Week in Review for week ending 3/9/19

TAXES

Gov. Pritzker proposes a $3.4 billion tax hike on Illinois families and businesses.  On Thursday, March 7, Governor J.B. Pritzker finally unveiled his plan for a graduated income tax in Illinois. Pritzker’s proposed rates would result in a $3.4 billion tax hike on Illinois families and businesses.

The Governor’s proposal would move Illinois from a flat income tax rate of 4.95% to a graduated income tax with six tax brackets. Families and small businesses with income between $250,000-$500,000 would pay a state tax rate of 7.75%, while the highest rate of 7.95% would apply to all income over $1,000,000.  As many small business owners file their tax returns as individuals, Pritzker’s tax hike would hit Illinois small businesses especially hard.

House Republican Leader Jim Durkin reiterated his Caucus’ opposition to Pritzker’s tax hike.

“The House Republican Caucus stands united in opposition to a $3.4 billion tax increase on Illinois families and businesses.”

Illinois’ corporate income tax rate would rise from 7% to 7.95%. Coupled with Illinois’ Personal Property Replacement Tax of 2.5% on corporations (1.5% on partnerships, trusts, and S-corps), corporate income taxes would rise from the current 9.5% to 10.45%, one of the highest tax rates in the nation.

Illinois business leaders spoke out against Gov. Pritzker’s tax hike that will drive families and jobs out of the state.

“Today’s massive tax hike proposal will further harm the state’s manufacturing sector, which has already lost more than 300,000 jobs since the turn of the century. Illinois cannot afford to lose more of these good, high-paying middle-class jobs,” said Mark Denzler, president and CEO of the Illinois Manufacturers’ Association. “Taxing and spending are not the answer to our daunting challenges. The governor’s plan will vault Illinois to the 3rd highest corporate tax rate and 8th highest individual tax rate in the United States. Given that we already face the highest property taxes in the nation, the most glaring part of today’s announcement is what is not included: there is no mention of property tax relief for job creators or curtailed government spending.”

“The Illinois Chamber realizes that Governor Pritzker has inherited real and serious fiscal problems,” said Chamber President and CEO Todd Maisch. “Unfortunately, his plan for a new tax increase is very unlikely to solve them. Taxing businesses and business owners without restraining state spending nor taking measures that will spur economic growth sends exactly the wrong message to job creators who are already questioning their commitment to Illinois. When they choose to move investment across state lines, government loses tax revenue and our communities take a hit.

“It is important to note that the increase on the ‘2.7 percent’ of taxpayers the governor is targeting will pay much more than the $3.4 billion net income the plan claims it will generate. They will also pay for the ‘tax relief’ afforded to other taxpayers. Clearly, this plan will trigger a serious reaction from employers, especially since the plan only addresses the perceived budget deficit and does not make any meaningful dent in Illinois’ backlog of unpaid bills nor the future spending demands of progressive members of the governor’s party. The plan should be viewed for what it is: merely a first installment.”

National Federation of Independent Business Illinois State Director Mark Grant said if Pritzker’s plan were to go through, he would expect small businesses to pack up and take their jobs with them.

“And then what happens is the people left behind are stuck with new bills and then all the pension costs we have,” Grant said.

BUDGET

COGFA reports on FY19 revenue trends.  The Commission on Government Forecasting and Accountability (COGFA), the budget-monitoring arm of the Illinois General Assembly, disclosed February 2019 budget numbers, including significant figures on Illinois general-funds cash flow trends, in its latest “Monthly Briefing.”  

Working with the Department of Revenue on cash flows in February, COGFA reported continued increases in collections on key Illinois taxes such as personal income and sales, although these increase were not sufficient to cover soaring spending responsibilities in areas such as pensions and Medicaid.  Personal income tax payments rose $37 million in February 2019 over the comparable figure in February 2018.  This helped to support an overall increase in February State general-funds inflows of $38 million during the year-over-year period.  While this was not a sufficient increase to enable the State of Illinois to start paying back its more than $8.4 billion in unpaid bills, it enabled the State to financially hold its own during the 28-day month.

ECONOMY

Illinois economy producing new jobs in service-intensive sectors.  A report to the General Assembly, “Illinois Employment and Wage Update,” works with data on the Illinois economy to analyze where new jobs are being created, and describes the character and educational qualifications of these jobs. 

Data from the Illinois Department of Employment Security (IDES) and other sources shows an enduring trend within the Illinois job market towards labor-intensive services, particularly in the fields of education and health care.  A look at total paycheck numbers in eleven defined employment sectors, ranging from mining to leisure and hospitality, shows a decade-long decline in the number of Illinois workers who make or build physical objects.  For example, the number of Illinois paychecks paid out to manufacturing workers dropped from 657,400 in 2008 to 589,300 in 2018.  While all of this decline was notched in only two years – the economic-downturn years of 2009 and 2010 – the pink slips handed out during the so-called “Great Recession” were not fully made up during the following eight years.  As economic activity continued to move to other U.S. states and abroad, Illinois factories rehired less than one-third of the manufacturing jobs lost during the recession.  There have been 28,300 new manufacturing jobs created in Illinois since the beginning of the post-recession upturn in 2010.

Other Illinois economic sectors display much better numbers, but fields such as “professional and business services” (148,800 new jobs created in Illinois since 2010) tend to be areas of professional education where jobs are concentrated in the greater Chicago area.  Furthermore, other areas of Illinois net job creation tend to be fields where employers demand specialized experience and educational training.  This is particularly significant with respect to new jobs in “education and health services” (98,200 new jobs created in Illinois since 2010), as hospitals and health clinics want people with educational credentials.  One major sector, “leisure and hospitality” (103,300 new jobs created in Illinois since 2010) is creating new non-credentialed jobs across Illinois.  However, these are lower-paying jobs than the manufacturing jobs that have been lost.

EDUCATION

Illinois scraps controversial PARCC testing in schools.  The Partnership for Assessment of Readiness for College and Careers (PARCC) test was first administered in Illinois schools in 2015 for students in grades 3 through 8.  PARCC data was supposed to provide useful information for teachers and administrators on how to improve the Illinois classroom experience.

While PARCC professionals had invested large quantities of work to generate a statistically valid test experience, and large amounts of data were collected, the test generated a great deal of concern from Illinois teachers and parents.  PARCC tests took over, and siloed away from teaching, large segments of teacher-student time.  Teachers had to reallocate classroom time to prepare for and administer the test.  The PARCC test results were calibrated so as to make it look like many Illinois students were enrolled in failing classrooms.  PARCC assessment professionals did not want Illinois teachers and educators to become complacent about their performance, so they calibrated the test and its results to demand very high standards from grade-school students. As a result of this decision, few students, schools, and school districts could perform adequately on the PARCC grade scale.

The PARCC test came to be widely disliked and the Illinois State Board of Education (ISBE) announced in late 2018 their intention to move away from this exam.  This week the ISBE announced its switch to a new standardized test, the Illinois Assessment of Readiness (IAR), for the student age groups previously targeted by PARCC.  The IAR is approximately two-thirds of the length of the PARCC test and requires less time to administer to students.  The ISBE announcement was made on Tuesday, March 5.    

FIRST RESPONDERS

Sheriff’s deputy killed while serving on U.S. Marshal’s force in RockfordMcHenry County Sheriff’s Deputy Jacob Keltner, who was serving as an assistant U.S. Marshal, was killed in the line of duty on Thursday in Rockford.  The tragic incident happened when a team of federal marshals was initiating the serving of an arrest warrant upon a suspect in multiple cases of armed robbery.

Following the fatal shooting, suspect Floyd Brown fled the scene.  A lengthy car chase shifted the scene to a Central Illinois police standoff on Interstate 55 near Lincoln, and I-55 was closed off to traffic for several hours before the suspect was finally taken into custody.  Brown is charged with first degree murder of an officer and is also facing federal charges because Keltner was assisting U.S. Marshals.

The Illinois House observed a moment of silence upon hearing an initial report of the tragic news.  The State Capitol grounds include a monument and inscription in stone of the names of all of the police officers who have been killed or died on duty in Illinois.  

HIGHER EDUCATION

Hammond Calls On Governor to Fill Board Vacancies and Release Emergency Funding for WIU.  State Representative Norine Hammond is urging Governor Pritzker to appoint a full Board of Trustees for Western Illinois University and release emergency funds to assist WIU given the recent drastic cuts announced by President Jack Thomas last Friday. These most recent cuts were seen in the form of layoffs, with the university announcing that they were letting go of 132 employees.

“Western is struggling, as most state universities are right now, and having a full board in place would help to ensure the university’s success. I am asking Governor Pritzker to take immediate action to fill six vacant positions on the board so Western can move forward. Additionally, I am asking him to release funds in an effort to reduce the negative impact not only to the university, but our area,” said Rep. Hammond. “The Board of Trustees regularly scheduled quarterly meeting is set for March 28th and 29th and I am working with the administration to make sure we see more members in place by then to help protect WIU and facilitate future success.”

Among the 132 employees to receive notices were 29 faculty members, 89 civil service workers, 12 academic service personnel and two administrative employees. President Jack Thomas had the unfortunate and difficult task of announcing these losses and stated in a university-wide letter in November, “While reductions are necessary, we cannot continue to reduce our way out of these fiscal challenges. We must grow as an institution. I want to emphasize again that student recruitment and retention efforts are everyone’s responsibility.”

JOBS

Site Selection magazine honors Chicago as America’s Top Metro area for corporate expansion and development.  The honor awarded this week, which covers calendar year 2018, comes from one of America’s foremost periodicals specializing in the field of economic growth and geographic selectivity.  Chicago became the list-leader in the “Top Metros of 2018” after repeating its focus on global business and coordinated public sector/private sector promotion. 

Site Selection pointed to key new assets throughout the Chicago area, including growing distributional centers along Will County railroads and highways; office/manufacturing projects in Chicago’s suburbs;  a major reinvestment announcement on Chicago’s Far South Side by the Ford Motor Company, which has made its Torrance Avenue plant a U.S. center for the successful manufacture of light-truck vehicles; and major Chicago headquarters space announcements by Facebook, Komatsu, Northrop Grumman, and Walgreens.