From State Rep. Dan Ugaste:

News from State Representative Dan Ugaste

Below are a series of updates on the state of Illinois’ finances, extended deadlines from the Secretary of State, and more. 

Should you have questions or concerns about this information, or if you need assistance with any state issues, don’t hesitate to contact my district office at 630-797-5530.

BUDGET

CGFA reports budget numbers for June 2020.  

The Commission on Government Forecasting and Accountability (CGFA) has released its monthly report for June 2020. 

The summary is a description of the current state of Illinois cash flow during the final month of fiscal year 2020, the year that ended on June 30, 2020.

Like other states, Illinois was hit hard by the economic shutdown that took place, starting in March 2020, in response to the COVID-19 pandemic.  

Many Illinoisans were laid off and changed their spending habits; many activities that yield significant tax income, such as the purchase of nonfood goods, were cut back. 

Some highly-taxed activities were almost entirely cut off for a time. 

Examples include drinking excise-taxed alcoholic beverages in bars, and playing the slots in casinos and at gaming terminals.  

CGFA reports that total FY20 State general funds revenues dropped by $1.135 billion, with the decline occurring in the COVID-19-related months of March, April, and May of 2020.

June 2020 saw a partial Illinois economic rebound, with many residents and their workplaces able to resume taxable economic activity. 

Personal income tax collections rose in June 2020 by $173 million from the year-earlier period, a net gain of 9.4%. 

Many other taxes continued to generate disappointing numbers in June, however. 

Declines were led by an $83 million drop in sales taxes for the month, representing a net drop of 10.5% in sales tax payments by Illinois customers through the retailers that collect the tax. 

Two specialty tax levies, on cigarettes and insurance, demonstrated especially sharp declines.   

The CGFA data analysts also continued to collect numbers that point forward towards understanding the State’s budget situation in FY21, the fiscal year that began on July 1, 2020. 

Illinois employment has declined, with more than 600,000 jobs lost. 

While some of this lost paycheck tax revenue can be made up for a short period by activity derived from federal emergency relief payments, true private-sector-based income tax revenue is not in a position to do well in FY21. 

As of May 2020, the Illinois unemployment rate was 15.2%. 

This marked an improvement from the pandemic-affected jobless number of 17.2% posted in April 2020, but CGFA analysts could not affirm that their current data points to continued recovery along this trajectory at this time.

State of Illinois borrows $1.2 billion in General Obligation debt in June 2020. 

The State of Illinois’ general obligation (GO) bonds are currently marked by major New York-based credit rating agencies with the lowest-sector rating available for so-called “investment grade” securities, a rating of “BBB-“ (Fitch Ratings, Standard & Poor’s) or “Baa3” (Moody’s). 

Any further cut by any one of these three credit rating agencies would reduce the State’s GO debt credit rating to below-investment-grade, a category popularly known as “junk bonds.” 

Junk bonds are bonds that are seen as having a significant risk of debt default and resulting loss of income to the creditor. 

The financier will customarily demand a higher rate of interest return for lower-rated credit instruments than is paid out by market borrowers who enjoying a high-grade credit rating. 

With global “true” interest rates near zero, the highest-graded borrowers can currently borrow money for as little as 0.55%/year. 

In order to pay past-due Medicaid bills, Illinois borrowed $1.2 billion in June 2020. 

The money was borrowed through the issuance of General Obligation Certificates. 

The tranche was financed through the loan window currently operated by the U.S. Federal Reserve’s Municipal Liquidity Facility (MLF). 

Despite the help provided to this borrow contract by the MLF loan window, Illinois was still required to pay 3.82% interest for one year. 

This marked a 327-basis-point (3.27%) interest rate spread, against Illinois and its taxpayers, above the payments that Illinois taxpayers would have been required to pay on the same debt if Illinois still had its now-long-vanished AAA credit rating.     

The $1.2 billion bond transaction was described in CGFA’s report to the General Assembly for June 2020. 

CGFA analysts reported their belief that Illinois will be forced to refinance this one-year MLF certificate issuance when it comes due in June of 2021.

JOBS

Facebook announces major investment in DeKalb County.  

The social-media giant allows hundreds of millions of worldwide registered users to share messages and images for free. 

In return for this free service, the users agree to let Facebook know what they ‘like.’  

Facebook’s automated software turns these “likes” into valuable advertising data. 

For example, if a user repeatedly ‘likes’ pictures of friends at the beach, the user will start to see lots of online advertisements for beachwear and summer beach experiences.   

Facebook’s business model demands that the firm own and control massive data centers. 

These facilities have to have large quantities of data storage machinery, together with the electronic connections required for rapid data retrieval and the massive cooling systems required for reliable machine operation.  

Facebook has selected Illinois as the site for its newest data center, a 907,000-square-foot factory-like building in DeKalb. 

Just west of Chicago, the DeKalb location possesses massive access to electronic data pipelines. 

New technologies, to be installed with the cooperation of the Kishwaukee Water Reclamation District, will reduce the use of cooling-pond evaporation and will enable the data center to use pre-used Illinois water.

In its announcement, Facebook stated that the $800 million Data Center project will employ hundreds of skilled trade workers in design and construction, with temporary site-related employment peaking at 1,200. 

After the multi-month design-build phase is completed, the center will employ approximately 100 operational jobs to tend the server machinery.

The DeKalb Data Center will be Facebook’s 12th data center in the U.S.  In addition to water recycling technology, the data center is scheduled to use 100% renewable energy.  Massive wind farms in Illinois, Iowa and the Great Plains states are starting to produce electricity at a level necessary to power facilities of this scale.

The Facebook announcement was made on Tuesday, June 30.       

TAXES

Revised State, federal tax filing deadline is July 15.  

Many Illinoisans have taken use of the one-time income tax holiday granted this year to taxpayers who usually face a filing deadline of April 15, 2020.  

Income tax returns and payments due, which usually must be mailed by April 15 of each calendar year, must this year be mailed no later than July 15. 

This one-time filing and payment relief was granted by the State of Illinois and the federal government as one of the steps being taken to respond to the current COVID-19 pandemic. 

Nothing in this July 15 relief will reduce the amount of the taxes due and payable; the relief, for each taxpayer, extends only to the date the return must be turned in and the tax paid.    

Taxpayers who have already submitted their tax returns for calendar year 2019 are not affected by this announcement, which applies only to last-minute filers.  The Illinois Department of Revenue continues to encourage early tax filing, which puts taxpayers first in line if they are eligible for a tax refund.  Not all taxpayers can file before a deadline, though.  Help is available for Illinois seniors who may be facing this year’s revised filing deadline.   

Taxpayer groups announce opposition to November 2020 graduated tax referendum. 

The proposal, which will be on the statewide ballot this fall, would amend wording within the Constitution of Illinois that bars the General Assembly from the enactment of special tax rates against classes or ranges of personal income. 

The Constitution currently mandates that the Illinois income tax be a “flat tax,” which means that any tax increase will affect every taxpayer. 

The November 2020 referendum would amend this section; the amended language would delete the wording that creates this flat tax mandate. 

Business groups came together this week to express concerns about the proposed amendment. 

The Illinois Farm Bureau, the National Federation of Independent Business, the Illinois Chamber of Commerce, and the Technology and Manufacturing Association announced their intent to form a consortium to develop public awareness about the consequences of the referendum proposal. 

The proposed amendment cannot be passed unless it gets either a majority of the entire November electorate, or three-fifths of the voters who specifically vote on the referendum question.     

TRANSPORTATION

Illinois drivers’ licenses and vehicle registration credentials extended until November 1, 2020.  

The extension was announced this week by the Office of the Illinois Secretary of State. 

The extension covers: (a) drivers’ licenses, (b) restricted driving permits issued to drivers who are driving under supervision, (c) non-driving personal identification cards issued by the Secretary of State, and (d) vehicle registration papers.  

As a result of the coronavirus pandemic, the Secretary of State closed his offices in mid-March.  Many of the offices have since re-opened, but are only operating under conditions of severe social distancing. 

Furthermore, there is now a significant document backup.  The Secretary of State’s Department of Driver Services issues more than 8.5 million Illinois drivers’ licenses and more than 3.0 million non-drivers’-license photo ID cards.

Under this extension, Illinois Secretary of State vehicle-related and ID-related documents will continue to be temporarily valid until the extension date.  The extension will enable the Secretary of State’s personnel, and their customers, to continue to work together to try to clear the backlog