Illinois increases minimum wage to $15 by 2025
Two committee rooms one floor apart in the Illinois State Capitol on Wednesday had concurrent discussions of a bill to hike the state’s minimum wage to $15 per hour by 2025
The 13 Democrats on the Senate Executive Committee voted to advance the bill, Senate Bill 1, to the floor for a full vote that could happen as early as Thursday. The senate committee’s six Republicans all voted against the bill, while it was only up for discussion — not a vote — in the House committee.
Gov. J.B. Pritzker has said he would like the minimum wage bill, his first major policy push, approved by the time he gives his budget address on Feb. 20. But Senate Majority Leader Kimberly Lightford, a Maywood Democrat and the bill’s lead sponsor, exhibited a more cautious tone after a near two-hour private caucus of Senate Democrats which preceded the Executive Committee hearing.
“If we move the needle (in negotiations) tonight and it’s something that we can take back to the caucus and have a conversation and caucus is comfortable with it, then possibly (it could be voted on Thursday),” Lightford said.
Opponents of the bill, including Rob Karr of the Illinois Retail Merchants Association, have been advocating at the Capitol this week for a regional rollout of the minimum wage.
Karr said that no other part of Illinois sees anywhere near Chicago’s 55 million annual visitors, and recent local increases gave the city 10 years to hit the $15 minimum wage, while the rest of the state is expected to hit the number in six years.
He pointed to plans in New York and Oregon which have lower rates for areas with lower costs of living in their $15 minimum wage rollouts. While Karr said the regional rate idea was denied in negotiations, Lightford said specifics for a regional plan in Illinois were never brought to her attention, although she would be willing to discuss them.
Lightford said a more likely potential compromise was to provide for greater regional tax credits to employers in lower cost of living areas by using the state’s prevailing wage — which fluctuates between regions.
“What we would do is regionalize the cost of the business tax credit as opposed to lowering the wages of the worker,” she said.
The rest of the language of the bill is similar to a wage increase that was vetoed by Gov. Bruce Rauner last session and is nearly identical to a policy memo detailed by Pritzker’s office that circulated the Capitol this week.
It will include a phased-in increase over six years, starting with an increase from $8.25 to $9.25 on Jan. 1, 2020 before increasing to $10 on July 1, 2020 and $11 on Jan. 1 2021. After that, it would increase by $1 every year until it hits $15 in 2025.
Lightford said the six-year phase-in was a compromise between unions, who wanted a four-year phase-in, and business groups, who would prefer an eight-year period.
Representatives of the Illinois Association of Park Districts told a House committee of their move to a neutral position on the bill which allows employers to pay a slightly lower rate for teens that ranges from $1.25 lower than the minimum rate in 2020 to $2 lower than the $15 rate in 2025.
‘A tough pill to swallow’
The Illinois Restaurant Association, which represents 27,000 restaurants employing 577,000 people across the state according to its president Sam Toia, testified as a proponent of the bill while noting it’s a “tough pill to swallow.”
Toia said the inclusion of a tip credit, which requires employers to pay only 60 percent of the minimum wage to tipped workers, allowed the IRA to support the wage increase.
Republicans on the committee had concerns about the bill’s unforeseen costs to the state.
Gov. Pritzker’s office anticipated yearly increases to the state budget from $82 million to $270 million until the cost is about $1.1 billion each year by the time the wage hits $15 in 2025. This is because the bill accounts for increased appropriations by 3 to 5 percent to some human service programs and direct service providers as well as costs for state employee raises.
This increase does not account for increased demands for extra funding for nursing homes, hospitals, colleges, universities and some other state agencies and human services providers, Sen. Dale Righter, a Mattoon Republican, pointed out.
Lightford said there was increased income tax revenue projections to help cancel out the increases in expenditures. Between 2020 and 2026, income tax revenues are expected to increase by varying amounts between $20 million and $96 million each year even when accounting for increased income tax credits the bill would make available to businesses.
The income tax credit would be applicable only to employers with fewer than 50 employees, and would equal 25 percent of the difference between an employee’s wage at the end of the last fiscal quarter and the current minimum wage rate for the first year of the program. The 25 percent credit would decrease by 4 percent each year until it remained static at 5 percent until 2027, when it becomes unavailable to businesses with more than five employees.
Karr said the IRMA is hoping to further negotiate the income tax credit as well.
While opponents have complained about the fast-paced push for the bill’s implementation, Lightford said the process was not a quick one – she has filed four similar bills since the minimum wage was last increased in 2010, the most recent of which was vetoed by Rauner.
In fact, she said, by the time the wage hits $15 in 2025, workers will already be due for another
increase, as she cited a National Employment Law Project report that said a single Illinois worker currently requires $14.58 per hour full-time to meet the cost of living in Illinois.
“By 2025, we will be at, again, much lower than we oughta be on the minimum wage,” she said.