Legislative Action Special Section                                                       

Last February, amidst a traffic-stopping snowstorm. House Speaker Michael J. Madigan (D-22, Chicago) held the first of four "jobs summits." In the next four months a blizzard of bills aimed at economic development and job creation wound through the General Assembly, finally distilling in the heat of July adjournment to a handful of significant legislation sent to the governor.

What businesspeople, primarily manufacturers, told the speaker they wanted — tax credits and regulatory reform — they got. What the state is supposed to get for its efforts and the cost in reduced tax revenues — a projected $60 million for the state and $15 million for local governments when fully phased in by 1998 — is more "decent jobs at decent wages."

The tax credits granted to businesses will come in three forms: two related to income taxes and one to sales taxes. Limited to manufacturers, the state will allow a 20 percent tax credit against income tax liability for expenses involved in hiring and training high school juniors and seniors in a Tech Prep program. Tech Prep is an attempt to give students who do not plan to go to college experience with the technology currently being used in manufacturing. Too often high schools cannot afford the expensive equipment that adequately prepares students for the jobs available in manufacturing.

A second Madigan initiative as approved gives a 5 percent exemption against the corporate income tax to manufacturers who operate an on-site day care center for dependents of employees. Businesses can receive the state tax credit only if they qualify for the similar federal income tax credit.

The sales tax break for business was broadened and made more costly for state and local governments. Under current law, manufacturers do not pay sales taxes on the purchase of production equipment. Beginning next year manufacturing businesses will get a bonus in the form of a credit memo against sales taxes on future purchases of nonproduction equipment, including research and development equipment.

Under this complex tax-break plan, the credit escalates over four years as a percentage of what sales taxes would have been had puchases not been exempt: 15 percent the first year, 20 percent the second, 40 percent the third and 50 percent the fourth and subsequent years.

Production equipment is defined as any equipment necessary to produce a product from raw material stage to finished, ready-to-ship stage. So, for example, if a manufacturer buys a new belt for a conveyor that moves material from one stage of production to another, the manufacturer does not pay sales taxes on that belt. It is exempt. However, if the manufacturer buys a new fork lift to haul raw material to the production line or haul the finished product to the delivery truck, the manufacturer does pay sales taxes on that piece of equipment. It is not exempted under current law.

Under the "bonus" sales tax legislation in its fully implemented form in four years, the manufacturer would get to apply half of the amount of the sales tax he would have paid on the conveyor belt if it were not exempted toward the purchase of a new fork lift. So if the manufacturer would have paid sales taxes of $600 on the conveyor belt, the manufacturer can, after 1997, get a sales tax credit memo of $300 to apply toward the sales taxes on a new fork lift, or any new piece of nonexempted equipment, even if it is for research and development rather than production.

The other part of the package promoted by manufacturers in the state streamlines some regulations. Legislation pushed by Rep. Nancy Kaszak (D-34, Chicago) will establish an office within the Department of Commerce and Community Affairs (DCCA) to help small and medium-sized busi-

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nesses with permits, job training and compliance with state and federal environmental regulations. The One-Stop Shopping Center will provide a toll-free number for general assistance, a master permit application system (one form for all required state permits), on-site permit assistance in economically depressed areas and information about job training opportunities.

Part of a pilot program is aimed at business retention and run through DCCA. It will focus on helping small-business owners who want to sell their businesses. Kaszak, sponsor of the business succession legislation, explains that family-owned businesses often do not plan ahead and are either taken over by unprepared owners or "absorbed" by larger corporations. She says this situation often leads to the closing of smaller businesses and the loss of jobs. Gov. Jim Edgar signed the business succession legislation on August 5.

Business also wanted more input into the rules-making process of state government. Under current law the public has 14 days after notice of a new rule to comment on it. The new legislation says the agencies would have to file "regulatory plans" every six months, listing all proposed rulemaking plans, with some exceptions, for the coming six months. Also, the Joint Committee on Administrative Rules (JCAR) will have an explicit set of standards to follow when passing on rules submitted to it by state agencies. In addition, DCCA must prepare economic impact statements for all new rules affecting business and, if requested, existing rules under JCAR review.

"One of the biggest problems facing our businesses, both large and small, are the outdated and worthless regulations which the state mandates," says Kaszak. "We are at the point where if government doesn't get out of the way, our businesses will crumble under the weight of these regulations."

The tax credits and regulatory reforms were passed by means of the unusual alliance of Speaker Madigan and the Illinois Manufacturers' Association. The governor was put in the position of signing off on $75 million in tax credits for business, or vetoing the bill and making Madigan look like the business and job creation advocate. *

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