CMAP closely monitors state legislative efforts related to the agency’s work and efforts to implement GO TO 2040.  The following describes highlights of recent legislative activity from November, including two budget reallocation bills and efforts to retain businesses through tax breaks.

Budget reallocation bills would provide much-needed funding for water data collection
In June 2011, the State of Illinois passed a $33 billion budget without sufficient revenues, resulting in an unbalanced budget.  The Governor line-item vetoed $376 million and proposed closures of state facilities, state employee layoffs, and other fiscal resolutions. During the veto session from October 25 to 27 and November 8 to 10, these fiscal issues were not fully addressed. On November 29, both houses passed two reallocation bills to address the budget, SBs 1311 and 2412, which would allow certain state hospitals and prisons to remain open until June 30, 2012. Both are now headed to the Governor for approval.

A small yet significant budget issue would also be temporarily resolved through SB 1311 to provide funding for Illinois Scientific Surveys through the Prairie Research Institute (PRI) at University of Illinois, Champaign-Urbana.  The Illinois Scientific Surveys is home to the Illinois State Water Survey (ISWS), which oversees the Illinois Water Inventory Program (IWIP), a comprehensive program to inventory water use throughout the state.  IWIP collects data on water withdrawal, use, and returns, which is critical for sound long-range water planning and was used to develop recommendations in Water 2050.  With the passage of SB 1311 (HA2), the University of Illinois will be reimbursed $15.8 million for the operation of scientific surveys and increased funding for grants to college students, with $3.6 million direct to ISWS.  This money leveraged approximately $62 million in external funding, according to the Metropolitan Planning Council.  Approximately $200,000 is needed for the IWIP program.

Reforming tax policies not included in tax-break package
The current tax system in Illinois is not meeting the needs of business, local governments or residents. As stated in GO TO 2040, tax policies should encourage local decisions that make effective use of land, generate good jobs, and trigger sustainable economic activity. It should not create inequities across household, businesses, and local governments.

An increase in the state corporate income tax earlier this year led to threats from some Illinois-based corporations to consider relocation if no new or additional relief was provided.  Furthermore, many corporations with existing tax incentive packages will see these incentives expire between now and 2014. The State, Chambers of Commerce, and local municipalities affected by potential corporate relocations are working to retain businesses, namely Sears Corporation, Chicago Mercantile Exchange (CME), and the Chicago Board of Trade (CBOE).  See a previous Policy Update on a joint hearing held this summer by the Illinois Senate Revenue Committee and House Revenue & Finance Committee to discuss the State’s business tax structure with key business community representatives and government officials.  Discussions between the State and these corporations initially resulted in an $850 million proposal. 

On November 28, the House Revenue Committee met and passed a $250 million tax-break package.  HB 1883 was later defeated on the floor.  It included extensions for research and development credits, raising the estate exemptions, and reinstatement of corporate income tax breaks. Very little in the bill addressed the State’s fundamental tax structure. For example, the bill did not seek to broaden the State’s relatively narrow tax base or to lower tax rates.  The core of the bill was simply tax incentives for CME and Sears in the form of tax credits and extensions.  It did increase the Earned Income Tax Credit (EITC) for low-income residents, which could have enhanced vertical equity. A special session will be held by the House on December 12 in an effort to move the tax relief package SB 397 forward, according to Chicago Public Radio.