1. Chicago Paint & Coatings Association February 17, 2015

3. State of Illinois $7 billion + income tax increase in 2011 – Starts to expire on January 1, 2015 @$7 billion Pension Payment - Current Fiscal Year $5.124 billion backlog of bills (as of 2/11/15) $100 billion + shortfall in state-funded pensions (teachers, state, university, etc. ) Governor proposing serious cuts in all GRF programs to alleviate debt

4. Loss of People, Revenue Since 1995 – Illinois has lost 366,616 tax-paying households (806,054 people) Loss of $26.3 billion in taxable revenue 2014 – Illinois is #2 in the nation again where more people are leaving than arriving. #1 in 2011, #2 in 2012 More people fled Illinois than were born here in 2014, sustaining a record net loss of 95,000 people Illinois has dropped from #6 in per capita income in 1998 to #15 in 2013 Illinois’ unemployment rate is 6.4%, higher than the national unemployment rate of 5.6%. (Dec. 2014)

5. Largest Costs Structural Imbalance – State Pensions, Medicaid, K-12 Education Pensions - Over $7 billion and Climbing Medicaid - $7.3 billion Education - $8.95 billion – flat through 2015

6. Taxes & Spending - Partial expiration of 2011 income tax increase - decreases personal income tax rates to 3.75% from 5% corporate income tax to 7.75% from 9.5%, costing the state over $2 billion just for the current fiscal year. - Current Budget & Revenues: Lawmakers approved $35.7 billion budget Revenues projected to only be $34.49 billion Leaving $1.2 billion deficit Since Illinois has a balanced budget requirement, this deficit was made up by $650 million in borrowing from other funds and $380 million in postponed bills, and other delayed payments, all of which must be paid back July 1, 2015.

7. Largest State Tax Exemptions – as of 4/1/14 $2.23 billionRetirement & Social Sec. (I) $1.64 billion Food, Drug, Medical (S) $1.11 BillionStandard Deduction (I) $548 millionProperty Tax Credit (I) $333 million Tax-Exempt Organizations (S) $282 millionExemption from Trade-Ins (S) $267 millionFarm Chemical Exemption (S)

8. Largest Business Tax Exemptions $267 millionFarm Chemical Exemption (S) $204 millionManufacturing Machinery Exemp. (S) $146 millionGasohol Discount (S) $133 millionBiodiesel Discount & Exemption (S) $125 millionRetailers’ Discount (S) $114 millionNon Motor Vehicle Use (MF) 88% of all Exemptions are contained on these two pages

9. Other Tax Incentives Targeted Return to 3 factor income tax apportionment for non-service companies $70 million Repeal Research & Development (R & D) Tax Credit $30.6 million Eliminate the Manufacturers’ Purchase Credit (MPC) $34.5 million Decouple from federal accelerated depreciation (one-time revenue increase) $100 million Include Puerto Rico and outer continental shelf in definition of U.S. $30 million Require income tax withholding on gaming winnings over $1000 from non-residents $4 million Decouple from 2004 federal tax legislation (qualified production activities deduction) $53 million Repeal deduction for foreign and domestic dividends received by corporations $90 million End deduction for company owned life insurance $9 million Tax canned software $65 million Extend the insurance tax to industrial insurance $15 million Repeal exemption for fuel transported to out of state destinations (Stealth Gas Tax) $45-90 million Limit retailers sales tax discount $125 million

10. Challenges Going Forward Illinois – Financial Problems Continue $9 Billion Budget Deficit – Including $5.124 Billion in Backlog of Unpaid Bills 2011 Tax Increase Started to Expire Jan. 1, 2015, reducing revenue by $2.1 Billion in the Current Fiscal Year and an Additional $2.7 Billion in the next Fiscal Year starting July 1. Will Tax Increase be Extended? If so, at What Rate? Pension Reforms Challenged in Court. Constitutional? If Not, Back to Drawing Board. Over $7 Billion in Pension Payments due this Year.

11. Other Current & Future Issues Loss of Revenue - Income Tax; Possible Service Taxes Clean Power Procurement – Electricity Costs Fracking/Shale Gas/Price of Natural Gas Chemical Regulation at State Level Chemical Bans – Triclosan, BPA, Flame Retardants, Coal Tar Sealers, Polystyrene Containers, etc. Asian Carp/Chicago Waterway System/Mississippi River Illinois Pollution Control Board Opening