By Jamey Dunn
This week, lawmakers overturned Gov. Pat Quinn’s veto of a smart grid plan, clearing the way for the state’s two biggest utilities to raise rates and begin work on the state’s electrical grid. But legislators left many issues unresolved and say they plan to revisit them when they return next month for the second half of veto session.
Senate Present John Cullerton presented a bill in committee this week that would give a tax break to a business that says the recent income tax increase would result in a $158 million tab.
The CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, has threatened to leave the state if lawmakers do not provide some form of tax relief.
Cullerton purposed changing the way the group’s taxes are calculated. CME’s tax bill is based upon its sales, but many of those sales are online trading. Cullerton said that state considers all of those sales as happening in Illinois, even though many of CME’s customers do not live in the state. “You can’t tell where the customer receives the service nor where the customer orders the service, so there’s a default that every sale takes place in the state of Illinois. So 100 percent of the revenue from this activity is being sourced to Illinois,” Cullerton said. His plan would lower the percentage of CME sales that are taxed by Illinois, and he said cut that $158 million tax bill “about in half.”
Cullerton added, “So there would definitely be a reduction in revenues to the state, but of course if they leave, there will be an even further reduction.”
Cullerton and other Democrats framed the change as keeping the tax code modern and in step with new technology. “The exchanges have said that if we don’t correct this inequity that they would consider going to another state, and so that obviously is something that we should take into account as well,” he said. “But it really is not a threat to leave that motivates me to do this. I think it’s just a recognition that this is an unfair way of calculating their tax.”
The proposal also includes a five year extension of a business tax break for research and development.
James Parasi, chief financial officer for CME, said his company employs more than 2,000 people in Illinois. He said those employees also pay income, property, sales and other taxes in the state. Parasi said CME’s income tax payment for 2010, before the tax increase, made up 6 percent of all the cooperate income tax revenues the state brought in that year.
Senate Republicans said they supported the idea of lightening CME’s tax load, however they said it was unfair to focus in on one business for relief. “There are dramatic and significant unintended consequences from that tax increase that need to be addressed. And it is preferable if they are addressed not necessarily on a company-by-company basis so much as in a broader based fashion,” said Sen. Matt Murphy, a Palatine Republican. “And including things that frankly will help the little guy, the small business, as well.”
Sen. Dale Righter said that offering help to only CME sends the wrong message to small-business owners who do not have the means to lobby the General Assembly on the same level. He likened the plan to a “corporate bailout.”
“I believe that you have a real problem. I believe that you have been caught in a glitch here that probably does need a fix,” Senate Minority Leader Christine Radogno said to Parasi. “This may be a real issue, but there is a perception problem that the only folks that get the help are those that have the access and the money to buy that access.” She said of the bill as is: “What’s not real is moving this bill forward because the governor is not going to sign it. It is not going to go through the House. And I don’t want to perpetuate the perception of this special treatment.” Radogno said she is willing to work on a more comprehensive package, but she did not think that lawmakers should rush a plan through before the end of the veto session to appease CME. “If you guys leave because this doesn’t pass today, it does raise the question to the sincerity of whether or not you were staying in the first place.”
A Quinn spokesperson said the governor had some suggestions to be included in the plan.
Quinn’s plan to pay regional superintendents was shot down in the House this week, leaving the administrators, who have not been paid since the summer, scrambling to find a solution before the end of veto session.
Quinn vetoed from the budget in June the money to pay regional superintendents and their assistants. He said the locally elected administrators should not be paid with state dollars and put forth a plan to pay them out of a local tax.
Rep. Frank Mautino said some of the superintendents are receiving support from public aid programs because they are barred by law from having another job. Mautino, a Spring Valley Democrat, is the sponsor of House Bill 3828, which calls for the superintendents to be paid out of the personal property tax replacement fund.
Opponents said that it is unfair to push the cost onto local governments, when the budget the legislature passed included the funding for the administrators’ pay.
“We’re getting a lot of concern from every unit of government that receives part of this money,” said Crystal Lake Republican Rep. Michael Tryon. Some opponents said it would be better to simply override Quinn’s veto of the funds. Mautino said he had no control over whether an override would be called for a vote. He placed HB 3828 on postponed consideration, which means he could call the bill for another vote. An override of Quinn’s veto could also happen before the end of veto session, but for now, the superintendents continue to wait for paychecks.
"We have said from the outset we deserve to be paid now and moving forward. We are disappointed by [the] vote in this chamber against this possible funding solution. We know we need a solution now and can't wait any longer. We will keep working with legislators to find the votes for a reasonable solution for our very serious funding problem, and we remain hopeful that resolution will happen in this veto session,” Bob Daiber, president of the Illinois Association of Regional Superintendents of Schools and Madison County regional superintendent, said in a prepared statement.
House Minority Leader Tom Cross said this week that he has the 30 Republican votes he needs to pass Senate Bill 512 — which would reduce pension benefits for employees hired before January, when a reduction for new hires went into effect. Cross said it is now up to House Speaker Michael Madigan to call the bill and put up 30 Democratic votes. Madigan’s spokesperson said once Cross gives Democrats a chance to review an amendment he is working on, Democratic leadership will start polling its caucus members to gauge whether there is enough support to pass the measure.
Gov. Pat Quinn said that if he were given the opportunity, he would veto the gaming bill lawmakers passed last spring. Since the bill, Senate Bill 744, was held from going to Quinn’s desk through a parliamentary procedure, he instead laid out what he would like to see changed. After being pushed all summer by the sponsors of SB744 for specifics, Quinn shared his thoughts in a news conference a week before veto session. Waukegan Democratic Sen. Terry Link, sponsor of SB744, said Quinn’s plan couldn’t pass in the Senate.
However, Link is also sponsor of SB 747, a plan he says is “based” on Quinn’s demands. Quinn denounced that bill and called Link's efforts a “charade.” Link said he would call SB747 for a vote on Wednesday but then opted not to because he said he wanted to allow for more discussion on the bill.
Cullerton, who supports gambling expansion, said he wants to give Quinn next week, when lawmakers take a break from session, to consider his options. Cullerton said his chamber would take up the issue of gaming in the last days of veto session. Lawmakers are scheduled to return to Springfield for the final three days of the veto session on November 8.