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May 11, 2019 Update | Roger C. Marquardt & Co., Inc.

May 11, 2019 Update

Governor’s Highlights:

Recreational Marijuana: 
Governor Pritzker and legislative negotiators unveiled a draft proposal (SB7 /Steans) to legalize recreational marijuana in Illinois. Under the plan, Illinois residents could possess up to 30 grams of marijuana (15 grams for non-residents). Adults can grow up to five plants if certain conditions are met. Products will be taxed on a scale based upon the amount of THC. Cultivators will be taxed 7% on their gross receipts. Permits current large-scale commercial growers who serve the medical cannabis community as well as small “craft” growers. Establishes a $20 million low interest loan program through the Department of Commerce and Economic Opportunity for qualified applicants to help defray the start-up costs. Establishes licenses for “social equity applicants”. Places limitations on ownership to prevent the ownership consolidation. Misdemeanor and class 4 felony marijuana convictions would be expunged. The amendment is assigned to the Senate Executive Committee. A hearing on the proposal is not scheduled. The Governor’s office noted this is not the final product. Negotiations continue.

Pension Payment Deferral: 
Governor Pritzker announced he will be dropping his plan to defer $952 million in pension payments for FY 20 due to higher than expected April revenues. Revenue Director David Harris told legislators Tuesday that income tax receipts in April were $1.14 billion higher than April 2018, and $1.5 billion more than “conservative” earlier projections. That increase is likely to continue into the next fiscal year. Pritzker’s budget initially proposed extending the state’s current pension ramp from the current 2045 to 2052. Doing so would allow the state to put in $952 million less next year and spend the money elsewhere.

Graduated Income Tax: 
The Governor’s graduated income tax proposal, SJRCA1(Harmon/Martwick) is assigned to the House Revenue Committee. Two of the 74 Democratic representatives, Rep. Yingling and Rep. Carroll, publicly stated this week that they do not support the Governor’s tax proposal. Republicans remain united in their opposition. Passage requires 71 votes in the House.   A hearing has not yet been scheduled.

Governor JB Pritzker appointed state Rep. Jerry Costello II to serve as the Director of Law Enforcement at the Illinois Department of Natural Resources.
Westlake Hospital in suburban Melrose Park will remain open for now. Last week the Health Facilities and Services Review Board ruled unanimously to allow the hospital to close. This week a Cook County Judge ruled that the hospital must keep stay open while the court reviews the Health Board’s decision. Rep. Welch, Rep. Willis and Melrose Park Mayor Ronald Serpico have asked the Attorney General to intervene in the Westlake issue. On another note, Governor Pritzker withdrew the nominations of Julie Hamos and Michael Geldner to the Illinois Health Facilities and Services Review Board following their participation in the decision to close Westlake.

The Department of Commerce and Economic Opportunity’s Office of Minority Economic Empowerment is posting two Notification of Funding Opportunities for a total of $15 million to provide minority-owned businesses with resources to help create jobs, build capacity, increase revenues, and expand regionally. The program was authorized, but never funded. $10 million in funding is open to minority-owned businesses located in underserved populations. Eligible applicants include minority- owned businesses using the federal definition of minority owned firms (at least 51% of the firm is directly and unconditionally owned by one or more members of a minority group), start-ups or established businesses requiring public infrastructure improvements. $5 million in funding is available for incubators who serve or would like to serve minority-owned businesses.  The Department of Commerce and Economic Opportunity will offer informational workshops across the state for businesses and incubators seeking additional details about the grants.

101st General Assembly:
Friday, May 10th was the deadline to pass substantive legislation out of committee in the second chamber. Some deadline extensions are likely. The House canceled session for Friday, May 10th and Monday, May 13th.
Cigarette Tax: 
Senate President Cullerton is pushing a plan to raise Illinois’ cigarette tax by $1 per pack, three times what the governor called for in his FY 20 budget proposal. Supporters say increasing the current $1.98 per-pack tax would bring in $159 million in revenue for the state, with the added benefits of cutting smoking rates and health care costs. The proposal includes a $1-per-pack tax increase on cigarettes sold in Illinois, which would bring the statewide tax up to $2.98 per pack. The proposal also increases taxes on other tobacco products to 64% of the wholesale price. Governor Pritzker’s FY 20 budget proposes a 32 cents per pack increase on cigarettes and a 36 percent tax on the wholesale price of e-cigarettes. Cullerton and advocates announced the plan at a press conference. The proposal has not yet been filed.
Child Welfare Reform: 
Legislators formed the DCFS Child Welfare Reform Caucus and proposed an initial set of reforms through an amendment to SB193 (Morrison/Feigneholtz) . The bill is designed to increase accountability from DCFS by requiring higher-level reviews of cases involving non-school age children, and by ensuring that corrective action is taken in reviewed cases as necessary to protect children. The bill also neutralizes any incentives that encourage caseworkers to reunite families, leaving children at risk in situations where parents or family members are perpetrating child abuse and neglect, and require the sole focus to be on the child’s health, safety and best interests. In addition, legislators will receive detailed reports on a regular basis that describe the issues identified in child protection investigations. The amendment passed committee unanimously and is now pending before the full House.
Capital Funding: 
Two capital proposals surfaced this week. HB391 (Zalewski) and HB HB3233 (Evans/Sandoval) are both supported by Operating Engineers Local 150. The bill is estimated to generate $2.4 billion a year for horizontal projects – roads, bridges, and public transportation projects. Under this bill, the state’s gas tax would increase by 25 cents per gallon (going from 19 to 44 cents per gallon) and car license and registration fees would also increase. The gas tax would be indexed to inflation. Municipalities are authorized to impose their own 3 cents a gallon gas tax by referendum. Driver’s license fees would essentially double and title fees would increase from $95 to $155. Vehicle registration for electric vehicles would increase to $1,000. Funds generated under the bill would be used for “pay-as-you-go” projects rather than a bond issue. Discussions on a capital bill continue with the Governor’s office. This proposal does not include the “vertical” projects requested by hospitals and universities. The amendment to HB 391 passed the House Revenue committee and is now pending before the full House.
Sports Betting: 
Rep. Zalewski filed two new sports betting amendments this week to HB1260 . (Five previous amendments were filed to HB3308 .) At a committee hearing, stakeholders expressed concern over license fees and taxes especially in relation to those of neighboring states.  Amendment 1 authorizes sports betting for riverboat casinos horse racing tracks, off-track betting parlors, video gaming operators and the lottery. Amendment 2 allows for companies such as DraftKings Sportsbook and FanDuel Sportsbook to get their own licenses at a higher cost, with the possibility of a “bad-actor delay”. The amendment includes requests from sports leagues on integrity fees and data. The second amendment does not include the lottery. Both amendments include a 25% tax rate on operator gross sports wagering revenue. Negotiations are ongoing. Both amendments remain in the House Rules Committee.
The Senate approved HB2233 (Thapedi/Mulroe) which codifies modern practice and case law regarding special interrogatories and provides guidance about their use. This is an initiative of the Illinois Trial Lawyers and the Illinois State Bar Association.The bill now heads to the Governor.
Nathan Reitz, son of former Rep. Dan Reitz, was appointed to replace Rep. Jerry Costello II, who resigned to take a job at IDNR. A replacement for Rep. Conyears-Ervin who resigned last week following her election as Chicago City Clerk is expected to be named on May 18th.
Coming Up:
Both chambers return to session on Tuesday, May 14th at noon. Three weeks remain in the spring session. 

Key Session Dates
May 24- DEADLINE for third reading of Substantive Bills in 2nd chamber.