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February 22, 2019 Updat | Roger C. Marquardt & Co., Inc.

February 22, 2019 Updat

Coming Up:
The Illinois House will reconvene on Tuesday, Feb. 21 at noon. The Senate is off next week and will return to session on Tuesday, March 5. The Legislature will now focus in earnest on considering legislation at the committee level while the Appropriations committees begin reviewing the FY 2020 budget in detail at the agency level.
Governor’s Highlights:
Governor Pritzker signed a law (SB 1 Lightford/) raising Illinois’ minimum wage to $15/ hour by 2025.
He also named the following additional agency directors:
Representative Linda Chapa LaVia will serve as Director of the Illinois Department of Veterans’ Affairs. Elected to the Illinois House of Representatives in 2002, she was the first Latino to be elected to the General Assembly from outside of Cook County. When elected, she resigned her commission in the Illinois Army National Guard.Grace Hou will serve as Secretary of the Illinois Department of Human Services. Hou is currently the president of Woods Fund Chicago, a grant-making foundation that draws on the power of communities to fight brutality of poverty and structural racism.
Colleen Callahan will serve as Director of the Illinois Department of Natural Resources. Callahan currently manages her own communications consulting firm after spending more than seven years as state director for USDA Rural Development in Illinois. 
Deborah Hagan will serve as Secretary of Illinois Department of Financial and Professional Regulation (IDFPR). Hagan has been an advocate for consumer protection in the Office of the Illinois Attorney General for more than 36 years.
Mario Treto, Jr. will serve as Director of Real Estate at IDFPR. Treto currently serves as Deputy City Attorney for the City of Evanston where he provides legal counsel to elected officials, departments and staff with compliance, transactional and corporate matters.
Francisco Menchaca will continue to serve as Director of Financial Institutions at IDFPR. Menchaca has held the post since his appointment by Gov. Quinn in July 2013 and previously served the department as credit union supervisor.
Jessica Baer will continue to serve as Director of Professional Regulation at IDFPR. Baer has held the post since her appointment by Gov. Rauner in September 2016 and previously served the department as general counsel. 
Omer Osman will serve as the Secretary of the Illinois Department of Transportation. He has over 29 years of experience in civil engineering and management in IDOT.
Fiscal Year 2020 Budget Address highlights:On Wednesday, the Governor delivered his first budget address to a joint session of the Illinois General Assembly. His budget proposal for Fiscal Year 2020 spends $77 billion across all funding sources. The governor laid out his proposal as the first step in a multi-year plan to move Illinois forward and to bring back fiscal stability.
Also, he proposed addressing Illinois’ structural deficit, currently $3.2 billion. In order to address that deficit, he called on legislators to immediately change the approach to the state’s pension contributions and increase revenue. Going forward, the Governor called on lawmakers to implement a progressive income tax, a process likely to take at least 18 months to two years and will require voters to approve a change in the state’s constitution. He described the FY 2020 budget as a bridge to the future when additional revenue from the progressive income tax would be available.
Pritzker’s FY20 budget proposes to spend $38.75 billion in general funds and relies on $38.9 billion in general funds revenue. The budget also includes a $3.7 billion new Capital program ($17.7 billion new and re-appropriated funds).
New Revenue: The Governor proposes several new sources to fund state services for now, pending passage of a progressive income tax. The FY 20 budget proposes $1.1 billion in new revenue sources, including:

  • Taxing Medicaid Managed Care Organizations ($390 million);
  • Taxing e-cigarettes ($10 million);
  • Taxing cigarettes ($55 million);
  • Decoupling from the Federal Tax Credit for Repatriated Corporate Income ($94 million);
  • Legalizing and taxing sports betting ($212 million);
  • Legalizing and taxing recreational cannabis ($170 million);
  • Instituting a plastic bag tax ($20 million);
  • Phasing out the private school tax credit over three years ($6 million);
  • Creating a progressive tax on video gaming ($89 million); and
  • Capping the “retailers discount” ($75 million).

He warns in the absence of these new revenues, spending needs to be reduced by an equal amount.
Additional detail: As proposed, Pritzker estimates The Capital Projects Fund will receive an additional $89 million/year and local governments approximately $18 million under this alternative video gaming tax structure. With respect to the “retailer’s discount,” the Governor proposes a $1,000-per-month cap on the Retailers Discount, which he projects would increase revenue deposits by $75 million GRF and $58 million for local governments. He emphasized how he plans to spend funds generated from the yet to be enacted progressive income tax including: addressing the structural deficit, funding state services, stabilizing pensions and allocating $100 million annually to the Budget Stabilization Fund.
Highlights from the Governor’s budget proposal include:
Bill Backlog: According to the Illinois Comptroller’s Office, Illinois’ bill backlog stands at $8.1 billion. Pritzker’s FY 20 budget proposes to issue $1.5 billion in general obligation bonds in the summer of 2019 to pay off most of the interest-accruing bill backlog in the state employee health insurance program, the Medicaid program, and other overdue payments to vendors. The Governor proposes the reduction of the interest rate under the Prompt Payment Act to a market-based rate, perhaps tied to five-year U.S. Treasury rates. Additionally, the fiscal year 2020 budget proposal dedicates another $155 million in surplus towards backlog paydown.
The Governor’s plan to stabilize Illinois pension system includes:1. Progressive Income Tax: $200 million generated in new revenue from the enactment of a progressive income tax will be directly paid to the pension systems on top of the amounts certified by the systems annually.2. COLA Buyout: The COLA buyout program, authorized by the General Assembly in 2018, will be made permanent. Pritzker expects to decrease FY 2020 State contributions by approximately $125 million.3. Pension Bonds: $2 billion in pension bonds will be injected to the pension systems.4. Pension Holiday: The Governor will extend the pension payment ramp by 7 years to FY 2052 from FY 2045, while keeping the target funded ratio the same at 90%. Under this re-amortization schedule, FY 2020 general funds contributions are expected to be reduced by $878 million.5. Taskforces: Two pension taskforces have been created. The first taskforce is charged to find assets in State real estate and infrastructure to put into the State-funded pension systems for improvement to the systems’ financial health. The second one will make recommendations on the consolidation of local police/fire pension funds.
Pritzker proposes funding the Early Childhood Block Grant at $594 million, an increase of $100 million from last fiscal year. Early intervention is increased by $7 million. Funding for the Evidenced Based Model for elementary and secondary education is increased by $375 million. The FY 20 budget includes a 5% increase for public universities ($52.5 million) and community colleges ($13.9 million) as well as a $50 million increase to the Monetary Award Program. Also included is $35 million for the second-year cost of the AIM HIGH merit scholarship program for high achieving students.
Human Services:
The FY 20 budget increases the income threshold for the Child Care Assistance Program to 200 % of the federal poverty level ($30 million increase) which will serve approximately 10,000 more children. Once in the program, families will be allowed to continue with incomes up to 215% FPL.Also included: funding to address minimum wage changes for human service programs including addiction treatment, child care, developmental disabilities, home services, adult day care, homemaker services and others.
Funding is also included for the Chicago Veteran’s Home ($20.6 million), 126 additional direct care staff at DCFS ($9.8 million), and new lead screening ($6 million).
In addition to proposing a new managed care organization assessment, the FY 20 proposed budget provides funding for Medical program staff to administer, coordinate and implement the 1115 Behavioral Health Waiver ($3.2 million). $2.5 million is also being allocated for 119 additional staff to improve Medicaid cost avoidance and recoveries.
Public Safety: The FY 20 budget funds two new State Police cadet classes ($7.6 million), establishes funding for the Firearm Dealer License Certification Program ($5 million) and funds a new Department of Natural Resources Conservation Police Class of 20 officers.  
Capital Budget:The Capital Budget includes:

  • $1.8 billion for a FY 2020 pay as you go Road Program
  • $20 million for state wide broadband
  • $750 million in Lump sums for CDB deferred maintenance- (Statewide facilities – $600 million/Higher education – $150 million)
  • $ 662 million non-bonded/$25 million bonded EPA loans and grants for municipal water and environmental projects

Find official budget documents here.101st General Assembly:
In total, 2,153 Senate Bills and 3.713 House Bills were filed for consideration during the 2019 Spring Legislative Session.
A House committee approved legislation (HB 345/Lilly) to raise the smoking age to 21. The bill is now pending before the full House.
Last week Representative Marcus Evans filed House Bill 2864, establishing a pilot program for a 2.1-cent tax on every mile a vehicle is driven on state roads. Following considerable feedback, Representative Evans tabled the legislation.
The House Prescription Drug Affordability & Accessibility Committee will hold a subject matter hearing on Feb. 27th at 9:30 AM in Room 114 of the Capitol to discuss public opinion and policy overview. Republican State Senator Jim Oberweis filed paperwork to challenge first-term Democratic US Representative Lauren Underwood in 2020. Oberweis will give up his state Senate seat, up for election in November 2020.Key Session Dates:Feb. 26- Consolidated Primary Election.March 22- DEADLINE for substantive Senate Bills out of Senate Committee.March 29 – DEADLINE for substantive House Bills out of House Committee.April 2- Consolidated Election.April 12- DEADLINE for third reading of Substantive Senate Bills and Substantive House Bills.May 10- DEADLINE for Substantive Bills out of Committee in 2nd chamber.May 24- DEADLINE for third reading of Substantive Bills in 2nd chamber.May 31- ADJOURNMENT.