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

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

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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