Fixing Illinois: Politics and Policy in the Prairie State

Chapter 5. Economic Development for Stability

ChaPTer 5 economic Development for stability The Illinois economy is struggling. The state’s finances are a shambles of debt and unfunded obligations. In April 2013 the state’s unemployment rate was 9.3 percent, worst among all the states except Nevada.1 From the employment peak of November 2000, Illinois lost 655,700 jobs and had regained only 192,000 of those jobs by March 2013.2 The state’s image has been battered by the fact that four of Illinois’s past seven governors have served prison time for public corruption or white-collar crime. “The situation is currently as bad as I have ever seen it,” declares veteran economic development professional Steve McClure, referring to the state’s environment for building the economy. “I think people should appreciate that businesses in the state don’t have to stay here.”3 “We have to improve, if nothing else, the image of Illinois,” says David Vite, former president of the Illinois Retail Merchants Association.4 How bad is the situation, and what can be done about it? Newspapers love rankings and organizations love publicity; this has spawned a number of state-level business climate rankings. As of 2013 Illinois tends to rank near the bottom among the fifty states in many of these analyses, a position that can damage the perceptions that outsiders have of a state, even if the rankings lack merit. Illinois can change those perceptions from negative to positive, but it will take a few years. Below is a listing of some of the more prominent business climate rankings for Illinois, with the 79 Economic Development for Stability “best” state rated number 1.5 Each has a different focus; some focus on tax burden, and others include broader issues such as public safety and quality of life. American Legislative Exchange Council (2011) 48 CEO Magazine (2013) 48 Development Counselors International (2011) 48 Forbes (2013) 38 Tax Foundation (2014) 31 CNBC (2013) 37 Small Business and Entrepreneurship Council (2011) 40 These and other business climate rankings have been decried by academics as “conceal(ing) more than they reveal when they conflate a disparate set of industry sectors into a single amorphous snapshot,” according to Joseph Cortright and Heike Mayer.6 Peter Fisher of the University of Iowa agrees, noting that “none of the indices actually do a very good job of measuring what it is they claim to measure, nor do they measure the right things to begin with.”7 But rankings create perceptions, which are important. In 2011 we took a survey of seventy economic development professionals in Illinois, the professionals who recruit businesses to locate in their communities or regions, to find out what they thought. They reported that perceptions of a poor business climate are important factors they have to contend with in their efforts to sell their communities as places to expand and do business.8 Three in four of the seventy respondents said that business climate rankings were important, very important, or extremely important, if only for the perceptions they created. Twenty-one of the respondents specifically mentioned perception in their open-ended answers as being important in shaping the initial impressions about a state, and low rankings could often result in quick elimination of a state from consideration by site selectors. “Whether these rankings are accurate or not they affect ‘perceptions’ and perceptions greatly influence potential and current business confidence in Illinois,” said one of the respondents. “I am constantly having to defend the business climate of our state with existing business,” said another, “and it is very difficult to do when every publication you see is ranking Illinois near the bottom of the list.” We asked the Illinois economic development professionals what the state could do to improve its business climate. They responded with these recommendations : 80 ChaPTer 5 • Reduce workers’ compensation liability insurance costs; • Reduce the corporate income tax rate; • Put the state’s fiscal house in order; • Provide stability and predictability about the future; and • Change the perception that Illinois is a corrupt state in which to do business. Illinois ranked fourth-highest in the country in 2012 in workers’ compensation rates for injured workers, at $2.83 per $100 dollars of compensation and 151 percent of the median for the states.9 Neighboring Iowa ranked thirtysixth at $1.90 per $100 dollars of compensation, and Indiana was forty-ninth at $1.16.10 Florida ranked...