in 2012 and to 10 percent for tax years beginning on or after January 1, 2013.

As with its counterpart, S.B. 400 as amended by House Amendments 1 and 2 passed the House 67-49 and the Senate 48-4.

On behalf of the entire Illinois retail community, IRMA would like to thank all those involved in the successful passage of this proposal. House Revenue & Finance Committee Chairman John Bradley (D- Marion), House Majority Leader Barbara Flynn Currie (D- Chicago), House Republican Leader Tom Cross (R- Oswego), Republican Spokesman on the House Revenue & Finance Committee David Harris (R-Arlington Heights), Senate Revenue Committee Chairman Toi Hutchinson (D- Chicago Heights), Senate Republican Leader Christine Radogno (R- Lemont), and Senate President John Cullerton (D- Chicago)for their diligence and effort throughout the process. Additionally, IRMA would like to thank Governor Pat Quinn for his leadership and every member of the Assembly who supported the proposal. Speaker of the House Michael Madigan (D- Chicago) declared a conflict early in the process, removed him from this process, and directed Rep. Bradley to conduct negotiations.

SCHEDULE

The Assembly has now adjourned for the holidays. It is scheduled to return January 31, 2012 when the Second Spring Session of the 97^th Illinois General Assembly will begin in earnest.

Rob Karr
Vice President
Government & Member Relations
rkarr@irma.org

November 30, 2011

This Week In Springfield the Assembly returned to action Tuesday to undertake consideration of unfinished business from the Fall Veto Session. Consideration of a tax relief package, the ever-present Tenaska proposal, and reconfiguring the State budget to keep seven State facilities open through the remainder of the State’s fiscal year, dominated the agenda.

TAX RELIEF PACKAGE

Over the course of the last several weeks, negotiations have been taking place on a tax relief package intended to soften the blow of the income tax increases passed in 2010 and effective on January 1^st of this year. Illinois increased the income tax from 4.8% to 7% (9.5% when the Corporate Personal Property Replacement Tax is included) on corporations and from 3% to 5% on individuals. This week, the Senate passed H.B. 1883 (Rep. John Bradley, D- Marion, Sen. Toi Hutchinson, D- Chicago Heights) on a bi-partisan roll call of 36-18-1. H.B. 1883 would have extended the sunset on all credits and exemptions in the income tax code for five years (including research and development and ethanol); increased the Earned Income Tax Credit (EITC) from the current 5% to 7.5% in 2012 and to 10% in 2013; increased the personal exemption from $2,000 to $2,050 and then increased it annually by the rate of inflation; increased the exemption of the inheritance tax from the current $2 million to $3 million in 2012 and $3.5 million in 2013; reinstated the Net Operating Loss (NOL) deduction but capped it at $100,000; and created a new tax exemption for live theater shows but capped the maximum exemption at $2 million. In addition to the above, H.B. 1883 contained proposals changing an apportionment election to keep the Chicago Mercantile Exchange (CME) in Chicago and extended the Economic Development Area encompassing the Hoffman Estates headquarters of Sears Holding Corporation to ensure they remain in Illinois despite substantially more generous offers from other states. In both cases, negotiators tied specific job creation/retention thresholds to the company-specific incentives and inserted ‘claw-back’ provisions should those thresholds not be met.

While the tendency is to focus on the portions of the proposal related to CME or Sears, the truth is there are benefits in this package for businesses of all sizes as well as their customers. For all businesses, the reinstatement of the NOL and the extension of the tax credits and exemptions for five years provide a level of certainty enabling more effective tax planning. For smaller businesses, in addition to the NOL, the increase in the inheritance tax exemption is beneficial. For consumers, particularly in areas outside of the greater Chicago metropolitan area, the retention of the ethanol and biodiesel tax credit is important. Likewise, the EITC and the increase in the personal exemption attempt to preserve the buying power of customers.

In the House, H.B. 1883 was soundly rejected receiving only eight votes. It should be noted that the House had previously been poised to consider a slightly less generous tax relief package. After the defeat in the House of H.B. 1883, negotiators announced their intent to continue to meet and, if a deal is reached, the Assembly will immediately return to undertake consideration.

Time is of the essence as employers who lost money in 2010 do not have the ability under existing law to write off those losses. At the same time, they are subject to the higher income tax making it even more difficult on them to remain in business, retain employees, or both. While some believe neither the CME nor Sears will leave, it is well known that Sears in particular has extremely generous offers from other states. They are making every effort to remain in Illinois as it has been their home for 124 years and they do not want to displace their 6,000+ employees. On the other side, they have a fiduciary responsibility to their shareholders to give the company the best possible chance at success. No one knows exactly when the proverbial bell will toll but the time is certainly near.

TENASKA

TWIS readers will recall that Tenaska, an out-of-state energy firm looking for a guaranteed return on investment of over 10% on experimental technology has been voted on in the Senate three times previously. In short, Illinoisans, but particularly commercial and industrial electric consumers, will be required to pay over $280 million per year in higher electric costs to guarantee Tenaska’s rate-of-return. Residential customers are largely protected as their increases are capped at 2%. This annual rate of return is guaranteed for 30 years meaning Illinois businesses will pay more than $8 billion in artificially higher electric costs over the life of Tenaska’s subsidy. This substantial cost comes on top of the recent income tax increase and despite the fact that a similar project in Indiana is currently $1.2 billion over budget. To make matters worse, Future Gen 2.0, another alternative energy project, has watched the Tenaska issue and is now allegedly preparing their own similar proposal.

After being defeated three times in the Illinois Senate, the Tenaska proposal, contained in S.B. 678 (Sen. John Cullerton, D- Chicago) finally passed yesterday with the bare minimum 30-votes required for passage. IRMA would like to thank the 28 senators who voted against the legislation.

IRMA did successfully fend off a last-minute amendment which would have allowed the Illinois Commerce Commission (ICC) to ignore the “cost of service” doctrine and have one customer class subsidize another. For example, the ICC could have chosen to hold schools harmless and put their share of the Tenaska increase on retailers and manufacturers. Alternatively, the ICC could have chosen to hold industrial users harmless and shift their costs to the commercial class meaning the commercial class would pay the cost of residential payers, industrial payers, and their own costs. IRMA President David F. Vite testified against the amendment. After making a persuasive case, the amendment was withdrawn.

The fight now shifts to the House. The House has previously passed the Tenaska proposal on two separate occasions. Nevertheless, the environment has changed since they first considered it and IRMA is hopeful that realization as well as the additional facts that the prolonged debate in the Senate generated will serve to change minds. In the meantime, IRMA members are strongly encouraged to begin contacting their State Representatives and urging them to vote “No” on S.B. 678 if it comes before the Illinois House.

CONTACT INFORMATION:

Rob Karr
Senior Vice President
Government & Member Relations
rkarr@irma.org

November 11, 2011

This Week In Springfield, the Veto Session did not conclude as was widely anticipated. A few large issues are still to be decided including possible income tax reform and a potential expansion of gambling. The Assembly is scheduled to return on Tuesday, November 29^th for one day.

UNEMPLOYMENT
CORPORATE INCOME TAXES
TENASKA
SCHEDULE

UNEMPLOYMENT INSURANCE

Due to the unforeseen depth and intensity of the economic recession, Illinois’ Unemployment Insurance Trust Fund finds itself approximately $2.5 billion in debt. The State had to borrow from the Federal Government to cover the debt meaning they will owe the Federal Government substantial interest payments starting January 1, 2012. While this situation is not unique to Illinois, policy makers recognized the need to address the situation quickly. Failure to do so by January 1^st, would have had substantial negative financial impact on Illinois employers and the State.

In order to try and address the financial impact on employers and return the Trust Fund to solvency, Governor Pat Quinn convened an ‘agreed bill’ process in late August. An ‘agreed bill’ process entails the Governor’s Office bringing together representatives of the Illinois employer community and organized labor, the stakeholders in the unemployment insurance system, to attempt to negotiate an amendment to the existing law which address the Trust Fund deficit, ensures laid off workers are paid, and returns the Trust Fund to solvency. The negotiations were overseen by the Governors’ Office and two representatives from each of the four legislative caucuses. IRMA President David F. Vite was the lead negotiator for the employers.

If no changes were made to the existing law, the following would have taken place:

the State of Illinois would have had to pay $240 million in General Revenue Funds (GRF) to the Federal Government to pay interest on the Trust Fund debt from Fiscal Year 2012 thru Fiscal Year 2017;

financial penalties would have been imposed on all employers, even those who have not laid anyone off in the last three years, and these penalties would have continued to increase ultimately costing Illinois employers $1.2 billion;

no reforms would have been instituted;

laid off workers would have experienced a one-week reduction – 25 weeks from 26 – in 2012 although they would have received 26 weeks again in 2013;

there would have been no ‘rest stops’ (i.e. financial penalties on labor and employers to force them back to the negotiating table to re-evaluate the system).

House Amendments #4 and #5 to S.B. 72 (Sen. Terry Link, D- Lake Bluff/Rep. Frank Mautino, D- Peru) contained the agreement concluded between employers and unions. S.B. 72 accomplished the following:

Illinois employers pay over $400 million less than they would have if no changes were made to the existing law;

Nearly half of Illinois employers’ (48%) will see a significant reduction (17% in 2012 and 25% in 2013) in their unemployment insurance taxes as they have not laid off an employee;

$240 million in General Revenue Funds from the State are not needed;

“Rest stops’ in 2016 and 2018 will force employers and unions back to the negotiating table to re-evaluate the system. Failure to do so will result in substantial monetary penalties.

The Trust Fund is returned to solvency in 2019 (or before if the economy improves);

There are real reforms to the system. These reforms are:

Treasury Offset Program (TOPS) which enhances the Illinois Department of Employment Security’s ability to recoup improper unemployment insurance payments through Federal income tax refund payments.

Personal liability – IDES would mirror Illinois Department of Revenue (IDOR) provisions that allow for the imposition of personal liability when business officers and employees willfully evade paying unemployment insurance taxes. This protects the employers who pay their share by not forcing them to cover the debts of bad actors. These penalties are identical to current penalties for failure to submit income tax monies withheld from employees.

S.B. 72 passed the House unanimously and the Senate 53-1. IRMA would like to thank the members of the Assembly who voted in favor the legislation.

IRMA would also like to thank Governor Quinn, his point-person for the negotiations Jerry Stermer, IDES Director Jay Rowell and his staff (particularly John Gingrich and Joe Mueller), Representatives Frank Mautino (D- Peru), John Bradley (D- Marion), Ed Sullivan (R- Mundelein), Pam Roth (R- Morris), and Senators Kwame Raoul (D- Chicago), Terry Link (D- Lake Bluff), John O. Jones (R- Mt Vernon), and Sue Rezin (R- Morris) for their leadership throughout the long and often frustrating negotiations.

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CORPORATE INCOME TAXES

The Assembly spent a great deal of time this week debating how best to address the needs of the Chicago Mercantile Exchange (CME), renewal of the Economic Development Authority (EDA) for Sears Holding Corporation, and ways to undo some of the damage wrought by the corporate income tax increase passed last January. In addition to the efforts to help ensure the CME and Sears remain in Illinois in the face of impressive efforts by other states to lure away these two entities and the thousands of jobs they create, the focus on income tax reforms includes whether or not to restore the research and development tax credit and the Net Operating Loss exemption both of which were suspended when the income tax increase was approved; whether or not to expand the Earned Income Tax Credit for low-income wage earners and increase it annually by the rate-of-inflation; whether or not to increase the inheritance tax exemption from $2 million to $5 million over two years; whether or not to decouple from the Federal Government on depreciation in order to help pay for the tax relief; and a few other more minor changes. However, debate among legislative leaders and the Governor over how large the overall package should be and concern that any changes be written correctly so as not to create unintended circumstances, did not allow the Assembly to finish by the close of business Thursday. In an effort to finalize agreement over the breadth and scope of the package and to ensure whatever is agreed to is written correctly, the Assembly will take the next 10 days to continue to meet in committee and finalize legislative language.

The House Revenue Committee will convene in Springfield at 1:00 p.m. on November 16^th, 18^th, and 28^th. Action on any proposal is widely anticipated when the Assembly returns November 29^th. Currently, the proposal is contained in House Amendments #1 and #2 to S.B. 397 (Sen. Toi Hutchinson, D- Chicago Heights/Rep. Barbara Flynn Currie, D- Chicago).

IRMA has been, and will continue to be, involved in the negotiations and debate leading up to November 29^th.

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TENASKA

The effort to call, for a fourth time in less than a year, the hugely controversial experimental energy plant called Tenaska, did not occur. TWIS readers will recall that another effort to pass Tenaska failed by five votes during the first week of veto session. The proponents are doing their best to round-up the five votes they need to achieve the minimum threshold of 30 and pass it out of the Senate. Efforts to defeat this hideously expensive proposal – which will require Illinois businesses to pay higher electric utility bills of at least $286 million per year for 30-years – continue unabated. The Assembly can reconsider the Tenaska proposal any time they return, so it is imperative that your State Senator and State Representative hear of your continued opposition.

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SCHEDULE

The Assembly will return Tuesday, November 29^th, in an effort to address unfinished matters. As of this writing, they are scheduled to be in session only on Tuesday.

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CONTACT INFORMATION:
Rob Karr, Senior Vice President
Government & Member Relations
rkarr@irma.org

TENASKA

TWIS readers will recall that for the past two years, an out-of-state energy company called Tenaska has been trying to pass legislation requiring rate payers to guarantee their investment, and an eye-popping 11% rate of return, in an experimental technology called carbon sequestration. In short, the plant would burn coal to generate electricity then pump the carbon gases into allegedly air-tight caverns deep underground. The Tenaska project would require Illinois ratepayers, particularly businesses as residential ratepayers are protected by a 2% cap, to pay above-market prices for electricity totaling $8.6 billion over 30 years or approximately $286 million per year. This project continues to be pursued despite the fact that a sister project in Indiana announced this week another $200 million in cost overruns bringing the total cost overruns to at least $1.2 billion. IRMA and a wide-ranging coalition including business, consumer, and environmental groups, have adamantly opposed the proposal. This week, the Senate voted for the third time in six months on the proposal, this time contained in S.B. 678 (Sen. John Cullerton, D- Chicago). As with the other times it has been considered, the proposal failed, and receiving only 25 votes – 5 short of the 30 needed for passage. Few proposals have had as many opportunities given to it for passage. Unfortunately, it may not be over. S.B. 678 was placed on “Postponed Consideration” meaning it could be called again for a vote. IRMA will continue to work to try and ensure it does not garner enough support for passage. IRMA would like to thank all the Senators on both sides of the political aisle who voted against S.B. 678 this week.

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SMART GRID

During the Spring Session, Commonwealth Edison (ComEd) successfully pushed S.B. 1652 (Rep. Kevin McCarthy, D- Orland Park/Sen. Mike Jacobs, D- Moline) through the Assembly. This is legislation allowing Ameren and ComEd to increase their rates by over $2 billion. These monies would be used by the utilities to upgrade the transmission and distribution infrastructure and, more importantly, install Smart Grid technology. In its simplest form, Smart Grid technology is supposed to allow rate payers to have far more control over their energy consumption and improve conservation. The investments in infrastructure are to substantially improve reliability. IRMA was among a host of others who expressed their opposition, not over the intent but rather the specifics including the potential rate-of-return.

Governor Pat Quinn vetoed S.B. 1652 stating that the bill ‘erodes meaningful consumer protections’ and would allow ‘vast profits for electric utilities’.

This week, the Assembly overrode the Governor’s veto in large part due to passage of a ‘trailer’ bill which attempted to address some of the concerns of opponents. H.B. 3036 (Rep. Kevin McCarthy, D- Orland Park/Sen. Don Harmon, D- Oak Park) reduced the rate-of-return, imposed new job creation guarantees on the utilities including penalties for failing to meet the job creation goals, and required the utilities to pay an additional $60 million to help low-income consumers and veterans who need assistance.

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PSEUDOEPHEDRINE

Over a year ago, the Illinois State Police (ISP) launched a pilot program called the National Precursor Log Exchange (NPLEx). This program is an electronic point-of-sale program designed to replace the paper ID and log system Illinois retailers are required to keep on every sale of any product containing pseudoephedrine (PSE). NPLEx is electronic and tracks purchasers. This enables the system to significantly impact ‘smurfing’. ‘Smurfing’ is the term for people who go store-to-store buying the limit of medicines containing PSE until they have enough to manufacture meth. A new method of making meth called ‘shake and bake’ also requires far less PSE than former methods increasing the need to cut down on ‘smurfing’. If a person has already purchased the maximum amount of medicines containing PSE for the month, the NPLEx system disallows the sale. This system has significant advantages for the retailer as well as law enforcement as it is real-time.

A few months ago, the ISP and the Office of Illinois Attorney General Lisa Madigan met with IRMA to develop legislation to make the NPLEx system permanent and to cancel the other pilot projects operating in various parts of the State so that NPLEx would be the system. This week, an amendment containing the agreed upon language was added to S.B. 73 (Sen. Bill Haine, D-Alton/Rep. Jerry Costello II, D- Sparta) and passed unanimously by the House. It now awaits concurrence in the Senate which is expected to occur when they return November 8^th. IRMA would like to thank Attorney General Lisa Madigan, the Illinois State Police for the pro-active engagement as well as the members of the House for their unanimous support.

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MAIN STREET FAIRNESS

Last January, the General Assembly passed and Governor Quinn signed into law, legislation requiring remote sellers (e.g. Internet) to collect and remit the Illinois sales tax. This protected Illinois retailers and consumers alike. It protected consumers as the tax is due and owing so Internet sellers who were not collecting the sales tax were exposing Illinois consumers, who assumed the tax was collected, to interest and penalties for failing to pay. It protected Illinois retailers by leveling the playing field instead of allowing the Illinois Tax Code to be used as a competitive advantage by the remote sellers.

This week, H.B. 3869 (Rep. David Winters, R- Rockford) was introduced seeking to repeal the Main Street Fairness law. The argument proponents of H.B. 3869 are trying to make is that the remote sellers are not collecting the sales tax and 21^st century entrepreneurs are allegedly being discouraged from establishing their businesses here. The facts say otherwise.

Internet sellers, such as Amazon, are collecting taxes in New York and have agreed to do so in Tennessee and California. Clearly, if they can collect and remit the sales taxes in those states, they can do so in Illinois. IRMA President & CEO David F. Vite sent a letter to Amazon CEO Jeff Bezos asking them to become the same responsible corporate citizen in Illinois that they are becoming in the aforementioned states. Those who want to blame the Main Street Fairness law for allegedly driving entrepreneurs out of Illinois miss the point: it was Amazon who chose to ‘divorce’ from those entrepreneurs rather than collect the taxes which are due and owing. If they can do it in states such as New York, Tennessee, and California, they can do it in Illinois.

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SALES TAX HOLIDAY

Illinois consumers enjoyed holiday from sales tax on back-to-school items and some clothing over ten-days in August 2010. The Assembly did not choose to renew the holiday in 2011 citing claims by the Illinois Department of Revenue (IDOR) that the holiday cost the State sales tax revenues. This week, The Comptroller’s Quarterly, published by the Office of Illinois Comptroller Judy Baar Topinka, contained facts to counter the claim that it cost. The facts read as follows: “Sales tax revenues increased by $214 million, or 13.3 percent – although that is due in part to the sales tax holiday in August of last year.” Clearly, the sales tax holiday worked as intended and did not cost the State tax revenues. Policy makers looking to stimulate economic activity without costing the State money can now look afresh at the holiday given these facts.

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HEALTH EXCHANGES

Like other states, Illinois must have a fully operational health exchange no later than January 1, 2014. In order to demonstrate progress, the State must have a plan in place by January 1, 2013. If a plan is not in place, the Federal Government could implement their own exchange without consulting the State. This is a scenario most interested parties want to avoid. For those who may not be aware, a very simplistic explanation of a health exchange is that it will operate like an Expedia for those who are seeking to purchase health insurance.

The problem with being too aggressive or expansive in creating and operating an exchange, is that the Federal Government has yet to provide guidance on a number of key issues. With that in mind, IRMA and a broad coalition of health insurance consumers, devised a limited approach to exchanges so that the State of Illinois does not find itself financially exposed or unnecessarily over-regulated. This proposal would create an independent Board with a significant representation of healthcare purchasers from the employer community.

Other interest groups take a far broader view preferring to give the Exchange expansive powers to determine which health plans can or cannot be sold, who is or is not eligible to purchase on the Exchange, impose additional fees, etc. All of these ideas will lead to more expensive and less available health insurance – exactly the opposite of how Exchanges were intended to work. An amendment encompassing this view has been filed to S.B. 1313 (Sen. Jeffrey Schoenberg, D- Evanston/Rep. Frank Mautino, D- Peru) and is scheduled to be heard in the House Insurance Committee when the Assembly returns. IRMA and other advocates of a more limited approach will be opposing these amendments.

It is absolutely vital that whatever is done a ‘first do no harm’ approach is taken. The concern with the amendments to S.B. 1313 is they are an invitation to harm.

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Contact Information Rob Karr Senior Vice President Government & Member Relations rkarr@irma.org

June 6, 2011

BUSINESS LIABILITY
CONSUMER FRAUD
CREDIT & FINANCE
HEALTH CARE
LABOR
LOSS PREVENTION
PHARMACY
REGULATION & LICENSING
TAXES

This issue of This Week In Springfield reviews the bills of concern to retail which passed to the Governor’s Desk. As always, they are divided by subject category and linked so you can obtain the actual language of the legislation should you desire to explore a bill in greater depth. Should you need additional information, please do not hesitate to contact IRMA.

BUSINESS LIABILITY

H.B. 3025 (Rep. Kelly Burke, D- Chicago/Sen. Edward Maloney, D- Chicago) Amends the Personal Information Protection Act related to ‘breach of the security of the system data’. In the event of a breach, establishes notification requirements. Differentiates between those who own the data and those who control the data. Provides that a financial institution under 15 U.S.C. 6801 et. seq. or any person subject to 15 U.S.C. 1681w is exempt from a new Section specifying requirements for the disposal of materials containing personal information.

IRMA POSITION: Neutral (as amended)
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CONSUMER FRAUD

H.B. 3406 (Rep. Marlow Colvin, D- Chicago/Sen. Toi Hutchinson, D- Chicago Heights) Amends the Consumer Fraud and Deceptive Business Practices Act. Provides that any person who offers a rebate to consumers at retail on any merchandise must conspicuously display and clearly disclose to the consumer the type of rebate being offered, whether additional fees may apply on the rebate offered, and the form of remittance that will be provided to the consumer. Provides that a person who violates those provisions commits an unlawful practice within the meaning of the Act.

IRMA POSITION: Neutral

H.B. 3513 (Rep. Sandra Piho, R- Glen Ellyn/Sen. M. Maggie Crotty, D- Oak Forest) Amends the Consumer Fraud and Deceptive Business Practices Act. Provides that a person may not print an individual’s social security number on a wristband or on the outside of any file associated with the products or services provided by the person or entity.

IRMA POSITION: Neutral
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CREDIT & FINANCE

S.B. 2063 (Sen. Don Harmon, D- Oak Park/Rep. Karen May, D- Highwood) contains the Prepaid Wireless Surcharge agreement negotiated by IRMA regarding the collection at point-of-sale of the E911 fee.

IRMA POSITION: Neutral
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HEALTHCARE

S.B. 1555 (Sen. William Haine, D- Alton/Rep. Frank Mautino, R- Peru) Creates the Illinois Health Benefits Exchange Law. Provides that beginning October 1, 2013 and in accordance with the federal Patient Protection and Affordable Care Act, the State shall establish a State health benefits exchange to be known as the Illinois Health Benefits Exchange in order to help individuals and small employers with no more than 50 employees shop for, select, and enroll in qualified, affordable private health plans. Sets forth provisions concerning Exchange functions, the Department of Insurance’s and the Commission on Governmental Forecasting and Accountability’s authority, the Legislative Study Committee, Committee studies, and federal action. Creates the State Employee Health Savings Account Law. Provides that, beginning in taxable year 2011, each employer shall make available to each eligible individual a health savings account program. Provides that an employer shall deposit $2,750 annually into an eligible individual’s health savings account. Provides that a trustee or custodian must use the funds held in a health savings account solely (i) for the purpose of paying the qualified medical expenses of the eligible individual or his or her dependents, (ii) to purchase a health coverage policy, certificate, or contract, or (iii) to pay for health insurance other than a Medicare supplemental policy for those who are Medicare eligible. Repeals the Health Care Justice Act. Effective immediately.

IRMA POSITION: Support

H.B. 1191(Rep. Greg Harris, D- Chicago/Sen. Heather Steans, D- Chicago) Amends the Illinois Insurance Code. Provides that no group policy of accident and health insurance shall exclude coverage for any routine patient care administered to an insured who is a qualified individual participating in a qualified clinical cancer trial, if the policy covers that same routine patient care of insureds not enrolled in a qualified clinical cancer trial. Provides that if the group policy of accident and health insurance uses a preferred provider program and a preferred provider provides routine patient care in connection with a qualified clinical cancer trial, then the insurer may require the insured to use the preferred provider if the preferred provider agrees to provide to the insured that routine patient care. Sets forth what a group policy of accident and health insurance with a preferred provider program shall reimburse. Provides that a qualified clinical cancer trial may not pay or refuse to pay for routine patient care of a individual participating in the trial, based in whole or in part on the person’s having or not having coverage for routine patient care under a group policy of accident and health insurance. Provides that the provisions concerning qualified clinical cancer trials do not apply to short-term travel, disability income, long-term care, accident only, or limited or specified disease policies. Effective January 1, 2012.

IRMA POSITION: Opposed (as we are all to all insurance coverage mandates)

H.B. 1193 (Rep. Greg Harris, D- Chicago/Sen. Heather Steans, D- Chicago) Amends the Illinois Insurance Code. Provides that no recoupment or offset may be requested or withheld from future payments 18-months or more after the original payment is made with some exceptions related to fraud. Requires certain information by displayed on the insurer’s demand for recoupment or offset.

IRMA POSITION: Neutral (as amended)

H.B. 1530 (Rep. Lou Lang, D- Chicago/Sen. William Delgado, D- Chicago) amends the Illinois Insurance Code to require insurance companies to offer coverage to customers. Puts mental health coverage on the same level as medical coverage. Mandated coverage for autisim and habilitate care was removed from the legislation in a Senate amendment.

IRMA POSITION: Neutral (as amended)

H.B. 1825 (Rep. Ann Williams, D- Chicago/Sen. Heather Steans, D- Chicago) Amends the Illinois Insurance Code. Provides that accident and health insurance policies that provide coverage for prescribed orally-administered cancer medications and intravenously administered or injected cancer medications shall ensure that the applicable financial requirements and treatment limitations are no more restrictive than the financial requirements and treatment limitations applied to intravenously administered or injected cancer medications that are covered by the policy. Provides that an insurer cannot achieve compliance with the coverage mandate by increasing financial requirements or imposing more restrictive treatment limitations on prescribed orally-administered cancer medications or intravenously administered or injected cancer medications covered under the policy.

IRMA POSITION: Opposed
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LABOR

S.B. 1122 (Sen. Terry Link, D- Lake Bluff/Rep. Jack Franks, D- Woodstock) Amends the Illinois Human Rights Act. Adds an employment discrimination prohibition that provides that it is a civil rights violation for any employer to refuse to hire, to segregate, or to act with respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure or terms, privileges or conditions of employment on the basis of pregnancy, childbirth, or related medical conditions. Provides that women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work. In provisions concerning charges other than in real estate, modifies procedures for cases in which both the Equal Employment Opportunities Commission and the Department of Human Rights have jurisdiction. Describes how those cases shall be processed and what rights a claimant has under various types of dispositions of the charge, including a request for a Department investigation using the EEOC file. Provides that the time limits under the Act are tolled until the EEOC issues its determination. Makes other changes. Effective immediately.

IRMA POSITION: Neutral

H.B. 1698 (Rep. John Bradley, D- Marion/Sen. Kwame Raoul, D- Chicago) contains the most significant reform of Illinois’ workers’ compensation system since 1975. Conservative estimates put the savings to employers at $500 million.

IRMA POSITION: Support
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LOSS PREVENTION

S.B. 151 (Sen. Tim Bivins, R- Dixon/Rep. Jim Sacia, R- Freeport) Amends the Criminal Code of 1961. Provides that a person commits identity theft when he or she knowingly uses, possesses, or transfers a radio frequency identification device capable of obtaining or processing personal identifying information from a radio frequency identification (RFID) tag or transponder with knowledge that the device will be used by the person or another to commit a felony violation of State law or any violation of the Identity Theft Law. Provides that, in addition to other elements of the offense, aggravated identity theft consists of the proscribed conduct. Establishes penalties.

IRMA POSITION: Support

H.B. 1220 (Rep. Michael Zalewski, D- Summit/Sen. Ron Sandack, R- Lemont) in addition to other provisions related to other provisions related to the impoundment of vehicles, allows for the impoundment of vehicles used in the commission of felony retail theft.

IRMA POSITION: Support
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PHARMACY

S.B. 335 (Sen. Heather Steans, D- Chicago/Rep. Michael J. Madigan, D- Chicago) is the Budget Implementation Act. It contained language amending the State Prompt Payment Act extending from 60 to 90-days the time the State has to pay a bill before the 1% interest beings to accrue.

IRMA POSITION: Neutral

S.B. 670 (Sen. Dan Kotowski, D- Park Ridge/Rep. Elaine Nekritz, D- Des Plaines) Amends the Pharmacy Practice Act. Provides that if a pharmacist substitutes any generic prescription in place of a brand-name anti-epileptic drug, then the pharmacist shall provide written notice to the patient no later than the time the prescription is dispensed.

IRMA POSITION: Neutral

H.B. 1338 (Rep. Robyn Gabel, D- Evanston/Sen. William Delgado, D- Chicago) Creates the Immunization Data Registry Act. Provides that the Department of Public Health may develop and maintain an immunization data registry to collect, store, analyze, release, and report immunization data. Sets forth purposes for which the registry may be used. Sets forth provisions concerning the provision of immunization data to the registry, confidentiality, and the release of information. Establishes immunity for certain entities from civil and criminal liability for certain actions. Provides that a person who knowingly, intentionally, or recklessly discloses confidential information contained in the immunization data registry in violation of the Act commits a Class A misdemeanor. Makes other changes. Effective on July 1, 2011.

IRMA POSITION: Neutral

H.B. 2056 (Rep. JoAnn Osmond, R- Antioch /Sen. Suzi Schmidt, R- Lake Villa) Amends the State Finance Act to create the Household Pharmaceutical Disposal Fund as a special fund in the State treasury.. Provides that a law enforcement agency may collect pharmaceuticals from residential sources and transport those pharmaceuticals to an incinerator permitted by the Environmental Protection Agency to be incinerated in accordance with the permit, permit conditions, the Act, and rules adopted under the Act. Provides that the portion of a site or facility that is used to incinerate pharmaceuticals in accordance with these requirements is exempt from regulation as a pollution control facility. Authorizes a law enforcement agency to collect pharmaceuticals from residential sources and to incinerate the collected pharmaceuticals in a manner that is consistent with rules adopted by the Agency. Authorizes the Department of State Police to use moneys in the Household Pharmaceutical Disposal Fund to make grants to local law enforcement agencies for the purpose of facilitating the collection and incineration of pharmaceuticals from residential sources. Defines “law enforcement agency”. Amends the Unified Code of Corrections. Requires 5% of the penalty levied against persons who commit specified drug offenses  be collected by the Circuit Clerk and remitted to the State Treasurer for deposit into the Household Pharmaceutical Disposal Fund.

IRMA POSITION: Support

H.B. 2089 (Rep. Wayne Rosenthal, R- Litchfield/Sen. W. Sam McCann, R- Carlinville) Amends the Illinois Controlled Substances Act. Adds MDPV and certain cannabinoids to the list of Schedule I controlled substances. Effective immediately.

IRMA POSITION: Support

H.B. 3042 (Rep. Robert Pritchard, R- Sycamore/Sen. Jacqueline Collins, D- Chicago) Amends the Illinois Controlled Substances Act adding certain cathinone derivatives to the list of Schedule I controlled substances.

IRMA POSITION: Support

H.B. 3090 (Rep. Louis Arroyo, D- Chicago/Sen. William Delgado, D- Chicago) Amends the Safe Pharmaceutical Disposal Act. Provides that any city, village, or municipality may authorize the use of its city hall or police department to display a container suitable for use as a receptacle for used, expired, or unwanted pharmaceuticals. Provides that the used, expired, or unwanted pharmaceuticals may include unused medication and prescription drugs. Provides that the receptacle shall only permit the deposit of items, and the contents shall be locked and secured. Provides that the container shall be accessible to the public and shall have posted clearly legible signage indicating that expired or unwanted prescription drugs may be disposed of in the receptacle.

IRMA POSITION: Support

H.B. 3449 (Rep. Frank Mautino, D- Peru/Sen. Tim Bivins, R- Dixon) Amends the State Comptroller Act. Provides that State payments for an employee’s payroll or an employee’s expense reimbursement must be made through direct deposit. Sets forth exceptions, including collective bargaining agreements and hardship. Provides that all State payments to a vendor that exceed a certain allowable limit of paper warrants in a fiscal year, by the same agency, must be made through direct deposit. Exempts the legislative and judicial branches of State government from these requirements. Provides that, if a State agency fails to meet the direct deposit requirements, the Comptroller may charge the employee or vendor a processing fee of $2.50 per paper warrant. Amends the State Prompt Payment Act. Provides that an individual interest penalty for a late payment owed by the State amounting to $5 or less shall not be paid by the State, except for certain claims under Article V of the Illinois Public Aid Code, the Covering ALL KIDS Health Insurance Act, or the Children’s Health Insurance Program Act to the Department of Healthcare and Family Services. Effective immediately.

IRMA POSITION: Support
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REGULATION & LICENSING

S.B. 1943 (Sen. William Delgado, D- Chicago/Rep. Naomi Jakobsson, D- Urbana) amends the Lead Poisoning Prevention Act with clarifications and definitions IRMA and others have sought for two years.

IRMA POSITION: Support

H.B. 1284 (Rep. Monique Davis, D- Chicago/Sen. William Haine, D- Alton) Creates the Portable Electronics Insurance Act. Requires vendors of portable electronics to hold a limited-lines license to sell or offer coverage under a policy of portable electronics insurance. Provides that a limited-lines license issued under the Act shall authorize any employee or authorized representative of the vendor to sell or offer coverage under a policy of portable electronics insurance. Establishes requirements for the sale of portable electronics insurance. Sets forth the conditions under which a vendor of portable electronics shall not be subject to licensure as an insurance producer under the Illinois Insurance Code. Sets forth provisions concerning billing, suspension or revocation of license, termination of insurance, and application for licensure. An IRMA amendment exempted service contracts and ensured that the license is only needed if the retailer chooses to offer this insurance.

IRMA POSITION: Neutral (as amended)

H.B. 1494 (Rep. Dan Reitz, D- Sparta/Sen. M. Maggie Crotty, D- Oak Forest) Amends the Illinois Optometric Practice Act of 1987. Adds anti-dry eye agents and agents for the treatment of hypotrichosis to be included in the definition of “ocular pharmaceutical agents”. Provides that the Board may add a pharmaceutical agent approved by the FDA or class of agents for the purpose of the diagnosis or treatment of conditions of the eye and adnexa after consideration of the agent’s systemic effects, side effects, and the use of the agent within the practice of optometry. Provides that the Board shall consider requests for additional agents and make recommendations within 90 days after the receipt of the request. Provides that within 45 days after the Board’s approval of a pharmaceutical agent or class of agents, the Department shall promulgate rules necessary to allow for the prescribing or administering of the pharmaceutical agent or class of agents. Effective immediately.

IRMA POSITION: Neutral

H.B. 1973 (Rep. Angelo “Skip” Saviano, R- River Grove/Sen. M. Maggie Crotty, D- Oak Forest) Amends the Illinois Optometric Practice Act of 1987. In provisions concerning fee splitting, removes language allowing an entity organized under the Limited Liability Company Act to practice optometry through or within any form of legal entity authorized to conduct business in Illinois or from pooling, sharing, dividing, or apportioning the professional fees and other revenues. Provides that a licensed hospital or hospital affiliate or an entity that is a licensed ambulatory surgical treatment center owned by an Illinois-licensed physician or optometrists may practice optometry through or within any form of legal entity authorized to conduct business in Illinois or apportionate professional fees or revenues. Effective immediately.

IRMA POSITION: Neutral

H.B. 2193 (Rep. Suzanna Mendoza, D- Chicago/Sen. William Haine, D- Alton) seeks to do two things. First, it places limits on who can possess products that contain a federally delineated amount of caustic or corrosive acids and it creates a registry at the retail level for purchasers of these products.  The law states that no person can possess a product that is regulated by Title 16 CFR Section 1500.129 of the Federal Caustic Poison Act unless they fall into a number of exemptions listed in the Bill.  Persons engaged in the sale, possession, transportation, or use of such products for their intended commercial purpose, are exempt from the restriction on possession of the product. Second, retailers who sell such products will be required to register customers prior to their sale.  Customers must provide government-issued identification with their picture, as well as fill out a form listing the date and time of the transaction, brand and product names and net weight of the items.  Batteries are exempt from the registry requirements. Importantly, it pre-empts regulation by local government.

IRMA POSITION: Neutral

H.B. 2917 (Rep. Barbara Flynn Currie, D- Chicago/Sen. Don Harmon, D- Oak Park) is a negotiated agreement between all parties, including IRMA, rewriting the Illinois Controlled Substances Act.

IRMA POSITION: Support
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TAXES

S.B. 43 (Sen. Susan Garrett, D- Highwood/Rep. Keith Farnham, D- Elgin) Creates the Taxation Disclosure Act. Provides that the Department of Revenue shall make tax rate information available on its Internet website. Provides that information for use and occupation taxes shall include the tax rate applicable in a municipality or the unincorporated area of a county and list the individual rates that comprise the aggregate rate in that municipality or in the unincorporated area of that county. Provides that information for property taxes shall include the name of each taxing district, a list of all funds for which taxes were extended, and the district’s total tax rate. Provides that information for income taxes shall include the individual and the corporate income tax rates. Provides that information for excise taxes shall include the statewide and the local rates. Provides that the information shall be made available in a viewable and downloadable format and shall be updated regularly. Effective July 1, 2012.

IRMA POSITION: Support

S.B. 401 (Sen. Toi Hutchinson, D- Chicago Heights/Rep. Dan Brady, R- Normal) Amends the Use, Service Use, Service Occupation, and Retailers’ Occupation Tax Acts. Extends the exemption for centralized purchasing activities from June 30, 2011 to June 30, 2016. Effective immediately.

IRMA POSITION: Support
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Rob Karr, Vice President

Government & Member Relations

June 1, 2011

WORKERS’ COMPENSATION
PHARMACY
ELECTRICITY
STATE BUDGET
LEAD
CAUSTIC SUBSTANCES
SCHEDULE

This Week In Springfield saw the First Spring Session of the 97^th Illinois General Assembly pass a State budget and conclude their business but not without some fireworks.

WORKERS’ COMPENSATION

The most historic and sweeping reform of Illinois’ workers’ compensation system since 1975 when it was put into its current form, passed the Assembly late last night with the support of Senate Democrats, Senate Republicans, House Democrats, and a lone House Republican, Representative Chris Nybo (R- Lombard)  but not without months of negotiations, some anxious moments, and a near-disaster. H.B. 1698 (Rep. John Bradley, D- Marion/Sen. Kwame Raoul, D- Chicago) passed the Senate 46-8-2 and the House 62-43-10.

H.B. 1698 (Rep. John Bradley/Sen. Kwame Raoul), as amended by Senate Amendments 3 and 5, will provide a minimum $500 million in real savings every year to the employer community. Those savings are realized from the following provisions:

– Requires physicians to use the American Medical Association (AMA) standards to determine impairment for the first time in Illinois history. Equally as important, arbitrators at the Illinois Workers’ Compensation Commission will be required to use AMA standards when determining disability.

– Allows for the creation of Workers’ Compensation provider networks, similar to current networks for health care. The employers create these networks. The employees have two choices. The employee can choose one of the network doctors or they can choose one doctor not in the network. However, they are limited to those two choices.

– Imposes a 30% reduction in the Medical Fee Schedule. Even with this cut, Illinois will have the second highest fee schedule in the country. The fee schedule would have to be cut 50% to drop Illinois from second to third.

– Significantly strengthens utilization review to ensure proper and necessary medical care is administered. This is a substantial cost control measure.

– Eliminates lifetime wage differential payments. Employees will now receive wage differential payments during their work career (to the age of 67 or five years after their injury, whichever is later) as opposed to their life span.

– Reduces carpal tunnel syndrome payments from an average of 40 weeks award to a maximum of 28 weeks.

– Changes the rebuttable presumption for workers injured while under the influence of illegal drugs or alcohol.

– Allows for appointment of new Workers’ Compensation arbitrators, who must be approved by the Senate. This is the first time that the Senate will have an ‘advice and consent’ oversight role of the appointment of arbitrators.

– Arbitrators must now be attorneys, will be held to the judicial ethics canons which is a substantial higher of conduct than today, and must undergo continual training in the application of AMA standards and utilization review, to name a few.

The $500 million in savings is a conservative number. The actual number could be closer to $700 million but we are being conservative in our estimates. Importantly, for the first time since 1975, absolutely no benefit concessions were required in order to obtain these savings.

The events leading to the passage of H.B. 1698 began in late Fall of 2010 when Senate President Cullerton (D- Chicago) and House Speaker Michael Madigan (R- Chicago) announced their intention to pass meaningful reform legislation. The first effort in early January 2011, during the closing days of the 96^th General Assembly, was not successful. At that point, Governor Pat Quinn also announced his intention to see reform of the workers’ compensation system.

Talks, spearheaded by Rep. Bradley, Sen. Raoul, and Director of the Illinois Department of Insurance Michael McRaith on behalf of Governor Quinn, continued throughout the Spring between the various parties. To her great credit, even though she was not always included directly in the talks, Senate Republican Leader Christine Radogno stayed engaged and relevant, often playing a key role in shaping the discussions through her staff and relationship with Senate President Cullerton. Her persistence and leadership played a key role in gaining the support of 15 of the 24 members of the Senate Republican Caucus. The talks were exceedingly difficult and, at several points, near the point of collapse. Ultimately, frustration led the House and Senate negotiators to introduce, and begin to move through the legislative process, a ‘nuclear option’.

As amended by House Amendment #1, S.B. 1933 sought to repeal the entire Workers’ Compensation Act on January 1, 2012. The result would be to go back to the days when all injury claims were litigated in court. Clearly, S.B. 1933 was not preferred by any of the parties involved in the workers’ compensation system but it did express the frustration the negotiators were feeling at the time in terms of obtaining an agreement and was used as a hammer to convince parties to negotiate. S.B. 1933 passed the House on Friday, May 27^th 65-48 with four Republicans voting in favor. Fortunately, S.B. 1933 was not needed once H.B. 1698 passed the House on the second try with the support of 61 House Democrats and only one House Republican, State Representative Chris Nybo (R- Lombard).

Former President John F. Kennedy once said that victory has many fathers but defeat is an orphan. While he meant it as a shot to those who really had nothing to do with the hard work required to produce victory, in the case of H.B. 1698, victory actually does have many fathers.

Senate President Cullerton, House Speaker Madigan, Governor Patrick Quinn, Senate Republican Leader Radogno, Director McCraith, Chicago Mayor Rahm Emanuel, Senator Raoul, and Representative Bradley are too be long and loudly commended for their tenacity throughout the long and difficult process that led to the first substantial and meaningful productive reform of Illinois’ workers’ compensation system. Likewise, we thank the entire Senate Democratic Caucus, House Democratic Caucus, the 14 members of the Senate Republican Caucus, and State Representative Chris Nybo for their support of the reform. On behalf of the members of the Illinois Retail Merchants Association, employers who pay the bills and struggle under Illinois’ hideously expensive and economically debilitating system, we offer our deepest thanks and appreciation to them all.

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PHARMACY

There were three developments of various degrees of importance to the Illinois pharmacy community.

First, H.B. 2934 (Rep. Sara Feigenholtz, D- Chicago/Sen. Jeffrey Schoenberg, D- Evanston) temporarily borrowed $900 million from various dedicated State funds to leverage the enhanced match from the Federal Medicaid program before it expires. The match monies will be used to pay down the State’s Medicaid payment backlog to Medicaid providers and the principal will be returned to the various funds from which it was borrowed.

Second, the Budget Implementation bill (S.B. 335) included language amending the State Prompt Payment Act. The one percent interest will begin to accrue after 90-days instead of 60-days.

Third, S.B. 670 (Sen. Dan Kotowski, D- Park Ridge/Rep. Elaine Nekritz, D- Des Plaines) amends the Pharmacy Practice Act to require the pharmacist to provide written notice to the patient any time a brand-name anti-epileptic medicine is substituted with a generic anti-epileptic drug.

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ELECTRICITY

Under current law, utilities must file a proposed rate increase with the Illinois Commerce Commission (ICC). Other parties may submit their opinions as to whether or not they believe the proposed increase to be justified. The ICC then makes a determination and to either deny, allow, or allow a smaller rate increase. It is a lengthy ordeal for the parties.

This year, Commonwealth Edison introduced a proposal that would have allowed them to increase rates annually with subsequent ICC oversight. The rate increases were to be used, at least in part, to upgrade the transmission and distribution system including the use of smart meters. According to the proponents of the proposal, the improvements would have reduced outages, energy efficiency, customer service, and would have given customers greater ability to reduce their bills through smarter energy utilization.

Under the proposal, ComEd and Ameren could have raised rates annually through 2017. From now through 2014, the rate increases were capped at 2.5%. For the years 2015 – 2017, however, the caps were removed. Additionally, the proposal allowed them a 10.25% return on equity. However, the allowable return on equity could increase based on what happens to the yields on 30-year Treasury bonds. Most financial observers expect the yields on 30-year Treasury bonds to increase as they are currently at near all-time lows.

ComEd projected that under their plan, assuming the 2.5% rate cap, a typical consumer would see their electricity bill increase by $3 per month or $36 annually.

After much debate, the proposal was amended to require the utilities to file their rate increase with the ICC, allow entities to submit comments, and give the ICC an opportunity to approve. However, the ICC would be required to act within eight months instead of the usual eleven months.

The proposal was opposed by a wide-array of groups, including IRMA and elected officials including Governor Quinn and Attorney General Lisa Madigan. While S.B. 1652 (Rep. Kevin McCarthy, D- Orland Park/Sen. Michael Jacobs, D- Moline) ultimately passed both chambers, Governor Quinn has threatened a veto. At this writing, if Governor Quinn does indeed carry through on his threat to veto the proposal, the utilities will have to find five votes in the Senate and four votes in the House in order to override. Given the sensitivity to utility rate increases among the electorate and the fact every member of the Assembly is about to run in largely new districts as a result of redistricting, finding those votes will be difficult – difficult but not impossible. This issue is far from over.

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STATE BUDGET

Amongst all the other issues, the Assembly fulfilled its primary role in every Spring session with the passage of the Fiscal Year 2012. TWIS readers will recall that there was a dispute early on between the Governor, Senate Democrats, and House Democrats over anticipated revenues for FY 2012. Early on, the House passed a resolution establishing an anticipated revenue level $2 billion lower than that estimated by the Governor in his proposed budget and $1 billion below the levels estimated by the Senate Democrats. After heated debate, it appears the House estimate has prevailed. I say ‘appears’ because the Senate Democrats did attach an amendment to the capital projects appropriations bill seeking to add back just over $430 million in spending. The fate of that amendment is uncertain as of this time given the fact the House refused to concur in the Amendment and a conference committee has not met to determine the fact of the extra spending.

The Governor has pledged to give the proposed budget ‘a microscopic review’. If he makes changes, we could see the Assembly back in town sooner than the Fall Veto Session to act on the Governor’s vetoes. It is important to note that the Governor can exercise a total veto or a reduction veto – he cannot increase spending. If he vetoes and the Democrats in the Assembly fail to override his veto, the budget will be thrown into flux. As it is now June 1, a 3/5ths majority would be required to pass anything making the Republicans significant players and probably leading to additional budget cuts.

After years and years of failed attempts, the Assembly finally passed a sweeping expansion of gambling including a casino license for the City of Chicago as well as several locations throughout the State and slot machines for horse racing tracks. The Chicago casino is something Mayor Emanuel would dearly love. The Governor is clearly not enamored with the gambling expansion but it remains to be seen whether he is willing to veto it and risk the ire of a wide cross section of the Assembly as well as the Mayor of Chicago.

Finally, there was a disappointment in the fact that the State’s highly successful sales tax holiday in 2010, which generated additional tax revenues for the State and local units of government, was not renewed for 2011. This will certainly be a topic of debate in the future.

All in all, the Assembly has approved a budget that exercises financial restraints and imposed cuts on nearly every sector. Some will, and do, argue that there are more cuts that could be made and they may indeed be right. Nevertheless, long-time Springfield denizens have not seen a budget process like this in at least three decades.

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LEAD

Ever since Illinois passed a lead labeling law for certain categories of children’s products, IRMA and others have been fighting for clarifications to enhance compliance. After two years of persistence, legislation enacting most of the clarifications was passed by the Assembly. S.B. 1943 (Sen. William Delgado, D- Chicago/Rep. Naomi Jakobsson, D- Champaign) defines ‘jewelry’, clarifies labeling, clarifies the definitions of ‘child care article’ and ‘toy containing paint’, and enacts a labeling exemption for inaccessible components and third-party testing. IRMA would like to thank Sen. Delgado and Rep. Jakobsson for their sponsorship. Also, Attorney General Lisa Madigan’s Office and the Illinois Department of Public Health for their cooperation.

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CAUSTIC SUBSTANCES

H.B. 2193 (Sen. Bill Haine, D- Alton/Rep. Susana Mendoza, D- Chicago) was passed to the Governor yesterday by the Assembly. TWIS readers will recall that H.B. 2193 seeks to regulate caustic and corrosive acids. The legislation was initiated after two attacks last year on Chicago women who were left badly scarred after having acid poured on them.

The proposed law will do two things. First, it places limits on who can possess products that contain a federally delineated amount of caustic or corrosive acids and it creates a registry at the retail level for purchasers of these products.  The law states that no person can possess a product that is regulated by Title 16 CFR Section 1500.129 of the Federal Caustic Poison Act unless they fall into a number of exemptions listed in the Bill.  Persons engaged in the sale, possession, transportation, or use of such products for their intended commercial purpose, are exempt from the restriction on possession of the product. Second, retailers who sell such products will be required to register customers prior to their sale.  Customers must provide government-issued identification with their picture, as well as fill out a form listing the date and time of the transaction, brand and product names and net weight of the items.  Batteries are exempt from the registry requirements.

For IRMA’s Chicago members, it is important to note that the bill contains a preemption which would declare void any local law that conflicts with the bill.  We would like to thank former State Representative and current Chicago City Clerk Susanna Mendoza for working with IRMA on this legislation. Also, Representatives Bill Cunningham (D- Chicago) and Dennis Reboletti (R- Addison) for their efforts in negotiating the bill into its final form. Finally, a thank you to Senator Haine for his sponsorship in the Senate.

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SCHEDULE

The Assembly is currently scheduled to return for its Fall Veto Session October 25^th – 27^th and November 8^th – 10^th. It is possible they could return prior to those dates depending on what action the Governor takes on the budget-related legislation passed to his desk.  If that were to happen, TWIS will keep you informed.

Rob Karr, Senior Vice President

Government & Member Relations

May 20, 2011

A LONG WAY TO GO AND A SHORT TIME TO GET THERE

With nine scheduled session days in the First Spring Session of the 97^th General Assembly, I am reminded of the lyrics from Jerry Reed’s song from “Smokey and the Bandit”: “we’ve got a long way to go and a short time to get there’. What follows is a very brief overview of some of the major issues of interest to retail still in front of the Assembly.

Workers’ Compensation Reform

Attempts to significantly reform Illinois’ draconian workers’ compensation law and remove the single largest impediment to economic investment in Illinois are on-going. We won’t know until sometime next week whether or not true reform will be achieved.

Sales Tax Sourcing

The Regional Transportation Authority (RTA) lost a court case over the issue of where sales taxes can be sourced under existing Illinois law. This was not really a surprise given the fact the taxpayer relied upon guidance and successful audits by the Illinois Department of Revenue (IDOR) and followed Illinois law and practices in effect for five decades. Nevertheless, this week, the RTA launched an effort to substantially rewrite Illinois’ sales tax laws in the final two weeks of session. There have been numerous meetings and many redrafts as the proponents wrestle with the realities of the marketplace. There is great concern in the business community and local governments that making such drastic changes in an extraordinarily short period of time will have unintended and severe consequences. For example, IDOR admitted that these changes will result in sales tax increase for some Illinois consumers. In another example, the RTA cannot predict which local governments will win new revenue or which will lose revenue.

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State Budget

This is an obvious ‘must do’. The House and Senate have passed different budgets with different revenue assumptions. The House anticipates approximately $1 billion in less revenue than the Senate and just over $2 billion less than the Governor. The chairman of the respective House and Senate appropriations committees met in an effort to reconcile. This effort has, to date, not yielded results. The House continues to stand by their more conservative revenue estimate and argues that if revenues come in higher than expected, those extra monies should be applied to Illinois’ numerous unpaid bills.

Redistricting

This is another ‘must do’ for the Democrats prior to the constitutional deadline. Every ten years the legislative districts are redrawn to re-balance them due to population shifts. This is the year and nothing occupies an elected officials’ interest more than redistricting. How those district lines are drawn can mean the difference between re-election for many incumbents. Hard decisions will have to be made by some as to whether or not to move into a better neighboring district or stay where they are in a district that is less favorable or pits them against one of their peers.

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Pensions

TWIS readers will recall that previously the Assembly passed substantial pension reform for future State employees (i.e. those hired after the reforms took effect). Reform-minded groups have spent weeks attempting to craft legislation to reform the pensions of existing State employees. To date, that effort has not come to closure and the opponents are working hard to ensure it never does. Successful reform could mean hundreds of millions of dollars to cash-strapped State and local governments. Also, pension experts have noted that the Teachers Retirement System (TRS) does not have enough assets to pay for the anticipated needs of current retirees.

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Energy

Last year, IRMA and countless other organizations successfully held-off a proposal called Tenaska which would have imposed significant costs on Illinois electric rate-payers, particularly in the commercial and industrial sectors, to guarantee the investment of a private company building an experimental coal gasification plant. This year, the Tenaska representatives continue to look for support or the opportunity to tie their controversial project to something everyone wants passed into law. Other similar but not identical projects (i.e. Power Holdings and Leucadia) are looking for support. Commonwealth Edison has been diligently working to build support for their proposal to allow them to gradually increase rates according to a statutory formula instead of having to seek approval from the Illinois Commerce Commission.

These are just a few examples of the issues still being discussed and negotiated as the Assembly heads into its final nine scheduled session days. Keep in mind that if the Assembly is still in session after midnight on May 31^st, a super-majority of three-fifths is required to pass any legislation. That would make the Republicans real players in the process – something the Democrats are unlikely to want – at least when it comes to redistricting and the State budget.

Stay tuned. It is shaping up to be a wild ride to the end.

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Rob Karr, Senior Vice President
Government & Member Relations

As it was a subject matter hearing and the committee was pressed for time, the Illinois Beverage Association (IBA) offered testimony on behalf of the opponents including IRMA. Included in their testimony were these important facts:

1.  According to the National Cancer Institute, sugar-sweetened beverages (e.g. soft drinks, sports drinks, flavored waters, teas, coffees, etc.) account for just seven percent of the American diet. That means 93% of our calories come from other foods and beverages. The chart below demonstrates these facts. (Click on the chart to enlarge.)

2. From 2000-2009, sales of regular soft drinks have declined year-over-year by 12 percent.

3.  The total amount of beverage calories has decreased by 21 percent from 1998-2008 due to no-calorie/low-calorie and smaller-portion offering.

4. Despite the above facts, during the same periods, childhood obesity continued to rise.

A tax on sugary beverages is clearly not the answer. For further proof, consider the experience of West Virginia and Arkansas. Both states have a tax on soda yet rank in the top 10 in obesity rates in the United States.

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SALES TAX SOURCING

For decades, Illinois businesses have been able to source their sales to a dedicated sales office. All of the sales made through that office were subject to the sales tax in effect for the jurisdiction in which that office was located regardless of the location of the purchaser, where the product was stored or originated, or where it was shipped. On January 27, 2011, the Circuit Court of the 10^th Judicial Circuit ruled in favor of a plaintiff who had relied upon the above stated rules and interpretations in sourcing their sales and, subsequently, where the sales tax on those sales was payable. The Illinois Department of Revenue (IDOR) had attempted to impose different standards.

Earlier this spring, there was an attempt to codify the court’s decision. That effort was met with significant opposition from some local governments including the City of Chicago as well as the Regional Transportation Authority (RTA). These entities, including IDOR, drafted an amendment seeking to impose a seven part test for determining where sales are sourced. The amendment is difficult to decipher and generated significant opposition from IRMA and many other organizations. The easiest way to describe the RTA proposal is that all sales, with the exception of those where the customer comes in the store and picks it up, would be sourced to where the inventory is located.

This week, House Majority Leader Barbara Flynn Currie (D-Chicago) brought together the interested parties that have emerged to date and then appointed a smaller working group, of which IRMA is a part. The working group was assigned the task of meeting over the next week and reporting back as to the viability of the seven-part test and the surrounding issues which must be addressed including how the seven-part test may preclude Illinois from ever participating in the Streamlined Sales Tax Program.

IRMA will continue to keep you informed as developments warrant.

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HEALTH INSURANCE

As passed by the House, H.B. 1530 imposed extraordinarily expensive insurance mandates related to autism and habilitative care. Additionally, H.B. 1530 sought to add ‘substance use disorder’ as a mental health disorder. In turn, if an employer were to cover mental health, that coverage must be on par with their offered medical coverage.  The mandates proposed in H.B. 1530 would have caused insurance rates in Illinois to increase even faster than normal making health insurance less affordable for employers than it already is.

This week, IRMA and a wide-array of interested groups met with Senators William Delgado (D- Chicago), Bill Haine (D- Alton), and Senate President Pro Tempore Don Harmon (D- Oak Park) regarding H.B. 1530 (Rep. Lou Lang, D- Chicago/Sen. William Delgado, D- Chicago). After excellent discussion, agreement was reached to delete the habilitative coverage mandate (the autism coverage mandate had already been deleted the day before) and clarify the language for parity to ensure that it was a mandatory offer and not a coverage mandate. Nevertheless, if an employer chooses to offer coverage on one or more of the mental health disorders as defined in the Act, they will have to do so at the same coverage level as offered in their medical coverage.

IRMA would like to thank Senators Delgado and Haine for their reasonableness and willingness to discuss H.B. 1530 and Senate President Pro Tempore Harmon for his willingness to mediate the compromise.

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CLOSING WEEKS

Theoretically, the Assembly is entering the final 15 days of the Spring Session. If they do not conclude their business by midnight on May 31^st, a supermajority of three-fifths is required to pass legislation. That would effectively put the Republican’s in the proverbial drivers-seat. Such a scenario is not impossible but certainly unlikely. Nevertheless, there are at least two ‘must do’s” before the deadline. The Democrats must pass legislation redrawing the lines of the legislative districts. This process must be done every 10 years to account for changes in population and keep the districts balanced. The State’s Fiscal Year 2012 budget is also on the ‘to-do’ list.

In addition, workers’ compensation reform, additional pension reforms for existing State employees, State retiree health insurance reform, historic education reform, and a number of power/energy related bills (e.g. Commonwealth Edison’s formula rate proposal, the much reviled Tenaska, Leucadia, Power Holdings, and a wide-array of alternative energy proposals), to name a few.

Bottom line: the final days of the First Spring Session of the 97^th Assembly are going to be active and interesting.

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Rob Karr, Senior Vice President

Government & Member Relations

This Week In Springfield witnessed Business Day 2011.

BUSINESS DAY 2011

Over 300 employers gathered in Springfield on Wednesday for the annual Business Day event. Annually, Business Day brings together employers of all sizes from throughout Illinois. The day began with the luncheon featuring a keynote address from Governor Pat Quinn and comments from State Representative John Bradley (D- Marion) and State Senator Kyle McCarter (R- Carlyle). Reform of Illinois’ hideously expensive workers’ compensation system was the focus of the speakers and the central focus of the day for most attendees.

Governor Quinn continued to emphasize that workers’ compensation reform is his top priority and he does not want the Assembly to go home without approving reform. The four principles he is using to judge any reform proposal are: (1) ensuring fairness; (2) care for the injured worker; (3) savings for the employer; and (4) restoring public trust. Specifically, the Governor wants to ensure that arbitrators are properly trained and held accountable, that injuries must arise out of and in the course of employment, workers receive quality care efficiently and are protected from unnecessary care, workers injuries are measured by objective standards, and that there is enhanced authority to prosecute fraud. In the end, the Governor’s goal is that reforms translate to at least $500 million in savings for employers.

State Representative John Bradley, the point person for the House Democratic Caucus on reform discussions addressed the attendees noting that Illinois is at a watershed moment with Democrats and Republicans agreeing that meaningful workers’ compensation reform needs to be accomplished for everyone. Rep. Bradley did say that employers will not get everything they might want but that reform must be substantial. To date, Rep. Bradley has done yeoman’s work in trying to achieve the type of reform Illinois employers will embrace without completely alienating unions, trial lawyers, and the medical community.

State Senator Kyle McCarter succeeded in obtaining a floor vote the evening of May 4^th on S.B. 1349. The legislation as considered by the Senate, contained everything Illinois employers would desire if they were able to write the legislation. Unfortunately, S.B. 1349 received only 25 votes (all 24 Republicans and 1 Democrat) falling 5 votes short of the 30 needed for passage. Even though the legislation was defeated, it was a tremendous accomplishment for a freshman Senator to force a floor vote on such a high-profile issue. If workers’ compensation reform indeed occurs, few will have done as much to advance the cause as Senator McCarter.

During the afternoon, attendees adjourned to the Capitol where certain groups met with the four legislative leaders, policy leaders in the Governor’s Office, and other legislators. Topics covered included workers’ compensation reform, sales tax holiday, streamlined sales tax, LINK ID cards, and a variety of other issues.

Business Day 2011 ended, as it always does, with a ‘not-to-be-missed’ reception under a big tent at the intersection of 2^nd and Adams streets – one block from the Capitol. Outstanding food and beverages from Outback Steakhouse, Kentucky Fried Chicken, Schnuck’s, Saputo’s Italian Restaurant, Anheuser-Busch, MillerCoors, Diageo, EJ Gallo Wines, and members of the Illinois Beverage Association (i.e. Coca-Cola, Snapple, Pepsico, and Dr. Pepper). Over the course of the three hour reception, at least 400 people attended including over 70 legislators.

IRMA would like to thank everyone who helped make Business Day 2011 a tremendous success. Particularly the retail members who took precious time away from their stores to make their views known directly to elected officials.

RFID

SB 151 (Sen. Tim Bivins, R- Dixon/Rep. Jim Sacia, R- Freeport) amends the Illinois Criminal Code to criminalize as identity theft the knowing use, possession, or transfer of a radio frequency identification device (RFID) capable of obtaining or processing personal identifying information from an RFID tag or transponder with knowledge that the device will be used by someone to commit a felony violation or any violation of the Identity Theft Law. The IRMA-supported proposal unanimously passed the House Judiciary II –Criminal Law Committee and now awaits consideration by the full House.

Rob Karr, Senior Vice President

Government & Member Relations

NEXT WEDNESDAY
WORKERS’ COMPENSATION REFORM
FRANCHISE TAX FILINGS

This Week In Springfield, the Illinois House met while the members of the Senate were back in their districts. The House began the process of hearing Senate bills that had passed the Senate prior to their Third Reading Deadline.

NEXT WEDNESDAY

Is workers’ compensation reform important to you? Do you worry about the state of Illinois’ economy? If so, you need to be in Springfield at Noon, Wednesday, May 4^th for Business Day 2011.

Join over 300 of your peers from around the State as you hear from, and meet with, policy makers.

During the opening luncheon, workers’ compensation reform will be the focus. Governor Patrick Quinn has graciously agreed to attend and will share details of his ongoing efforts to reform Illinois’ workers’ compensation system.

State Representative John Bradley (D- Marion) and Senator Kyle McCarter (R- Carlyle) will also speak during the luncheon on their respective efforts to enact workers’ compensation reform.

After the luncheon, attendees will visit at the Capitol to meet with their legislators and share thoughts on workers’ compensation reform and any other issues of importance.

The day will end with the Gala Reception under the “big tent”. The theme this year for the reception is the seventies. This reception has become a ‘can’t miss’ event and is yet another excellent opportunity to interact in a less formal atmosphere with your legislators and other policy makers and shapers.

If you have not yet registered or require additional information, please visit www.irma.org or call 217-544-1003. We look forward to seeing you next Wednesday, May 4^th, in Springfield.

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WORKERS’ COMPENSATION REFORM

With five weeks left until the scheduled end of the legislative session, reform of Illinois’ workers’ compensation system remains a top priority for Governor Quinn and the legislative leaders. Therefore, real and meaningful workers’ compensation reform is still very much a possibility.

TWIS readers will recall that last week S.B. 1349 (Sen. Kyle McCarter, R- Carlyle) fell five votes short of passage with all the Republicans and one Democrat voting in favor. Twenty-eight Democrats voted ‘present’ while six other Democrats voted ‘no’.  The provisions of S.B. 1349 reflected the ideal reform package from an employer perspective and were supported by IRMA and all the other employer-related groups.

IRMA and the other employer representatives continue to meet with representatives of the Governor’s Office and the four legislative leaders in an effort to ensure meaningful workers’ compensation reform passes this Spring. In addition, there are meetings with editorial boards and other opinion makers to explain what would constitute meaningful reform.

Business Day 2011 is an excellent opportunity for you to personally join the effort and explain directly to policy makers how the current system is counter-productive and the form meaningful reform should take.

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FRANCHISE TAX FILINGS

IRMA and other business community representatives successfully convinced the Illinois Secretary of State’s Office to withdraw changes to interrogatories that must be filed by companies in Illinois. These changes were proposed without any input from impacted parties or changes to law or regulations. The proposed changes would not only have inflicted higher fees on in-state companies but were sowing confusion given the fact that they would have applied to filings due May 1^st.

The Secretary of State’s Office pledged to work with all the interested parties, including IRMA, to address what the Secretary of State’s Office believes are issues surrounding franchise tax requirements and filings. IRMA would like to thank Secretary of State Jesse White and his senior staff for their responsiveness, reasonableness, and willingness to work cooperatively.

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