HB3647 94TH GENERAL ASSEMBLY

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94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB3647

Introduced 2/24/2005, by Rep. Bob Biggins

SYNOPSIS AS INTRODUCED:

New Act
15 ILCS 405/16.2 rep.
30 ILCS 5/3-8.5 rep.

Creates the Illinois Fee Management and Transparency Act. Provides that a user charge or fee assessed shall be charged against each identifiable recipient for special benefits derived from State activities beyond those received by the general public. Sets forth procedures for determining fee amounts. Sets forth requirements for legislation that imposes fees. Sets forth requirements for State agencies to implement fees. Requires the State Comptroller to submit an annual report to the General Assembly concerning State agency fees. Requires each State agency to review its fees every 2 years. Requires the Auditor General to evaluate each agency fee at least once every 5 years. Amends the State Comptroller Act to repeal a Section concerning the reporting of agency fees. Amends the Illinois State Auditing Act to repeal a Section concerning Agency Fee Imposition Report Forms. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning State government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Illinois Fee Management and Transparency Act.

Section 5. State objective. The purpose of this legislation is to implement a uniform management and oversight program for the administration and assessment of State-imposed fees and user charges. The use of fees to fund State programs and services is a positive tool and one that has distinct advantages over general tax increases. Fees can register public demand for a service or program, improve operating efficiency of government agencies, and prevent waste of State services or resources. Fees should not be imposed to fund general public services unrelated to the program or service for which the fee is imposed but should be used to recover the full cost to the State of providing special benefits and services beyond those that accrue to the general taxpaying public. It is the objective of the State of Illinois to ensure that each service, sale, or use of State goods or resources provided by an agency to specific recipients be self-sustaining and promote efficient allocation of the State's resources by establishing user charges or fees for special benefits provided to the recipient that are at least as great as costs to the State of providing the special benefit and that allow the private sector to compete with State government without disadvantage in supplying comparable services, resources, or goods where appropriate. This Act establishes State policy regarding fees assessed for government services and for the sale or use of government goods or resources.

Section 10. General policy.

(a) A user charge or fee shall be assessed against each identifiable recipient for special benefits derived from State activities beyond those received by the general public.

(b) Determining when special benefits exist. When a service (or privilege) provides special benefits to an identifiable recipient beyond those that accrue to the general public, a charge shall be imposed to recover the full cost to the State for providing the special benefit or to compensate the State for the market price of the good or service rendered. A special benefit is considered to accrue and a user charge shall be imposed when a State service:

(i) enables the beneficiary to obtain more immediate or substantial gains or values (which may or may not be measurable in monetary terms) than those that accrue to the general public (e.g., receiving a license to carry on a specific activity or specific business or for use of public lands);

(ii) provides business stability or contributes to public confidence in the business activity of the beneficiary by regulating competencies (e.g., insuring deposits in commercial banks or setting and monitoring compliance with educational requirements and competencies for specific skills rendered to the public); or

(iii) is performed at the request of or for the convenience of the recipient and is beyond the services regularly received by other members of the same industry or group or by the general public (e.g., receiving expedited or after hour services).

Section 15. Exemptions. In general, user charges or fees should not be assessed where it is not cost effective to do so, where it is inconsistent with government policy objectives, or where it would unduly stifle competition or industry innovation. The following State charges or assessments are not considered a user charge or fee subject to the provisions of this Act:

(a) general taxes;

(b) any form of inter-agency or inter-governmental charge;

(c) any government business enterprise operating in a competitive or potentially competitive market;

(d) repayments of loans to the State;

(e) asset sales, rental of property, or royalties;

(f) fines and pecuniary assessments or penalties; and

(g) fees charged by courts and tribunals.

Section 20. Determining the amount of user charge to assess.

(a) Except as otherwise provided by this Act, user charges or fees assessed by a State agency must be sufficient to recover the full cost to the State of providing the service, resource, or good when the State is acting in its governmental capacity. Partial cost recovery may apply where new programs, services, or resources are being phased in, where there are government-endorsed community service obligations, or for explicit government policy purposes contained in the implementing legislation.

(b) User charges must be based on market prices when the State, not acting in its governmental capacity, is leasing or selling goods or resources or is providing a service (e.g., leasing space in a State-owned building). Under these business conditions, user charges need not be limited to the recovery of full cost and may yield net revenues.

(c) User charges shall be collected in advance of, or simultaneously with, the rendering of services unless appropriations and authority are provided in advance to allow reimbursable services.

(d) No charge may be made for a service when the identification of the specific beneficiary is obscure, and the service can be considered primarily as benefiting broadly the general public.

(e) Charges shall be made to the direct recipient of the special benefit even though all or part of the special benefits may then be passed on to others.

Section 25. Determining full cost.

(a) "Full cost" includes all direct and indirect costs to any part of the State government of providing a good, resource, or service. These costs include, but are not limited to, an appropriate share of all of the following:

(1) Direct and indirect personnel costs, including salaries and fringe benefits such as medical insurance and retirement. Retirement costs include all (funded or unfunded) accrued costs not covered by employee contributions.

(2) Physical overhead, consulting, and other indirect costs including material and supply costs, utilities, insurance, travel, and rents or imputed rents on land, buildings, and equipment. If imputed rental costs are applied, they must include:

(A) depreciation of structures and equipment, based on official Internal Revenue Service depreciation guidelines unless better estimates are available; and

(B) an annual rate of return (equal to the average long-term Treasury bond rate) on land, structures, equipment, and other capital resources used.

(3) Management and supervisory costs.

(4) The costs of enforcement, collection, research, establishment of standards, and regulation, including any required environmental impact statements.

(b) Full cost shall be determined or estimated from the best available records of the agency, and new cost accounting systems need not be established solely for this purpose.

Section 30. Determining market price.

(a) "Market price" means the price for a good, resource, or service that is based on competition in open markets and creates neither a shortage nor a surplus of the good, resource, or service.

(b) When a substantial competitive demand exists for a good, resource, or service, its market price shall be determined using commercial practices, for example:

(i) by competitive bidding; or

(ii) by reference to prevailing prices in competitive markets for goods, resources, or services that are the same or similar to those provided by the government with adjustments as appropriate that reflect demand, level of service, and quality of the good or service.

(c) In the absence of substantial competitive demand, market price shall be determined by taking into account the prevailing prices for goods, resources, or services that are the same or substantially similar to those provided by the government, and then adjusting the supply made available or price of the good, resource, or service so that there is neither a shortage nor a surplus.

Section 35. Implementing user charges by legislation. Legislation to impose a new user charge or fee must:

(1) Clearly define the program or service to be funded and its scope and intent.

(2) Contain a fiscal note that forecasts first-year start up costs and estimates annual costs of the program or service. The fiscal note must be public and readily accessible.

(3) State whether the proposed fee or user charge is intended to cover the full cost of the program or service or offset only a portion of the program or service costs.

(4) Whenever possible, not specify the precise fee amount, but allow for the fee amount to be developed by rulemaking of the administering State agency to allow administrative updating of fees to reflect changing costs and market values and for input of the affected public through the rulemaking process.

(5) Take into consideration other programs that provide special benefits to the same or similar user populations and design proposals to avoid the duplication of collection efforts and costs and ease the burden on users.

(6) Consider the fiscal and competitive impact of the user charge or fee on those subject to the user charge or fee. User charges or fees imposed in other states shall be considered only in determining whether proposed user charges or fees or increases in existing user charges or fees would be fiscally or competitively detrimental to those subject to the assessment and not to justify user charge or fee amounts in excess of the full cost of the program, service, or resource.

Section 40. Agency implementation of user charges or fees. Agencies are responsible for the initiation and adoption of user charge or fee schedules consistent with the provisions of this Act. Each agency must complete a Fee Imposition Report Form for each current user charge or fee imposed or for any new user charge or fee proposed by the agency. The Fee Imposition Report Form shall be filed with the Comptroller at the time the Comptroller specifies by rule. The Comptroller shall submit to the General Assembly by September 1 of each year a report detailing, by agency, the information required under the Agency Fee Imposition Report Form. The Fee Imposition Report Form shall include a list and description of all fees imposed by the agency. For each fee, the agency shall:

(1) state the special benefit conferred by the State justifying the imposition of the fee or user charge pursuant to this Act;

(2) provide the statutory authority for the fee;

(3) identify the population affected by the fee;

(4) determine the full cost or market price of the special benefit in accordance with this Act. The information used to establish the amount of the fee or user charge and the specific methodology used to compute the amount of the fee shall be maintained by the agency and be made readily accessible to the public;

(5) identify all funds into which the fees are deposited;

(6) identify the specific use of the funds generated by the fee; and

(7) state whether the fee pays for the full cost of the State program, resource, or service provided as a special benefit to the users or whether the fee pays only partial costs or generates revenues in excess of the full cost of the program.

Section 45. Biennial review of agency fees. Each agency shall review all fees assessed and collected by the agency every 2 years to determine whether the existing fee amount should be adjusted to reflect unanticipated changes in costs or market value. If an adjustment to the user charge or fee merits review and adjustment, the agency head shall request an Auditor General review of the user charge or fee pursuant to Section 50 of this Act. If the Auditor General's evaluation of the user charge or fee pursuant to Section 50 of this Act recommends an adjustment to the user charge or fee, the agency shall proceed with the rulemaking process or recommend necessary legislation.

Section 50. Auditor General evaluation of fees and user charges. Unless requested sooner by an agency, the Auditor General shall evaluate each agency user charge or fee no less often than every 5 years. The Auditor General shall determine whether an adjustment to increase or decrease the user charge or fee amount is warranted after an audit of the agency program or service as provided by this Section. As part of the user charge or fee evaluation, the Auditor General shall:

(1) evaluate the methodology used to compute the fee amount;

(2) analyze administrative efficiencies in administering the program and agency processes for reporting revenues and expenditures and recommend where agency efficiencies or cost reductions could be implemented; and

(3) analyze the effectiveness of the program or service in terms of legislative intent.

If revenues exceed the full cost of the program or service by more than 20% for 3 consecutive years, the Auditor General shall recommend a fee decrease to more accurately reflect the full cost of administering the program or service.

If moneys from the General Revenue Fund are necessary to subsidize a particular program or service, the Auditor General shall determine the amount of those moneys used per year to support the program and make a recommendation as to whether the fee or user charge should be increased to recover the full cost of the program.

Section 55. Severability. The Provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

(15 ILCS 405/16.2 rep.)

Section 900. The State Comptroller Act is amended by repealing Section 16.2.

(30 ILCS 5/3-8.5 rep.)

Section 905. The Illinois State Auditing Act is amended by repealing Section 3-8.5.

Section 999. Effective date. This Act takes effect upon becoming law.