ILLINOIS (WCIA) — Three weeks after taking the oath of office, Governor J.B. Pritzker’s new administration is nearing the finish line of its first major legislative triumph as top negotiators piece together the final touches of a negotiated agreement to gradually raise the state’s minimum wage to $15 an hour.
The Illinois House is scheduled to host a subject matter hearing on the topic on Wednesday. The state Senate could vote on the bill on Thursday, according to chief bill sponsor and Majority Leader Kim Lightford, a Democrat from Maywood.
Tuesday morning, Lightford and Pritzker administration officials courted business groups and other interested parties in a flurry of meetings intended to build a concensus around the complex economic issue.
A central component to the proposal is a temporary tax credit for businesses with 50 employees or fewer. During the six-year ramp up period when payroll expenses are expected to swell, the state will defer an estimated $126 million in payroll taxes in an effort to ease employers, including nonprofits, into the new system.
In the first year of the program, workers wages will rise to a minimum hourly rate of $9.25. Business owners will receive a tax credit for 25 percent of the total cost of increasing wages, but that benefit only counts toward employees that previously earned less than $9.25 an hour.
Since Chicago and Cook County already implemented minimum wages higher than that state’s $8.25 hourly wage floor, those businesses would not immediately qualify for the tax credit, according to a Pritzker administration memo obtained by WCIA. A source close to the Pritzker administration highlighted this aspect as a feature that specifically benefits businesses in central and southern Illinois.
Starting in 2021, as employee wages would reach $10.25 an hour, the tax credit for employers would drop from 25 percent down to 21 percent. In 2022, workers would make at least $11.25 per hour, while the tax credit to offset that higher expense would shrink to 17 percent. The following year, the tax credit drops to 13 percent, while wages reach $12.50 an hour. The tax credit narrows to nine percent in 2024, as businesses would be required to pay employees at least $13.75 hourly. Under the proposed plan, every worker at least 18 years of age and older would begin earning at least $15 an hour on January 1st, 2025.
Companies with 50 employees or fewer could continue to collect a tax credit to offset five percent of their increased payroll expenses for another two calendar years. Small businesses with five employees or less could collect that benefit for a third year before the tax credit program is scheduled to expire.
The memo from the Pritzker team also highlighted significant increases in state spending for pay raises due to state workers, home care workers, and other various human service providers, that will pile up in the wake of the minimum wage increase. The estimated additional expense to taxpayers will reach $1.09 billion over the span of the ramp up period.
According to Senator Dale Righter, a Mattoon Republican and top budget negotiator, that may only be the tip of the budget iceberg.
“This minimum wage, once it’s fully implemented, will cost taxpayers in the state budget one billion dollars,” Righter said on Tuesday. “It’s not like we’re flush with money already. Not to mention colleges, universities, human service providers, they are all going to feel the impact of this.”
Park districts, who often employ youth ages 16 to 17, will see their minimum wage capped at $13 an hour. However, school districts and universities that rely on state funding were not included in the minimum wage calculation. State universities have expressed concerns about the higher payroll expenses to the governor’s office, and will likely use those mandates to buttress their budget requests before the House and Senate appropriations committees in the weeks ahead.
If Illinois does move to raise the minimum wage to $15 an hour, it would become the fifth state in the nation to do so, following Massachusetts, New York, California, and New Jersey, which became the fourth state to start raising its hourly wage floor to a goal of $15 last week. Each of those states started with a higher wage floor than Illinois has currently, and none of those states have fully implemented the $15 wage floor yet, providing a trove of new data points and research opportunities for economists to explore in the near future.
Governor Pritzker, who campaigned on a promise to raise the state’s wage floor to $15 an hour, is scheduled to deliver his first budget address on February 20th.