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Keefe: Ready for Even Higher Taxes Next Year and for Years to Come?

By Eugene Keefe

Tuesday, July 11, 2017 | 499 | 0 | min read

Last week, the Illinois General Assembly, led by House Speaker Michael Madigan, raised our state income tax to 4.95% to raise about $5 billion in new money from you, me and business.

Eugene Keefe

Eugene Keefe

Various members of the cowardly Illinois Republican Party crossed over and voted to override Gov. Bruce Rauner's budget veto. A few legislators mumbled that there is still work to be done to reform workers' compensation. Our suggestion is: Don’t hold your breath on any future WC or other “reforms.”

We are also sad to see that all the pressure and stress that came with trying to make some progress, and real reforms for our clients and other businesses in this state, all came to nothing. We do feel businesses and jobs are going to continue to leak out to our sister states until someone in the super majority ruling party starts to feel the pain of those growing departures.

Speaker Madigan was able to bring together the 71 members needed to override Rauner's veto. Ten House Republican representatives crossed party lines to work with the Democrats to pass the $36 billion budget. Legislators passed a bill out of the Democrat-controlled House that included a $5 billion income tax increase to pay part of more than $15 billion in unpaid bills.

I believe they are also borrowing another $6 billion we don’t have to ensure your great-great-grandkids have to deal with their mistakes.

Rauner originally vetoed the bill a week ago on Monday, saying the bill didn't reform Illinois government enough, including changes to workers' compensation and a freeze on property tax, among other things.

The Illinois Senate overrode Rauner's veto within an hour, but the House failed to pass a vote until Thursday evening. The body did not meet on the Fourth of July and failed to reach a quorum on Wednesday. As the House was readying to go into session on Thursday, it was delayed when a woman threw an unidentified white powder into the governor's office, sending the Capitol into lockdown for two hours.

Rauner called the override vote "another step in Illinois' never-ending tragic trail of tax hikes,” during a news conference. “(Madigan's budget) is not balanced, does not cut enough spending or pay down enough debt, and does not help grow jobs or restore confidence in government. It proves how desperately we need real property tax relief and term limits."

I would point out to our plucky governor that we now also need income tax relief because of the certainty that tax is going to continue to rise. Rauner proposed tougher standards to prove causation in workers' compensation claims, and measures that would force WC arbitrators to use only American Medical Association guidelines in determining how much seriously injured workers could be paid for permanent partial disability. That was later dropped in favor of reducing the medical fees that doctors, hospitals and pharmacies can charge for treating injured workers.

Speaker Madigan said that while those reduced medical fees saved money, the only sector that wasn't seeing any reductions in profits was the Illinois WC insurance industry. We have no idea how he singled out just WC insurers for this supposed profit-gouging in one small area of insurance business.

He called for WC insurance company profits to be regulated. He or his staff also cooked up the confusing idea of having the state form its own tiny mutual insurance company to somehow compete with the industry giants using Madigan’s expert government precinct captains — oops, I mean payrollers.

We assure our readers that all of that silliness and legislative sleight of hand has been dropped. In short, now you see this state's WC insurance company dodge, now you don’t.

Madigan claims legislators would continue to negotiate workers' compensation reforms. It is my opinion that such statements are bluffing and balderdash. The 2017 reforms are over. I do feel there may be a very slight chance that medical reimbursement rates may again be cut and recommend that our readers in the health care industry keep their lobbyists working to give you reasonable reimbursements.

Susan Mendoza, the state comptroller, said it was still unclear whether the shiny new budget would solve our fiscal crisis. She indicated that businesses and local governments in this state still face one of the highest workers' compensation insurance rates/costs in the country, and we still have numerous underfunded pension systems that continue to threaten to downgrade the state's credit rating.

As I have advised my readers, the General Assembly Retirement System, or GARS, and the Judicial Retirement System, or JRS, cannot truly be “pre-funded” as they are currently set up. These retirement systems, and possibly some of the other government pension systems, are, in my opinion, fake, false and misleading to taxpayers and all Illinois citizens. In short, a fake government pension is a fake promise.

I did not see any effort to truly reform government pensions in all the budget battles. It is my hope that someone in the Illinois Supreme Court, or other members of our judiciary, start to question the ethics of their pension funding and their continued participation in such plans, and take action to ensure the public knows the true and staggering cost of what our government officials, including our judiciary, are and will be receiving.

On a related note, we can all be certain that state income taxes are going up, and should go up again and again without any of the work comp or other pro-business reforms bravely sought be Gov. Rauner.

At present, state spending is supposed to go down by about half of the 2017 tax increase. In my view, this ensures that this state is going to have to again start another fight over budgets and tax increases in about eleven months, or by June 2018. In short, additional tax increases at the state and local level aren’t going to stop until the reasons for the increases are addressed.

Eugene Keefe is a founding partner of Keefe, Campbell, Biery and Associates, a Chicago-based workers' compensation defense firm. This column was reprinted with his permission from the firm's client newsletter.

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