Illinois must unite to reverse economic decline

January 23, 2019

Chief economist points to state’s economic decline as cause for pension reform, spending cap

SPRINGFIELD (Jan. 23, 2019) – Today, the Illinois Policy Institute released an annual State of the State analysis of Illinois’ economic performance. The nonpartisan nonprofit’s research recommends two key policy solutions ahead of Gov. J.B. Pritzker’s next public address. Chief economist Orphe Divounguy offered the following statement:

“A look around Illinois’ struggling cities and towns reveals a state that can no longer sit idly by and wait for change. Our governor and General Assembly have a massive opportunity this year: enact meaningful reforms to benefit those in need.

“Until now, our budget has been shackled and suffocated by rising costs that taxpayers can simply never keep up with. Social services have suffered. Schools have suffered. Meanwhile, the government continues taking more money Illinoisans need to care for their families.

“Since the decade began, Illinois has experienced the greatest population loss of any state in the nation. This period of decline has had detrimental effects on the economy.

“Job seekers in Illinois spend an extra month looking for work, compared to the national average, or give up altogether. The weak job climate means that when someone decides to pack up and leave Illinois, it’s usually in search of better opportunities.

“Businesses are witnessing the outmigration of highly educated talent and realizing the people they need to hire aren’t sticking around. They’re deciding to make fewer investments in the state. Punished by rising property taxes and high corporate and franchise taxes, businesses simply can’t afford to stay or grow here.

“Both businesses and families are choosing new home states where there isn’t a constant demand that they shell out more. The competitive advantage of Illinois is waning.

“As we move into the new legislative session, lawmakers must address the root causes of our state’s pain. Both state and local budgets have been heavily burdened by our pension costs. But a constitutional amendment that would protect already-earned benefits while allowing for changes to the growth in future benefits would lay a foundation for income tax and property tax relief for the most vulnerable Illinoisans.

“Passing a spending cap would also better align government spending with what taxpayers can afford. It would create a more efficient government, alleviate fears of constant tax hikes and instill confidence in families and businesses that Illinois is a place to plant roots.

“Tax hikes hurt the economy. Period.

“A progressive tax is the wrong solution for Illinois. States with a progressive tax see disparities between the wealthy and the poor increasing, rather than shrinking. In total, their economies, jobs and wages grow slower than in the 17 states without a progressive tax. It’s no surprise that states with a progressive tax lost 300,000 people last year to states with more competitive tax environments. A progressive tax can never be the solution to our ailments.

“There is a path forward to improving our economy: pension reform and a spending cap. If lawmakers heed this agenda, the next four months will shift the momentum toward the prosperity Illinoisans deserve.”

Fast facts on Illinois’ economy:

  • If Illinois had experienced the same recovery from the Great Recession as the rest of the nation, the state’s economy would be an extra $34 billion larger than it is today.
  • Fifty-three percent of Illinois’ outmigrants left the state in search of work since 2010.
  • Since 2010, annual private sector employment growth was 40 percent slower in Illinois than the rest of the country.
  • Illinois state income taxes have risen 65 percent since 2010, while they have declined in most other states.
  • In 2018, home values in Illinois were down 6 percent relative to their 2007 peak. Meanwhile, home values across the rest of the nation were up 14 percent.

To watch Illinois Policy Institute’s State of the State, click https://illin.is/2RxGoqJ.
To read more about the State of the State, visit http://illin.is/sos2019.