Workers’ compensation is a budget issue, costs taxpayers nearly $1 billion a year

March 23, 2017

New report finds structural reforms can save taxpayers $300 million, bring in new businesses, bolster economy

SPRINGFIELD (March 23, 2017) – A new report by the Illinois Policy Institute finds that workers’ compensation costs Illinois taxpayers $982 million each year proving that not only is it a budgetary item, but it is also a major cost driver that should be controlled and managed.

The new report analyzes workers’ compensation costs for state government, school districts, townships, special district governments, municipalities, counties, other special police and fire districts, and publicly funded construction projects. 

Illinois taxpayers are forced to shoulder not only the cost of government wages, health insurance, pensions and other benefits, but also to fund workers’ compensation costs that surpass those among the other states in the region. According to the recent “2016 Oregon Workers’ Compensation Premium Rate Ranking Summary,” Illinois’ system is the most expensive in the Midwest and ties for seventh-most expensive in the nation.

“Illinois should set the goal of aligning its workers’ compensation costs with those of other states in the region, after adjusting for wage differences, so that taxpayers can better afford this regulation on government payrolls,” said Michael Lucci, vice president of policy at the Illinois Policy Institute. “Businesses are leaving Illinois in the dust when they invest in neighboring states that have lower costs and more pro-growth reforms. We need to adjust the current law – specifically medical reimbursements, drug dispensing rules, wage replacement and indemnity costs – and make Illinois competitive again. Such changes can be done in a way to prioritize the long-term well-being of workers over the short-term profits of special interests through commonsense reforms.”

The data also show that local governments bear the brunt of public sector workers’ compensation costs, shouldering $727 million of the $982 million total cost, tying up scarce local tax dollars.

Reforms to Illinois’ workers’ compensation system would bring down costs while also prioritizing injured workers’ long-term well-being over the profits of special interests. These reforms would address harmful financial incentives in the medical fee schedule, pharmaceutical dispensing and wage and indemnity awards.

In addition, further reforms that would specifically ease the cost for local governments include:

  • Adopting the federal definition of catastrophic injuries for the Public Safety Employee Benefits Act
  • Eliminating the effective bump in take-home pay given to some injured government workers under the Public Employee Disability Act
  • Structuring light-duty programs to bring injured workers back on the job doing light work

The full Illinois Policy Institute report “Workers’ compensation estimated to cost Illinois taxpayers nearly $1 billion per year” can be viewed online at


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