This Week in Springfield – 100-33

IN THIS ISSUE:

BUDGET
PRE-JUDGEMENT LIENS
PAY HISTORY
EMPLOYEE EXPENSES
NURSING MOTHER’S ACT
PHARMACY BENEFIT MANAGERS
TOBACCO 21
FOOD SERVICE SANITATION MANAGERS CERTIFICATE
LIQUOR CONTROL COMMISSION”>
DRONES
PROGRESSIVE INCOME TAX

The Second Spring Session of the 100th General Assembly adjourned on schedule with a full-year budget agreed to by both parties and final action on numerous items.

Budget

With rarely seen bi-partisan margins in favor, the Fiscal Year 2019 budget was approved by the Assembly as contained in HB 109 (Rep. Greg Harris (D-Chicago)/ Sen. John Cullerton (D-Chicago), the appropriation bill, and HB 3342 (Rep. Greg Harris/Sen. Heather Steans (D-Chicago), the Budget Implementation Bill (BIMP). It is a full-year budget for FY ’19 and a supplemental budget for FY ’18 to cover the inadequacies of the current year’s budget. The budget contains no tax increases. Revenues come from anticipated higher tax revenues from a growing economy, $200 million in fund transfers, $800 million in sweeps from various administrative funds, and over $400 million in pension reforms.

The pension changes are voluntary so they rely upon an estimation of the number of people in the pension system who will exercise the options. The pension changes are: (1) a buy-out for vested, inactive members who are now employed somewhere other than the state but have not retired. They will be offered a buyout at 60% of the value of their pensions (estimated savings = $41 million); (2) A buyout of the 3% annual cost-of-living-adjustment for Tier 1 pensioners (estimated savings = $382 million over time); and, (3) reduces salary spiking cap from 6% to 3% meaning any salary increases over 3% will be covered by local government employers.

The budget started months ago with the formation of a bi-partisan budget working group including representatives of the Governor’s office. The framework agreed to by these legislators was then moved to the four leaders and the Governor who made some adjustments and finalized the budget.

It is an $80 billion budget but the real focus is on the portion paid from General Revenue Funds which totals $38.5 billion. Here are some highlights:

  • Elementary and secondary education received an increase of $402 million as compared to FY ’18. TWIS readers will recall that last year, a comprehensive reform of the funding formula was enacted but it requires $350 in additional monies in each year for the next 10 years. Due to the fact a supplemental budget for FY ’18 was included in the budget deal, that $350 million threshold was met for the first two years.
  • Higher education received an increase of $60 million. In addition, a $25 million scholarship fund (AIM HIGH) was created to provide tuition assistance to in-state students wanting to continue their education at in-state institutions of higher learning. This $25 million must be matched by the various institutions.
  • Human service entities are funded including a 50-cent per hour wage increase for caregivers who work with developmentally disabled individuals, substance abuse providers, mental health providers, etc. Human service spending totals $13.835 billion of the GRF budget but even more goes to human services as a result of federal funds.
  • Public safety spending will cover two mental health treatment facilities and two life skills re-entry facilities as well as a new State Police cadet class.
  • A $2.9 billion pay-as-you-go capital program as well as nearly $9 billion to fund IDOT’s FY 19 road program.
  • Nearly $64 million in back wages owed to state employees. These cost of living increases were originally frozen by the Governor’s Office but a court ordered them to be paid.
  • A temporary reimbursement bridge for pharmacies with 10 or fewer locations in counties with less than 50,000 in population. This is a result of the shockingly low reimbursements being seen as a result of the Medicaid managed care rollout.
  • The sunset for on-line lottery is extended for another year. The new private lottery manager, Camelot, will assume control July 1st so this gives them time to put a program in place and recommend changes they would like to see. .
  • Prohibits cost of living increases for legislative and executive elected officials and appointees.
  • The bill backlog could be reduced by up to $1 billion under the provisions of SB 2858 producing additional interest savings to the state.

The budget has been sent to the Governor for his consideration.

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Pre-Judgement Liens

HB 4324 (Rep. Emanuel Chris Welch, D-Westchester/Sen. Kimberly Lightford, D-Chicago) originated from a union-funded group known as the Raise the Floor Alliance. As introduced, HB 4324 would allow any employee to file a lien against an employer’s real and personal property simply on the basis that the employee believes he or she has a valid wage claim against the employer.  The lien would have taken precedence over almost any other lien or judgment, including mortgages, and could have been filed for single employee wage claims that amount to several hundred dollars in damages and/or class action lawsuits and representative wage claims that allege millions of dollars in damages. Filing a lien of such significance without first proving the merit of their allegations would have subjected employers to constant extortion in order to avoid dealing with a lien on their property.

A business and banking coalition led by IRMA worked with Rep. Chris Welch and Rep. Jay Hoffman (D-Belleville) to reach an agreement ultimately adopted in House Floor Amendment #2 that addresses the issues presented by the advocates.  Currently, the Department of Labor (DOL) is taking 18 months to adjudicate a claim. The agreed upon language requires the DOL to adjudicate wage claims within 30 days of receiving the claim. This would address the issue of unscrupulous companies dissolving, reorganizing, or disappearing before a claim is adjudicated. If the company is found guilty, exhausts its appeals, and still does not pay, a lien will be placed on it assets according to current lien practices.  Finally, if a claim is verified, an employer will be required to submit an escrow of 10% of the claim for the duration of the 30 day adjudication. If, after the 30 days the employer is found innocent, the funds will be returned to the employer.  This agreement passed the House by a vote of 88-3.

The proponents of the legislation filed Senate Committee Amendment #1 in an attempt to renegotiate the terms of the bill by removing the time limit on the escrow account in contravention of the original agreement. While the bill with the amendment passed the Senate by a vote of 31-18-1, Rep. Welch filed a motion to non-concur as a result of the non-agreed amendment.

IRMA would like to thank Rep. Welch and Rep. Hoffman for their leadership on this issue.

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Pay History

Similar legislation that was vetoed by the Governor and failed to be overridden by the Senate last year passed the House with by a vote of 87-24 and the Senate by a vote of 31-16-1.  Despite an avenue for compromise offered by the business community, the advocates chose to pursue the same path traveled before.

HB 4163 (Rep. Anna Moeller, D-Elgin/Sen. Christine Castro, D-Elgin) prohibits an employer from asking an employee about previous wage, salary and other compensation.  It also erodes the current statutory defenses for Illinois employers while expanding the statutory penalties.  While IRMA has, from the beginning, agreed to prohibit the question as long as there are common sense exemptions (e.g. employee already works for the business or salary is a matter of public record), IRMA remains opposed to arbitrarily restricting Illinois’ employer’s current limited defenses and increasing current statutory penalties.  Especially when the penalties provide more “protection” for prospective employees who would potentially be asked a question in violation of the proposed legislation than current employees who are paid less in violation of the current statute—a perplexing quirk that seems to undermine the proponents own stated purpose for bill.

Illinois currently only has three defenses to an unequal wage claim (1) seniority system; (2) merit system; and (3) a system that measures earnings by quantity or quality of production. The advocates argue that limiting the current defenses and increasing the penalties will deter employers from violating the Equal Pay Act. In the past 11 years (excluding 2010 and 2011 where there is no available data), under the current limited defenses, there have been only 51 recorded violations of the Equal Pay Act. In that same time period, approximately 707 investigations were conducted by the Illinois Department of Labor. Less than 7.5% of all claims in the last 11 years have resulted in a violation.  According to the U.S. Small Business Administration there are over 1.2 million businesses in Illinois. Assuming that a different company was responsible for each violation only .0000425% of Illinois businesses have been responsible for an Equal Pay Act violation in 11 years.  This is a 99.9999575% compliance rate.

Despite this compliance rate, some business associations, led by IRMA, were willing to take a proactive step to support expanding the current Equal Pay Act to prohibit an employer from asking about a prospective employee’s wage and salary. A year ago, these associations suggested using a compromise that was accepted by all parties in Massachusetts that included an affirmative defense for employers. Since that time, Oregon, Delaware, California, and Puerto Rico have passed legislation prohibiting asking about an employee’s previous wage and salary. Oregon and Puerto Rico have adopted the Massachusetts model. So three of the five major jurisdictions support a compromise model.  Additionally, this model has been introduced in Rhode Island, Connecticut, Montana, Georgia, and Texas. Despite over 700 investigations over the past 11 years of available data 99.99% of all Illinois employers have already proven to be compliant with the current law.

IRMA and a coalition of businesses went further and offered to remove the affirmative defense, passed in other states, from the legislation and just prohibit an employer from asking the question.  The current penalties would remain the same and apply to a violation of the new prohibition. This language is reflected in SB 3100 (Sen. Jennifer Bertino-Tarrant, D-Plainfield). This additional compromise was also rejected by the proponents. SB 3100 passed the Senate Executive Committee by a 13-1-2 vote and sits on 3rd Reading in the Senate.

It stands to reason that a reasonable compromise would be to take a proactive step forward by prohibiting the salary inquiry while recognizing the overwhelming majority of Illinois businesses have proven to promote and support both men and women in the workforce.

IRMA would like to thank Sen. Jennifer Bertino-Tarrant and all Senators who were willing to find common-sense, fact-driven compromise. HB 4163 now goes to the Governor for his consideration.

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Employee Expenses

SB 2999 (Sen. Patricia Van Pelt, D-Chicago/Rep. Melissa Conyears-Irvin, D-Chicago) requires an employer to reimburse an employee for all necessary expenditures or losses incurred by the employee directly related to services performed for the employer. Necessary expenses” include all reasonable expenditures or losses including, but not limited to, uniforms, equipment, vehicle expenses, electronic devices such as cell phones, tablets, and computers, and any other expenditures or losses an employer requires an employee to incur in direct consequence of the discharge of employment duties. An employer is not liable under this Section unless the employer knew or had reason to know that the employee incurred the expenditure or loss.

This legislation is consistent with federal law. SB 2999 passed the Senate by a vote of 50-2 and the House by a vote of 114-1.  The legislation will be forwarded to the Governor for his consideration.  IRMA is neutral with the legislation and would like to thank Sen. Van Pelt and Rep. Conyears-Irvin for their work with the business community on this issue.

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Nursing Mother’s Act

HB 1595 (Rep. Katie Stuart, D-Collinsville/Sen. William R. Haine, D-Alton) requires an employer to provide for reasonable break time during the first year after the child’s birth each time the employee needs to express milk. The break time may run concurrently with any break time already provided to the employee. An employer may not reduce an employee’s compensation for time used for the purpose of expressing milk or nursing a baby. An employer shall provide reasonable break time as needed by the employee unless to do so would create an undue hardship as defined by the Illinois Human Rights Act.

HB 1595 passed the House by a vote of 104-0 and the Senate by a vote of 49-0.  The legislation will be sent to the Governor for his signature.  IRMA is neutral.

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Pharmacy Benefit Managers

HB 3479 (Rep. Sara Feigenholtz, D- Chicago/Sen. Andy Manar, D- Bunker Hill) initially sought to provide significant new reimbursements to pharmacy. The cost of doing so was over $200 million and legally questionable as it would have meant unilaterally changing the contracts negotiated and signed by the managed care organizations.  With these questionable requirements, the House passed the legislation by a vote of 87-16-1 while recognizing changes would be needed as the legislation worked its way through the process.  As a result, Senate Amendment #5 was filed and took a different approach by, seeking to regulate PBM’s, require the reporting of certain reimbursement information to the State, regulate PBM audits of pharmacies, and prohibit gag clauses and the ability of PBM’s to use the Medicaid contract and the contract serving state employees to force pharmacies to participate in other unrelated contracts.

HB 3479 remains on second reading so that the parties can continue to discuss the issues over the summer.

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Tobacco 21

SB 2332 (Sen. Julie Morrison, D-Deerfield/Rep. Camille Lilly, D-Chicago) prohibits anyone below the age of 21 from purchasing tobacco from a licensed Illinois retailer while removing any penalties for the underage possession or consumption of tobacco.  The initiative passed the Senate with a vote of 35-20-0 and initially failed to pass the House with a vote of 56-54-1.  After some political trading took place the initiative passed the House by a vote of 61-49-1.

As currently drafted SB 2332 makes it legal  for a person under the age of 21 to: (1) possess tobacco, (2) consume tobacco, (3) sell tobacco, (4) buy tobacco from an unlicensed Illinois retailer or individual, or (5) buy tobacco from a licensed out-of-state retailer or online.  Additionally, the bill protects unlicensed, unregulated, and, untaxed individuals selling tobacco to minors while prohibiting licensed retailers from selling tobacco products to anyone below the age of 21.

Raising the age from 18 to 21 may not make as big of a difference as lawmakers hope, given that most smokers — nine out of 10 according to the Surgeon General— have already begun smoking by the age of 18. Additionally, the vast majority obtain their tobacco products from older family and friends. Three out of four minor smokers will become adult smokers.  Ironically, SB 2332 may actually encourage this behavior by removing the current statutory penalties for underage use and consumption of tobacco.

IRMA is opposed to the bill which will drive sales away from licensed retailers to illegal sellers and to out-of-state retailers which will reportedly, according to the Department of Revenue, cost the state $48 million a year.

SB 2332 will now be sent to the Governor for his consideration. It is unclear whether the Governor will or will not sign the legislation.

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Food Service Sanitation Managers Certification (FSSMC)

HB 5011 (Rep. Ryan Spain, R-Peoria/Sen. David Koehler, D-Peoria) grandfathers the FSSMC’s that were approved prior to last year’s passage of the legislation that removed the redundant state certification and fee on food retailers.  Last year, IRMA convinced lawmakers to remove the redundant state food certification and accompanying unnecessary fee on food retailers.  IDPH complied but has refused to acknowledge the expiration date of current FSSM certificates. This has required some employees to retake the federal tests before the expiration of the current 5 year certificates.  HB 5011 would grandfather those FSSM certificates approved before the change in the law.

HB 5011 was approved unanimously in the House by a vote of 111-0 and the Senate by a vote of 55-0.  It has been sent to the Governor for his consideration where he is expected to sign the legislation. IRMA supports the legislation.

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Liquor Control Commission

SB 3022 (Sen. Tony Munoz, D- Chicago/Rep. Lou Lang, D-Skokie) seeks to undo a reform made by former Governor Rod Blagojevich who undertook a reorganization of several agencies that included moving the Illinois Lottery, Gaming Commission, and Liquor Control Commission (ILCC) under the Illinois Department of Revenue (IDOR). Today, only the ILCC remains under IDOR. Retailer and others long-chaffed under an ‘independent’ ILCC believing it was strongly tilted toward the interests of the wholesale tier of the three-tier system. There is a belief that by having ILCC under the auspices of IDOR has restored at least some semblance of balance which is appropriate as the ILCC is supposed to be a neutral arbiter and regulator.

Nevertheless, the legislation passed the Senate by a vote of 52-3 and passed the House by a vote of 92-12-1.  SB 3022 now goes to the Governor for his consideration.  IRMA is opposed to the legislation.

 Drones

SB 3291 (Sen. James Clayborne, D-East St. Louis/Rep. Marcus Evans, D-Chicago) would preempt home rule municipalities from passing regulations on the use of drones or unmanned aerial systems (UAS).  The Federal Aviation Authority (FAA) retains the authority to regulate private and commercial drone use. Despite this authority local municipalities have been introducing ordinances that regulate drones.

The Federal Aviation Authority (FAA) has created rules for both commercial and private drone use and has made it clear that the FAA’s rules preempt local and state jurisdiction regarding the regulation of drones. Additionally, in 2015, Illinois created the Illinois Unmanned Aerial System Oversight Taskforce, to which IRMA was appointed, to provide oversight and input in creating comprehensive laws and rules for the operation and use of drone technology within Illinois. The taskforce’s final report indicated that the state should provide guidance within the FAA guidelines and however well-intentioned, overly burdensome local regulations that discourage or unnecessarily obstruct the otherwise safe and lawful use of UAS should be avoided.

Per the taskforce’s recommendations, SB 3291 would give the state, and specifically the Division of Aeronautics within the Department of Transportation, the authority to regulate drones in compliance with FAA guidelines.

The legislation passed the Senate by a 52-0 vote and the House by a 112-4 vote. SB 3291 now goes to the Governor for his consideration.  IRMA supports the legislation.

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Progressive Income Tax

 

On a partisan roll-call, Illinois House lawmakers narrowly passed a nonbinding resolution to replace Illinois’ current flat tax with a graduated or progressive income tax system.  Proponents argue that House Resolution 1052 provides for a fairer and progressive way for the state to generate revenue by reducing taxes on the middle and low class while increasing taxes on those some consider ‘rich’.  While the proponents of the resolution believe a graduated income tax is more equitable the resolution did not provide for any suggested or specific rates.  Opponents of the resolution pointed out that the states that have progressive income taxes have higher rates for lower and middle class than Illinois’ current flat rate.

 The nonbinding resolution passed the House with by a margin of 61-52.

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