Archive for July, 2017

Statement in Response to 2017 State Budget Passage

Sunday, July 9th, 2017

We have some appreciation with yesterday’s passing of the state budget. For our higher education institutions, school districts, road and infrastructure, health-care providers, and community organizations, this budget begins to add some semblance of security to provide for necessary services.

We are pleased that the final proposal dropped service taxes from the revenue proposal and extends the research and development tax credit through 2022.

However, we remain concerned with several issues of the budget.

We are concerned with the permanent 32 percent tax increase that individuals and employers now face. We fear that this will continue the recently reported exodus of residents and employers leaving our state. We realize that the only way to get out of this situation is to increase revenues while reducing expenses. Unfortunately, we do not believe that the proposed cuts in the budget come close enough to matching the increase in taxes.

Further, without real reform, we foresee limited, if any, job growth and economic development. A lack of property tax freeze continues to strap our residents with one of the highest tax burdens in the nation. Without workers’ compensation reform, our employers continue at a disadvantage when compared to other businesses in the Midwest.

Even Comptroller Mendoza’s office has been quoted as saying, “This is not a cash infusion.”

Andrea Durbin, chair of Pay Now Illinois (the coalition that sought court orders for the state to pay for contracted services already provided) has stated, the “budget lacks full funding to pay back bills from 2016 and 2017.”

The approved budget simply continues the status quo. It does little to address the nearly $15 billion in unpaid bills. It fails to adequately address the $250 billion in pension debt. It continues an annual deficit. It does not help grow jobs or restore confidence in state government. It does not pay down the increasing state debt.

Because of this, Moody’s warns of “further deterioration” as the budget does little “to address massively unfunded pensions or to pay down bills.”

It is simply a start. More needs to be done to support job growth, economic development, and restore confidence in our state. We have a long way to go, but this is a start.

Sammons Joins Old Second

Saturday, July 8th, 2017

Derek Sammons of Wheaton has been named Senior Vice President of Commercial Lending at Old Second National Bank, operating from the Lisle branch at 3101 Ogden Avenue. He will focus on building long-term, mutually beneficial relationships with commercial banking customers.

Sammons began his banking career in 1990 immediately after earning his degree in economics and finance at the University of Illinois, Champaign-Urbana. Prior to joining Old Second, Sammons served as a Managing Director of Commercial Lending for The PrivateBank and Trust Company in their Oak Brook office; Vice President of Commercial Lending, Owner/Entrepreneur Client Group with The Northern Trust Company in Oakbrook Terrace; and Vice President of Commercial Lending with First American Bank in Elk Grove Village.

Sammons participates in various civic and charitable organizations and enjoys volunteering for the Chicago Mission Youth Hockey Club and Camp Kesem.

 

About Old Second Bancorp, Inc.

Old Second Bancorp, Inc. is a diversified bank holding company headquartered in Aurora, IL. The Company operates through its subsidiary, Old Second National Bank, with 25 banking offices across seven counties in northern Illinois. Old Second Bancorp, Inc.’s common stock trades on The NASDAQ Stock Exchange under the symbol OSBC. More information about the Company is available by visiting the “Investor Relations” section of its website www.oldsecond.com.

General Assembly: Special Session Report

Saturday, July 8th, 2017

The House kicked things off over the long holiday weekend by first approving the revenue increase bill (SB 9), the fiscal year 2018 budget proposal (SB 6), and the budget implementation bill (SB 42) on Sunday. Most notably 15 Republican representatives voted in favor of the tax increase.

 

The Senate then came in two days later on July 4 to concur on the three bills, prompting Gov. Rauner to immediately veto all three bills in their entirety. With remarkable efficiency we rarely see in Springfield, the Senate then promptly overrode the Governor’s veto in under an hour.

 

The Illinois House then came in Thursday to override the governor’s total veto on the three pieces of legislation. However, this time several Republican representatives switched their votes on the revenue proposal from yes to no. Republican representatives that switched their votes include Reps. Cavaletto, Davidsmeyer, Meier, and Reis. This prompted Democrats, who previously voted against the increase to vote in favor. Democratic reps who flipped include Reps. Halpin, Manely, Mayfield, and Scherer.

 

Most notably, there are no economic reforms. No workers’ compensation reforms, no property tax relief, and no small business investment incentives. The state’s $15 billion bill backlog appears to get lip service, but not much else. Fund sweeps and interagency borrowing provide only $1.5 billion to throw at the backlog, assuming that the budget is balanced.

 

The budget doesn’t look balanced. It relies on dubious savings and accounting maneuvers (some of which have been endorsed by Republicans in the past). As we have seen, authorizing spending is not the same thing as actually having the funds to pay the bills. Other aspects of the package unnecessarily burden specific industries including transportation, agriculture, petroleum and insurance. Not to mention, the Senate left town without taking any action on extending the EDGE tax credit proposal as laid out in HB 162.

 

There are certainly positives to the pending budget package. The long impasse is finally at an end, granting a temporary reprieve from national embarrassment. Avoiding junk bond status. Higher education and others can finally get in line to be paid.

 

As the most prominent opponent of the service tax, we are gratified it was dropped. We quickly killed the stunningly bad “Jobs Tax” and it never came back, nor did a 20% gross receipts tax on financial transactions. A few important tax savings provisions were included in the tax increase legislation.

 

However, the outlines of another major battle are already forming. Baked into the budget package is a poison pill in the appropriation for K-12 education. The appropriation for schools is authorized only if the Governor signs one of two bills that change the way education is funded in Illinois. The only bill that has passed the legislature on the issue is one the Governor has threatened to veto, which would set up another veto showdown in the coming weeks. More on this issue later as its implications become clearer.

 

So what were exactly included in these bills that are now law of the land in Illinois? Below you will find a brief synopsis of the package of bills. These do not include every aspect (keep in mind these bills are several hundred pages long), but do provide a snapshot of each proposal.

 

REVENUE OMNIBUS DETAILS

Below are some pertinent highlights of what is law and what was left out in the revenue portion of the package laid out under SB 9:

  • Service taxes, soda taxes, satellite or streaming taxes as proposed in earlier versions were removed;
  • Income taxes are permanently increased for individuals to 4.95% (from 3.75) and 7% for corporations (from 5.25) beginning July 1, 2017;
  • A complete rewrite of the state’s unclaimed property law;
  • Graphic arts machinery and equipment exemption is restored;
  • The expansion of the manufacturing machinery and equipment exemption to include production-related tangible personal property formerly covered by the expired manufacturers’ purchase credit was removed from the final version of SB 9;
  • The R&D credit is restored retroactively;
  • Illinois Income Tax Act is decoupled from the federal Domestic Production Activities Deduction;
  • Unitary business non-combination rule is repealed;
  • The definition of the United States is amended to include areas of U.S jurisdiction for the purposes of natural resource exploration;
  • Earned income tax credit and education expense credits are increased;
  • Gasohol will be subject to sales tax at 100% of selling price — currently taxed at 80% of selling price; and,
  • Creates the Uniform State Tax Lien Registration Act.

It should also be noted that the tax rate increase mandated by SB 9 will require employers to change the rate of income tax withholding for their employers immediately.

 

BUDGET BILL DETAILS

The budget bill (SB 6) spends roughly $36 billion. Most notably it would provide the first full-year funding appropriation in two years. Major highlights include:

  • Provides for a full-year appropriation for state universities and community colleges;
  • Increases MAP grants;
  • Funds Medicaid;
  • Funds pension and group health;
  • $19 million in Job Training Grants;
  • $3.2 million increase for agricultural education;
  • $10 million increase to Cooperative Extension Services, County Fair and Agricultural Societies;
  • Funds both federal and state LIHEAP; and
  • Funds various social services.

BUDGET IMPLEMENTATION BILL (BIMP)

The budget implementation bill (aka BIMP), SB 42, is what makes the budget work. Or in other words, the paperwork in order to implement the spending. Nothing major to note in this proposal, but here are a few major highlights:

  • Authorizes up to $8 billion in payments for the bill backlog;
  • Implements a Tier 3 defined benefits plan for Tier 2 members; and,
  • Provides the AMTRAK operating subsidy.