December 9, 2022

This Week in Illinois

Session Update

After conclusion of business last Thursday afternoon, the Senate released its session calendar for 2023. This week, the House released its 2023 calendar. Lawmakers will return January 4th for the beginning of lame duck session. The 103rd General Assembly will be inaugurated on January 11th. 

The terms of each of the newly-elected Senators has been released. View the document here to see the term length for each member of the upper chamber.

RTA Strategic Plan

On Wednesday, the Regional Transportation Authority (RTA) held a discussion on their proposed budget and strategic plan. This virtual event functioned as the virtual public hearing on the 2023 Proposed Operating Budget, Two-Year Financial Plan, and Five-Year Capital Program and the final Strategic Plan Movers Workshop.

A main theme reiterated throughout the meeting was the anticipated funding gap that will arise for the RTA in 2026 after federal funding has been exhausted. The budget deficit is projected to be $730 million. There is stable public funding but operating revenue due to fewer fares has been reduced.

Provided below are some of the funding options that the RTA has identified.

• Increase RTA Sales Tax This option involves an increase of 0.25 percentage points in the existing RTA sales tax levied on Cook County and Collar Counties in the RTA service area. 
• Increase State Motor Fuel Tax This option involves an increase of $0.05 per gallon in the Illinois Motor Fuel Tax (MFT) levied on the sale of gasoline or diesel, with revenues dedicated to transit operations. 
• Implement Congestion Pricing This option involves a congestion pricing mechanism to levy a geographic- and/or temporal toll or fee on travel on Chicago area highways into the city with revenues dedicated to transit operations
• Expand RTA sales tax on services This option involves an expansion in the existing RTA sales tax to cover services, most of which are currently exempt from taxation.
•  Implement VMT Tax This option involves a VMT tax, a tax on the number of miles driven in a vehicle, to replace 5% of state MFT taxes lost by fuel efficiency and EV adoption and dedicate revenues to transit operations. 
• Increase Tollway Tolls This option involves a 5% increase in tolls on the Illinois State Toll Highway Authority (Illinois Tollway), with revenues dedicated to transit operations. 

View the five-year strategic plan draft here.

UI legislation signed into law by Governor

The Governor has signed SB 1698 into law as PA 102-1105.

During the recently concluded veto session, the Illinois Chamber, joined by other business groups and labor interests were able to come to an agreement that will save Illinois employers nearly a billion dollars in higher unemployment insurance taxes. The General Assembly approved the agreement in SB 1698 and Governor Pritzker signed the measure into law as PA 102-1105. The new law goes into effect January 1, 2023. The Illinois Department of Employment Security (IDES) is preparing the 2023 employer tax calculations which is estimated to be mailed to Illinois employers the first week of January. 

The objectives of the Illinois Chamber to the negotiations were to lessen tax increases on employers, establish better predictability for employers and bring greater stability to the UI Trust Fund. The agreement reduces employer taxes by $913M over the next 5-years. The Trust Fund Year End Balance over the next 5 years is estimated to remain above $1.5 billion.

At the beginning of 2020, the Illinois UI Trust Fund was over $2 billion. With the COVID pandemic taking hold and mandatory business shut downs the Trust fund plunged to a deficit of over $4.5 billion requiring borrowing from the federal government.

• The State pays the remaining $1.363 billion in Title XII borrowing. Because Illinois failed to pay off our federal debt by the federal deadline, Illinois employers lose a portion of our FUTA tax credit and incur in 2023 a $21 per employee tax for employees earning $7,000. The FUTA tax gross revenue of $114 million will be deposited into the Illinois Trust Fund. 
• The target balance for the Adjusted State Experience Factor (ASEF) will increase from $1.0 billion to $1.75 billion. Labor had originally asked that it be increased to $3 billion.
• The Taxable Wage Base (TWB) will increase over a five-year period by 2.4% per year. The TWB was last increased in 2009. Labor had asked that the TWB be increased by an average of 2.4% per year forever. The agreement provides for a fixed 2.4% increase per year for the first five years and then the TWB is frozen at that number. The TWB will increase from $12,960 to $14,592 over five years and will then be frozen at $14,592.
• An additional $450 million of State monies will be loaned, interest free, to the UI Trust Fund. These monies will help protect against the possibility of the predicted recession being deeper than expected. The loan will be paid back, interest free, by Illinois employers over a ten-year period beginning in 2024. If in any year the July 1st Trust Fund balance is less than $1.2 billion, the $45 million repayment will be suspended for that year and the payment schedule will be extended another year.
• Speed bumps” are created to bring both sides back to the table in two years. IF no legislative agreement is reached a $500M benefit cut for labor and a $500M tax increase for business is triggered. These speed bumps have served their purposes of bringing the parties to the negotiating table and have never been enacted. 

The financial portion of the agreement (payoff of federal debt and insertion of $450 million into the Trust Fund) is embodied in SB 2801 which was approved by the Senate. The House will be taking up the measure when it returns for a lame duck session scheduled to start on January 4, 2023. The year end Trust Fund balances are projected as follows: 2022- $62 million deficit; 2023- $1.58 billion; 2024-$1.76 billion; and 2025-$1.71 billion.

If you have any thoughts or questions please reach out to Jay Shattuck at jfshattuck@michaelbeststrategies.com or Aaron Harris at adharris@michaelbeststrategies.com

State of Illinois to Receive More than $350 Million in Federal Funding to Support Small Businesses

On Wednesday, the U.S. Department of the Treasury announced that Illinois will receive up to $354.6 million to administer four programs as part of the State Small Business Credit Initiative (SSBCI). The expanded program offering through SSBCI will enable Illinois to support small businesses across the state - helping them attract more capital investment and expand or launch business operations, while supporting key sectors. All of the new programs will launch in the coming months.

Illinois' four programs include the existing Advantage Illinois program, which provides favorable funding terms through a loan participation model; a new Advantage Illinois loan guarantee model, which will support businesses that have had difficulty receiving loans in the past; a new venture capital direct equity program that will support emerging technologies and industries; and a Climate Bank Finance program to issues loans to small businesses in the clean energy space.

The State Small Business Credit Initiative (SSBCI) was reauthorized as part of the American Rescue Plan Act (ARPA). The SSBCI program provides a combined $10 billion to states, with Illinois eligible to receive up to $354.6 million.

Advantage Illinois (AI) Loan Participation Program (Existing Program)

Advantage Illinois' existing Loan Participation Program provides low-interest loans to small businesses by partnering with local lenders located across the state. In 2022 as of December, 71 percent of AI loans have gone to businesses owned by people of color, women, people with disabilities or veterans.

Advantage Illinois (AI) Loan Guarantee Program (New Program)

Advantage Illinois' new Loan Guarantee Program will support business applicants who are having difficulty gaining access to capital by using funds to guarantee a percentage of loans provided by partner lenders. By guaranteeing a percentage of the loan, it makes loans more attractive to lenders and has the potential to increase the funds received by the businesses.

INVENT Venture Capital Program (VCP) (New Program)

Innovation Venture Fund (INVENT) will operate as a direct equity program with a focus on investing in businesses in key industries such as agriculture, ag tech, information technology, life sciences, manufacturing, quantum, and more.

Climate Bank Finance Loan Participation Program (New Program)

This new program will be overseen by DCEO and administered by the Illinois Finance Authority (IFA), which will partner with local lenders to issue the loans. Climate Bank funds will be available to small businesses in the clean energy sector.

The programs will launch in the near future; interested businesses should fill out this form to receive additional information and updates when the programs are launched.