IVCA Provides Updates for State and Federal Legislative Issues - 04.12.17

IVCA Provides Updates for State and Federal Legislative Issues

UPDATE provided by Stricklin & Associates on April 12, 2017:

 
The General Assembly is currently on a two-week legislative break, before returning to Springfield the week of April 24th.  Both chambers will return to tight deadlines to move bills out of their respective chamber, and only 5 weeks until the May 31st regular session deadline.
 
The past several years any budget agreement has been reached in the month of June, primarily due to a July 1st deadline for any k-12 education budget.  It is unclear whether any agreement will be reached in the coming months.
 
Our primary legislative concern is a proposal for a “privilege tax” that has been introduced in the House by Representative Chris Welch (HB3393) and in the Senate by Senator Daniel Biss (SB1719).  The House version passed out of committee on a strict party line vote last week, and is now on second reading.  The Senate version is not expected to move, and will more likely take up the House version if it is passed. 
 
HB3393 would impose a 20% “privilege tax” on partnerships and S corporations engaged in the business of conducting investment management services.  Stricklin & Associates has spoken to the sponsor and advised him of our staunch opposition; but Rep. Chris Welch believes there is a revenue opportunity which the state should seize upon in tough budget circumstances and indicates he is committed to passing his bill and is working his roll call to line up support.
 
We have also spoken with Rep. Christian Mitchell, who believes the federal tax "loophole" should be addressed and therefore is a cosponsor of the measure. House Deputy Majority Leader Arthur Turner is also a cosponsor and we have an appointment to see him before the legislature returns from its Spring Break April 24.
 
House Revenue Committee members Rep. Mike Zalewski and Rep. Elgie Sims are not cosponsors but did support the bill in committee.  We’ve spoken to them and provided more information for their review.
 
We’ve reached out to several members who understand the VC/PE industry who have expressed their direct opposition, such as Rep. David Harris and Rep. David McSweeney, who was particularly effective in the Revenue Committee hearing opposing the bill.  We’ve provided our fact sheet to numerous members in the General Assembly and asked them to consider, including Reps. Elaine Nekritz, Scott Drury, Carol Sente, and Kelly Burke, and will be following up with them as well. Overall, we have identified a target list of 10 democratic legislators we believe could vote against this bill if it is called for a vote.
 
HB 3393 is driven by the Chicago Teachers Union and is part of a larger, national campaign.  Given that the Governor and the teachers unions have an adversarial relationship, the most enthusiastic supporters of this bill may not only believe in the underlying policy but are almost certainly trying to create an awkward political situation for the Governor.
 
For any questions please call Dave Stricklin at 312-771-2562. 
 
Senator Biss’ bills, SB 778 to make private equity investments of pensions funds FOIA-able under statute, as well as SB 779, which requires public retirement systems to disclose various expenses and fees that are paid to investment funds, passed out of committee and are on second reading in the Senate. 
 
HB 3061 (Guzzardi) mirrors legislation from late last session and would require the Illinois Investment Policy Board to identify companies that contract to build a border wall and include those companies in the list of restricted companies for public retirement systems. HB 3061 passed out of committee 7-4, and is now on 3rd reading in the House.
 
Last week, the House Democratic Caucus passed a ‘lifeline’ budget that would appropriate over $800 immediately.  The measure, which passed 64-45, provides $559 million to higher education and $258 million to social service providers that are not currently funded through court orders--such as domestic violence shelters that are on the verge of shutting their doors.
 
The budget takes money from two funds: the Commitment to Human Services Fund and the Education Assistance Fund - neither of which has been appropriated this year.  This is important to note that because these funds to do not come from the General Revenue Fund, the budget would not further add to the $13 billion unpaid bill backlog.
 
Democratic members contend that this budget is absolutely necessary to protect the most vulnerable portions of the population from further harm.  Republican members that opposed the measure believe that any stopgap budget would take pressure away from negotiating a full budget.  Many members spoke to the Senate grand bargain as proof that focus should remain on a full budget.
 
The Senate package, however, is still on uneasy footing.  Senator Bill Brady (R) has introduced his own budget bills stemming from the original negotiated proposal.  His 'balanced budget' proposes $5 billion in general revenue spending cuts to match the projected new revenue streams.