The Illinois State Chamber of Commerce filed suit on April 22 against the State of Illinois challenging the constitutionality of increased business fees the group believes “unfairly burden employers in order to balance the state’s budget.”
The Illinois Chamber is asking a Cook County Circuit Court judge to strike down a fee paid by all Illinois businesses and the mechanism by which excessive fees are used to raise general revenue.
The Illinois Chamber doesn’t object to reasonable and justifiable fees, but disapproves of the use of excessive fee increases to finance general government spending.
The Illinois Chamber’s goal is to end the state’s practice of inappropriately and excessively taxing employers. “The Illinois business community recognizes that the state continues to face serious budget problems,” said Ray Neisewander III, chairman of the Illinois Chamber Board and executive vice president of Raynor Garage Doors in Dixon, Illinois. “However, the employers of this state already pay more than half of all the state and local taxes collected in Illinois. Employers do not want another round of unjustified fee increases when the FY05 state budget is passed.”
In 2003, the governor and Illinois General Assembly raised licensing and other fees in more than 300 areas applicable to Illinois employers. The lawsuit charges that since then, the governor’s office has inappropriately transferred millions of dollars generated by these special-purpose fund fee increases to cover General Revenue Fund spending.
The Illinois Chamber’s complaint challenges the newly imposed Industrial Commission Operations Fund Surcharge, which requires all Illinois employers to pay a fee to operate the Illinois Industrial Commission, the agency that oversees workers’ compensation.
While the Illinois Economic and Fiscal Commission estimates the new surcharge will generate more than $31 million, total appropriations for the Industrial Commission in the 2004 Illinois State Budget are under $14 million. The Illinois Chamber asserts the state is deliberately generating more than twice the Industrial Commission’s needed revenue to improperly subsidize Illinois’ overall budget shortfall.
The Industrial Commission Operations Fund Surcharge is indicative of the excessive nature of many business fees imposed by the Blagojevich administration to generate money for the state, according to the Illinois Chamber.
Inappropriate Fee Increases
While the lawsuit addresses the Industrial Commission Operations Fund Surcharge specifically, the Illinois Chamber believes that surcharge is only one of many inappropriate, arbitrary, and excessive fee increases that illegally generate funds for the state’s General Revenue Fund and are not limited to the specific underlying statutory programs for which they were intended.
An example of other problematic fees is the Used Vehicle Dealers License, which increased 2,000 percent from $50 in 2003 to $1,000 in 2004 and beyond. The Illinois Environmental Protection Agency introduced more than 60 new fees in 2003 and raised many existing fees by as much as 250 percent in 2004. EPA fees are expected to generate more than $60 million this year alone, by far the most of any state agency and more than double the agency’s 2003 budget.
A new Commercial Distribution Fee was imposed on trucks in 2004, in addition to the numerous taxes and fees already paid by such vehicles. The new fee is paid to the Secretary of State but deposited in the General Revenue Fund. According to the Illinois Chamber, this “fee” appears to serve no purpose other than to raise revenue for the state’s general fund.
Alarmingly, the governor recently has proposed nearly 200 additional fee hikes on Illinois employers to raise an estimated $57 million more in fee revenue for the FY05 budget.
Lawful to Discriminate?
The Illinois Chamber is asking the court to rule on whether it is lawful for the state to discriminate among fee payers and specifically burden one group–in this case businesses and employers–with providing funds to finance all government programs.
The governor must either restrain spending to align government expenditures with existing revenue, or seek additional revenue from all the citizens of Illinois, said the Chamber. Employer fee increases are creating a hostile environment by ignoring the economics that encourage investment and job growth.
Illinois courts have in the past ruled unconstitutional fees that are assessed in an arbitrary manner and that have no relationship to the services rendered or the purpose of the underlying legislative act. Also, the Illinois Supreme Court has ruled the state may not arbitrarily single out one group for taxation where no substantial difference exists between that group and others not taxed.
Named as defendants in the suit are John Filan, director of the Office of Management and Budget; Illinois State Treasurer Judy Baar Topinka; Dennis R. Ruth, chairman of the Illinois Industrial Commission; and Deirdre K. Manna, acting director of the Illinois Department of Insurance.
Doug Whitley is president and CEO of the Illinois State Chamber of Commerce.