Democrats in the General Assembly, flush with supermajorities in both chambers and a friend in the governor’s mansion, will take a different approach to foster investment and job growth.
Gov.-elect J.B. Pritzker has said he plans to build the state’s economy by revitalizing small business growth with improved access to capital, infrastructure improvements and investment in higher education, among other efforts. He’s also said he favors a graduated income tax and increasing the state’s minimum wage to $15 an hour.
Pritzker’s new administration and Democrats in the House and Senate have an opportunity to reshape Illinois’ business climate in the next year. Among the issues expected to arise are workers’ compensation costs, property taxes and the state’s debt load.
A CNBC report in July ranked Illinois at No. 28 overall in America’s Top States for Business 2018. The Land of Lincoln ranked No. 42 for its economy and No. 29 for cost of doing business. By comparison, Indiana was ranked No. 5 for cost of doing business, Np. 20 for its economy and No. 16 overall. Wisconsin ranked No. 17 overall, getting No. 20 for cost of doing business and No. 30 for economy.
Businesses have been leaving the state. And Amazon recently decided to build its second headquarters in two East Coast cities, passing over Illinois. On Wednesday, Illinois lost two businesses to neighboring states. Rockford-based Seal-Rite Door announced it was leaving Illinois for a new $16 million facility in Wisconsin. Alliance Steele, based in Bedford Park, Illinois, announced it was going to move to Indiana. Both companies got financial incentives from their new states.
While a number of high-profile companies have in recent years decided to move their headquarters to Chicago, signs that the state’s business climate is hurting investment abound. A financial planner says Illinois’ high debt levels leads to businesses looking elsewhere to invest elsewhere. Illinois’ budget is out of balance, even with a $5 billion tax increase from 2017. It’s $200 billion-plus government retiree liabilities aren’t going anywhere either. Buffalo Grove-based financial planner John Bever said that debt leads to increased overall tax burden on not just residents who then may flee the state, but business owners who take jobs with them.
“Illinois has a big bill that they have to pay so it makes it difficult for them to create a situation where there’s an incentive for an employer to locate in this state,” Bever said.
State Senate President Pro Tempore Don Harmon, D-Oak Park, said with Democrats taking over the executive branch and securing supermajorities in the state legislature, it’s time to tackle the state’s finances, and he’s hoping Republicans are there to help.
“And I’m hoping that the budget we passed last year will be a template for that kind of bipartisan support,” Harmon said. “But we’ve run out of excuses. We’ve got to put our fiscal house in order.
Both parties are also eyeing Illinois’ high property taxes, something else that impacts job creators.
“Property taxes, obviously a business, a warehouse, they have to pay property taxes too,” state Rep. Allen Skillicorn, R-East Dundee, said. “But think about workers’ compensation.”
The Workers Compensation Research Institute doesn’t measure the cost paid by employers, but it does measure the average total cost per claim, which includes indemnity benefits paid to injured workers, medical payments for treatment, litigation and management costs. The total cost per claim with more than seven days of lost time was about $50,000, the institute reported. Illinois’ costs were similar to Iowa, but 23 percent higher than Wisconsin, 32 percent higher than Indiana, 42 percent higher than Tennessee and 72 percent higher than Michigan. WCRI does not have data on Kentucky or Missouri
Illinois manufacturers’ have for years said the state’s workers’ compensation costs are too high making the state uncompetitive in attracting business investments. Republicans and Democrats disagree about the solution.
State Rep. Will Davis, D-Hazel Crest, said the state overhauled workers’ compensation policies in 2011, but insurance companies didn’t pass those savings down to employers.
“The biggest issue in workers’ comp is the insurance industry,” Davis said. “And they kind of play both sides of this.”
State Rep. Tom Demmer, R-Dixon, said the industry could play a role, but that’s not the only thing affecting the cost of doing business in Illinois.
“I think there are multiple factors that drive workers’ comp rates high,” Demmer said. “I’m sure there is some portion of it that is on the insurers’ side, but it’s also on the that we put in state law in how workers comp costs are handled.”
Republicans and the business community have pushed for reforms like ensuring employees prove the injury happened at work. Democrats and the Illinois Trial Lawyers Association have said Republican proposed reforms will lead to poorer quality of care for injured workers.
One idea Democrats have attempted several times, but was most recently vetoed by outgoing Gov. Bruce Rauner, was having a nonprofit work comp company funded with state dollars generated by workers comp fees employers pay to the state. The nonprofit seeded with public money would then compete with the private sector.
With even more Democrats in the legislature it’s possible that could surface again.
“Our best option here in Illinois, what the legislature has done, is try to create a union run business to compete with the insurance companies? That’s only going to drive up prices,” Skillicorn said. “[State debt, property taxes, workers’ comp costs] are all problems that matter. Unfortunately greed has ruled the day. Pigs get fat, hogs get slaughtered, and that’s exactly what the political class in the state of Illinois is doing.”