Illinois This Week in Springfield – 99-15

SESSION CONTINUES
PRIVATE LABEL CREDIT CARDS
HEROIN
BIOSIMILARS
LOCKING MECHANISM FOR PRESCRIPTIONS
DATA SECURITY
RETAIL THEFT – ACCELERATED RESOLUTION COURT
SNAP ELIGIBILITY
LIQUOR CONTROL ACT AMENDMENTS
TOBACCO
TELECOM MODERNIZATION
DIRECT SALES
FOOD ESTABLISHMENT SELF-INSPECTIONS
CONCEAL CARRY

This Week In Springfield, both chambers of the Illinois General Assembly adjourned but only temporarily. With no deal in place on a Fiscal Year 2016 budget, and an escalating war of words between Democrats and Republicans, both chambers will meet in regular session throughout the summer or until a budget agreement is reached. As such, the House is scheduled to return June 4th and the Senate June 9th. It is important to note that since the May 31st deadline has been reached, a 3/5ths super-majority is required to pass any legislation.

What follows is an overview of where legislative session stands as well as a review of issues of immediate concern to retail over the last week.

SESSION CONTINUES…TENSIONS RISE

As noted above, an FY 16 budget for the State of Illinois has not been approved. The Governor proposed a budget of just over $32 billion in February that was out-of-balance by $2.2 billion due to a pension reform program most considered to be unrealistic. In return, the House and Senate developed and passed a $36 billion budget that is $3-$4 billion out-of-balance. A parliamentary motion was utilized to hold the passed budget in the Assembly. That motion can be removed at any time by the filer and, once removed, the budget is then transmitted to the Governor. It is widely anticipated that this will not occur until very close to July 1st – the start of the next fiscal year. The effect of the holding motion is two-fold. First, it does give all parties time to negotiate further. Second, if nothing is agreed to by the deadline, it gives the Governor very little time to act. His choices are to either Reduction Veto the budget or apply a Total Veto. However, the Governor has already stated he intends to exercise a Total Veto immediately upon receiving the Democratic budget.

TWIS readers know that the Governor submitted a Turnaround Agenda and has publicly stated that he is willing to consider additional tax revenues for the state so long as portions of his Turnaround Agenda are approved. For example, the Governor is seeking reforms in Illinois’ workers’ compensation and tort systems as well as a property tax freeze, redistricting reform, and term limits. However, the Democratic-majorities in the House and Senate put significant pieces of the Governor’s proposals (i.e. workers’ comp, tort, and property tax freeze) to votes where, predictably, they failed to receive majorities necessary for passage. In the case of the House, the Republicans voted “present” to signify their displeasure with what they perceived as a contrived process and the fact they did not consider the proposals ‘real’ as they had not actually been introduced on behalf of, or written by, the Governor. Additionally, the House voted down the Governor’s human service cuts included in his budget proposal. In the Senate, Republican Leader Christine Radogno introduced significant portions of the Turnaround Agenda which were written by the Governor’s Office. These proposals were heard in long and often contentious hearings in the Senate Judiciary Committee and then voted down along party.

At this writing, the prospects of agreement in the near future appear dim. Earlier this week, the Governor promised a $20-$40 million full-scale campaign to attack Democrats, particularly Speaker of the House Michael Madigan and Senate President John Cullerton, for what the Governor believes are their unwillingness to compromise, failing to protect the middle-class and ominous statements that the two leaders have enriched themselves. For their part, Speaker Madigan and Senate President Cullerton claim to have been preparing for this all spring and have promised to respond in-kind painting the Governor as unreasonable, a threat to the middle-class, and bringing Washington D.C.-style politics to Illinois. Some of this has already started to emerge as they have described Governor Bruce Rauner as a Republican-version of Rod Blagojevich and have adopted a mantra that they are willing to discuss reforms they believe would help the middle class (e.g. minimum wage, paid sick leave).

Deadlines are what often help bring issues to a conclusion. In terms of deadlines, the first state paychecks will be due the second week of July. If there is not budget at that point, state workers will start to miss paychecks. The first General State Aid payment for schools is due approximately August 10th. Some schools will not be able to open if these payments are not received. Over-shadowing this entire situation are the contract negotiations with AFSCME – the union representing the vast majority of state employees. These negotiations have been widely reported to be very contentious and the word ‘strike’ has been bandied about. However, late in session, the Assembly, voting on party-lines, sent to the Govenor SB 1229 (Sen. Don Harmon, D-Chicago/Rep. Mike Smiddy, D- Port Byron). This legislation would prohibit workers from striking, would keep the current contract in place until such time as a new agreement is reached, and would allow either party to invoke mediation. If a mediator is unable to bring agreement, either party can initiate impasse mediation.

It remains to be seen how this will all play out. If, indeed, both sides carry through with their threats, it is going to be a very long, hot summer in Illinois.

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PRIVATE LABEL CREDIT CARDS

As TWIS readers may recall, the Assembly unanimously passed an IRMA-initiative last year that allowed for a refund on bad debt established through a Private Label Credit Card (PLCC) administered by a third party. Former Governor Pat Quinn decided to use the bill, and a few others, as a vehicle for unrelated amendatory vetoes in his final moments in office effectively killing the bill. The initiative was reintroduced in the form of SB 507 (Sen. Daniel Biss, D-Skokie/Rep. Anthony DeLuca, D-Chicago Heights).

As a refresher, if a consumer does not pay for the merchandise they purchase on credit, and efforts to collect fail, a bad debt is declared and the sales tax is refunded to the retailer. This happens because in the eyes of the law, a sale is deemed not to have occurred. However, several years ago, the Illinois Department of Revenue (IDOR) issued a controversial opinion that a bad debt refund did not apply to PLCC’s administered by a third party. SB 507 takes into consideration this modernization and corrects this inequity by allowing a refund of sales tax on the bad debt created by consumer using a store branded PLCC. Over the course of last year and again this year, IRMA worked with IDOR to address their procedural concerns to ensure proper documentation would be available; limited the transactions that are available for a bad debt refund; and provided a clear line of accountability. As a result of this continued negotiation SB 507 passed both Chambers and has been sent to the Governor for his signature.

IRMA would like to thank Sen. Daniel Biss and Sen. Anthony DeLuca for their sponsorship as well as the Illinois Department of Revenue for working diligently with IRMA and other parties to obtain a workable compromise.

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HEROIN

Illinois will soon have the nation’s most comprehensive approach to combating heroin and prescription drug abuse. HB 1 (Rep. Lou Lang, D- Chicago/Sen. Dan Kotowski (D- Park Ridge) passed both chambers this week and now proceeds to the Governor.

HB 1 includes, but is not limited to, the following provisions: allows pharmacists to dispense opioid antagonists to someone claiming a heroin overdose pursuant to policies and procedures developed by the Illinois Department of Public Health; expands authority of the Illinois EPA to distribute grants for drug take-back programs; provides training for law enforcement, school officials, fire fighters, and others to administer opioid antagonists; IEPA shall establish a statewide medicine take-back program; the Department shall develop a poster and brochures for display and distribution in pharmacies regarding take-back information/events; expands utilization of the Prescription Monitoring Program (PMP); creates a peer review committee for prescribers and dispensers; and lowers the threshold where someone is potentially considered to be shopping for medicine from six prescribers or six pharmacies in one month to three prescribers or three pharmacies in one month.

IRMA would like to thank Rep. Lang, Rep. John Anthony,Rep. Patti Bellock, Sen. Kotowski, Sen. Iris Martinez, and Sen. William Delgado all of whom contributed significantly to one or more of the issues contained in HB 1. We would especially thank Rep. Lang for his approach that led to the final version of HB 1.

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BIOSIMILARS

In a very simplistic definition, biologics are medicines derived from living organisms. Early versions include vaccines and blood components (e.g. blood platelets). Second generation are chemically synthesized. Biosimilars are, as the name implies, similar to biologics in that they function the same way in the body. They are the generic version of biologics. The US FDA recently opened a pathway for biologics to be approved for use in the United States. Some have sought to inhibit the substitution of biologics with biosimilars despite the financial benefits that accrue to patients and government programs. A battle has been raging in states around the nation between those who want to inhibit such substitution and those that don’t want artificial barriers. Illinois was a part of that debate.

This week, agreement was reached on SB 455 (Sen. Tony Munoz, D- Chicago/Rep. Edward Acevedo, D- Chicago) regulating how and when biosimilars are substituted and notification provided to prescribers and patients.

In short, a biologic can only be substituted with a biosimilar if the FDA has given approval, the prescriber has not indicated “do not substitute’, and the patient is informed of the substitution. Additionally, within five business days of dispensing a prescribed biologic, the pharmacy must input the information into an interoperable electronic medical records system, an electronic prescribing technology, a pharmacy benefit management system, or a pharmacy record that can be electronically accessed by a prescriber. Entry into one of these systems is presumed to be notice to the prescriber. If the prescriber does not have electronic access, he/she must notify the pharmacy. The agreement on SB 455 ends a multi-year debate in Illinois.

IRMA would like to thank Sen. Tony Munoz for his leadership on this issue over the past three years. Additionally, IRMA would thank Rep. David Harris for his leadership and participation as well as Rep. Acevedo for his sponsorship in the House.

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LOCKING MECHANISM FOR PRESCRIPTIONS

As introduced earlier this Session, HB 3219 (Rep. Mike Zalewski, D-Riverside) would have created a pilot project mandating every pharmacy to participate and requiring every new or refilled Schedule II prescription that contains hydrocodone to be dispensed in a non-reusable locking device. This package is defined as having an alphanumeric combination lock. The bill had been introduced at the behest of the only company to manufacturer such a product. IRMA pointed out that this mandate would cost pharmacies at least $39 million dollars. Moreover these costs are not recoverable because pharmacies are prohibited from charging the patient for the bottle under their existing contracts with private insurers and government benefit programs (e.g. Medicare Part D, Medicaid, and prescriptions for individuals in nursing homes) would be exempt from the legislation. Additionally, this legislation would provide an advantage for mail order prescription providers because the mandate could not be enforced on out of state mail-order pharmacies. Finally, pharmacies were not provided protection from liability if the product failed. As a result of some of these concerns, Rep. Zalewski amended the legislation to create a pilot project for which pharmacy participation is completely voluntary. Moreover, the pilot project is limited to $150,000 that is provided from the Department of Human Services. IRMA would like to thank Rep. Zalewski and Rep. Robert Martwick for addressing the concerns of the retail community.

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DATA SECURITY

SB 1833 (Sen. Daniel Biss, D-Skokie/Rep. Ann Williams, D-Chicago) changes what is currently considered “personal information” for the purposes of requiring notification to the consumer and/or the Attorney General if the information is breached.  Specifically, the bill charts new territory by requiring notification for breaches of “consumer marketing” and “geolocation” information.  After months of discussions with the Attorney General’s office, IRMA was able to negotiate several changes to the bill which, in total, removed our opposition and allowed IRMA to take a neutral position.  Some of the more important changes include:  narrowing the definitions of consumer marketing and geolocation information to more closely target specific behavior of concern to the Attorney General, removing the requirement to notify the individual when geolocation and consumer marketing information is breached, raising the threshold that triggers notification requirements and expanding the time allowed for businesses to notify individuals and/or the Attorney General when information is breached.  There were a number of other changes made in a good faith effort by the Attorney General’s office to address IRMA’s concerns.  SB 1833 passed both chambers and now awaits action by Governor Rauner. IRMA would like to thank Attorney General Lisa Madigan, Senator Biss, and Rep. Williams.

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RETAIL THEFT – ACCELERATED RESOLUTION COURT

SB 202 (Sen. Bill Cunningham, D-Chicago/Rep. Michael Zalewski, D-Riverside) would establish a pilot program for Cook County which would provide an accelerated route to adjudication for persons accused of misdemeanor retail theft or criminal trespass.  This measure comes out of concerns raised by Cook County Sheriff Tom Dart about jails overcrowded with non-violent offenders who remain in jail for long periods of time awaiting trial because they cannot afford to bond out.  This bill will permit qualifying persons accused of the aforementioned crimes to either have a final adjudication of their case within 30 days of arrest or be allowed to bond out of jail on their own recognizance until their hearing date.  IRMA supports this bill because it addresses the crime of retail theft in a way that is fair to the victim without undermining the severity of retail theft.  We also support this bill because it substantively addresses the concerns of taxpayers and criminal justice reform advocates who want to ensure that persons sitting in jail awaiting trial are there because they are a potential threat to society and not simply because they are poor.


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SNAP ELIGIBILITY

SB 1847 (Sen. Daniel Biss, D-Skokie/Rep. Robyn Gabel, D-Evanston) will allow more people in Illinois to qualify for SNAP benefits.  It is estimated that the bill will add 40,000 more SNAP cases (cases include individuals and families) to the program.  IRMA opposed the bill because it adds more cases to a SNAP distribution system that is not spread throughout the month and creates substantial difficulties for grocers, employees, and customers.

Prior to 2013, Illinois had one of the most favorable SNAP distribution schedules in the country because it distributed benefits throughout the month.  After making some software changes in 2013 that were allegedly necessitated by the Affordable Care Act (ACA), the Department of Human Services (Department) elected to change SNAP distribution to the first 10 days of the month.  This change was particularly baffling because it was made after the USDA (the federal Department that issues SNAP benefits to the states) wrote a letter to all of the states encouraging them to distribute benefits throughout the month.  In response to the letter, a number of states began expanding their distribution beyond the first few days of the month.  Illinois was the only state to move in the opposite direction.

Amidst IRMA’s strong objection, the Department moved forward with the distribution change.  A few months later, IRMA submitted evidence that changing the distribution caused job loss, a reduction of employee hours, and store traffic that was severely diminished in the latter half of the month.  Presented with that data, the previous administration agreed to temporarily add additional dates beyond the 10th of the month to relieve the pressure on the independent grocers that largely serve communities in need and to put their employees back to work.  As this was a temporary compromise, a resolution was passed that required everyone to come back to the table in 2015 and hammer out a permanent fix to SNAP distribution that was fair to everyone involved in the program.  Before the group reconvened, SB 1847 was introduced to add more people to the SNAP program and further exacerbate the existing distribution problem.

The grocers that IRMA represents seek a permanent solution that will allow customers, regardless of how they pay for their groceries, to be served with dignity, offered healthy, perishable items at all times of the month, put employees back to work throughout the month, and allow for grocery stores that are operating in areas where there is high SNAP usage to remain viable.  Despite IRMA’s objection to moving the bill until a distribution solution is reached, the bill passed both Houses.  The sponsors, committee chairmen and Republican members of the House committee have vowed to help us reach a solution with the Department and advocate community this year.  We would also like to thank Rep. Patti Bellock for her presentation on the House floor explaining the need to solve this problem. IRMA looks forward to resolving this issue in the near future.


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LIQUOR CONTROL ACT AMENDMENTS

 
“Of Value” Provisions

HB 4018 (Rep. Frank Mautino, D-Spring  Valley) clarifies that alcoholic liquor can be packaged in combination with non-alcoholic products without violating the three-tier system.  In addition, it makes clear that manufacturers and distributors can furnish non-alcoholic merchandise to retailers for free as long as the merchandise is not tied to an alcoholic product.  The Illinois Liquor Control Commission had previously taken the heavy-handed position that furnishing items such as coolers to promote non-alcoholic products (e.g. sports drinks, bottled water, etc.) violated the Act.  Therefore this change was sought to clarify that such a practice will not be considered as violating the prohibition of giving something “of value” to retailers to sell or promote the sale of alcoholic products.

Happy Hour, 100ft Rule Exemptions and Sunday Sales

SB 398 (Sen. Antonio Munoz, D-Chicago/Rep. Sara Feigenholtz, D-Chicago) will give businesses some flexibility to have traditional happy hours and will clarify that meal and party packages with unlimited drinks for a set price are allowed by law.  The city of Chicago wrote tickets to hotels and restaurants for their offering of such packages on New Year’s Eve in violation of Trade Practice Policies (TPP) written by the Illinois Liquor Control Commission (ILCC).  The TPPs have always been issued to describe “best practices” and have never been given the force of law.  A number of the restaurants and hotels that were cited for the practice have since sued the city and all of the cases that have reached a final decision have been decided in favor of the business.  SB 398 was written to address this issue and to allow licensees to serve discounted drinks for up to 4 hours/day for no more than 15 hours/week.  The bill will also include the following measures:

•           Prohibit TPPs

•           Allow hotel restaurants under the same ownership to have one license and transfer liquor from one location to the other as long as the restaurants are in the same hotel

•           Deletes the Sunday sales prohibition, but will allow local jurisdictions to prohibit through local ordinances

•           Grants the local liquor commissioner the authority to provide an exemption to the 100 ft. rule so that businesses don’t have to seek the exemption from the state legislature

•           Requires that all servers be BASSET certified

•           Prohibits licensees from selling drinks “2 for 1”, from increasing the volume of a drink without proportionately increasing the price and from allowing drinking games

The changes to this bill represent agreements made between everyone involved in the 3-tier system.  They are common sense changes that allow retailers and restaurants to have flexibility and certainty in the sale of alcohol and, most importantly, to sell and serve it responsibly.

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TOBACCO

Tobacco Licenses

House Bill 2494 was introduced and passed last year as P.A. 98-1055 and requires retailers to obtain a license to sell cigarettes. The legislation was introduced to reduce the sales of cigarettes to minors, illegal sales of contraband tobacco, and the illegal smuggling of cigarettes in Illinois. The license includes an annual fee that is intended to help fund the interdiction of smuggling and retail inspections. P.A. 98-1055 also included an employee training program, a merchant citation mitigation provision, and record keeping provisions.  HB 2513 (Rep. Marcus Evans, D-Chicago/ Sen. Julie Morrison, D-Deerfield) is a trailer bill that clarifies the provisions passed in P.A. 98-1055. Specifically, the legislation: (1) allows a waiver for records to be kept out of state; (2) broadens the employee training requirements; (3) allows the employee training to be conducted electronically; (4) provides an avenue to mitigate retail tobacco citations; and (5) provides a waiver for closed loop distribution invoice record keeping requirements.  The good faith negotiations between the Illinois Department of Revenue and IRMA led to an agreed bill that passed both Chambers unanimously and has been sent to the Governor for his signature.

IRMA would like to thank Rep. Marcus Evans, Sen. Julie Morrison, staff and the Department of Revenue for all of their hard work on reaching an agreeable compromise on this legislation.

Contraband Cigarettes

SB 509 (Sen. Antonio Munoz, D-Chicago/Rep. John Cabello, R-Loves Park) will allow cigarettes without the tax stamp of the local jurisdiction to be considered contraband and thus make retailers subject to penalties outlined in the Cigarette Tax Act.  The City of Chicago sought the change because the sale of cigarettes without the Chicago/Cook County tax stamp is on the rise and they wanted the option to impose stronger fines on retailers who are caught selling such unstamped packs of cigarettes.  We should note that it seems the rise in the illegal sale of cigarettes is not only relegated to bad actors in the retail community, but increasingly such sales are occurring in person-to-person sales controlled by local gangs.  In addition, we also note that the rise in the illegal sale of cigarettes seems to correspond to the tax increases that have occurred at the state and local levels over the past couple of years.  These tax increases have made the price of cigarettes more expensive than any other city in the country; a fact that is not lost on the growing underground market for unstamped cigarettes.

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TELECOM MODERNIZATION

The current 9-1-1 network in Illinois is outdated and lacks the necessary funding to maintain adequate 9-1-1 services for the State.  In 2013, the Illinois General Assembly extended the sunset on the Telecommunication Act and in doing so also created the 9-1-1 Services Advisory Board (“Board”). The Board was convened to determine the 9-1-1 costs necessary for every 9-1-1 system to adequately function and to recommend options to fund these systems. SB 96 (Sen. John Sullivan, D-Quincy/Rep. Brandon Phelps, D-Harrisburg) contains the recommendations as presented by the Board after numerous statewide meetings. It also contains important changes to modernize Illinois telecommunications and the video competition laws.

Currently, there are three surcharges that help fund the current 9-1-1 systems and network. One of these charges includes a 1.5% tax that is collected by a retailer on the sale of any prepaid wireless telecommunications service.  The retailer must include a line item on the receipt to show the surcharge. The retailer remits the surcharge to the Illinois Department of Revenue where they place it in the Wireless Service Emergency Fund.

In order to fund the Illinois Telecommunications Access Corporation (“ITAC”), which provides equipment for hard of hearing and deaf people, SB 96 adds an additional 1.5% surcharge on the purchase of any prepaid wireless telecommunications service. Similar to current law, the retailer will collect the 3.0% surcharge from the consumer. To remain consistent with current law the retailer may combine both surcharges in one line item on the receipt. The 3.0% tax will be remitted to the Illinois Department of Revenue where it will be divided between the Illinois Telecommunications Access Fund and the Wireless Service Emergency Fund. SB 96 also implements a statewide $0.87 tax per landline, wireless, VOIP, and cable provided telecommunications which will be collected by telecommunication carriers and remitted to the Illinois Department of Revenue.

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DIRECT SALES

SB 142 FA #1 (Sen. Kotowski, D-Park Ridge) as introduced allowed a person over the age of 65 to cancel a direct sales contract (Tupperware, Etsy, Mary Kay, Pampered Chef, etc.) after 15 business days or three weeks. Illinois, along with 48 other states, follow Federal Trade Commission (“FTC”) rules that allow consumers of all ages to cancel a direct sales contract within three business days. These guidelines were promulgated in 1972 and have continuously been reviewed by the FTC and found to provide adequate protection for all consumers, including those over the age of 65. Sen. Kotowski amended the bill to require a different format for the cancellation provision adjacent to the consumer’s signature. This too would be inconsistent with 49 other states and the FTC rules.  The amendment passed the Senate Judiciary Committee based on the reservations expressed by members of the Committee. Sen. Kotowski held the amendment on 3rd reading to allow IRMA to help negotiate and develop a comprehensive bill over the break that would target and address the bad actors in the direct sales industry while protecting both legitimate businesses and vulnerable consumers.

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FOOD ESTABLISHMENT SELF-INSPECTIONS

SB 1800 (Sen. Heather Steans, D-Chicago/Rep. Sara Feigenholtz, D-Chicago) will allow the City of Chicago to implement a self-inspection program for low-risk food establishments.  Qualifying food establishments would perform their own health inspections every two years which would then be randomly audited by the Department of Public Health.  The department will develop the inspection form and fines for noncompliance will be assessed.  The city has run a successful pilot program for the past couple of years, so this bill would make the program permanent and allow them to expand beyond current program participants.  Allowing low-risk food establishments to perform their own inspections allows the city to use its limited inspection resources wisely and cover more ground to ensure the safety of the food residents consume.  IRMA members have participated in the pilot program and we look forward to having more members qualify for the expanded program.

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CONCEAL CARRY

SB 836 (Sen. John Sullivan, D-Quincy/Rep. Brandon Phelps, D-Harrisburg) amends the conceal carry law which went into effect last year.  Since the bill was signed into law, there have been a number of interested parties on both sides of the issue looking to amend the bill in any number of directions.  While it did not seem that there was much desire to actually change the law this soon after passage, SB 836 will make a number of changes that will mostly be of no concern to the retail community.  Members should note two changes in particular.  First, it allows a person to purchase a firearm with a conceal carry license instead of the FOID card. We can expect the Illinois State Police to promulgate administrative rules implementing this new provision. Second, it also allows a person to transfer a loaded firearm from their person or inside the vehicle to the trunk while in a parking lot. Currently, the weapon must be unloaded prior to exiting the vehicle for placement into the trunk. SB 836 passed both chambers and now awaits action by Governor Rauner.

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