With sputtering economic growth, broken budgets, scarcely believable unfunded liabilities and hundreds of unaffordable mandates placed on local communities, Illinois has been on an unsustainable path for years, if not decades.
The failures of state government in these areas are broad and numerous. Here’s a look at the staggering statistics that outline Illinois’ dire straits.
1. Worst-in-nation employment recovery since the Great Recession. In terms of putting people back to work after the Great Recession, Illinois is far out of line with its neighbors and the single worst state in the country. There are 236,000 fewer Illinoisans working today than when the Great Recession began.
2. Illinois’ workforce is shrinking. The shortage of work opportunities is an obvious problem, but it’s not showing up in unemployment data. That’s because Illinois’ workforce keeps shrinking due to workforce dropout. Even though the recession ended years ago, Illinois’ workforce keeps getting smaller as workers give up hope of finding employment.
3. Illinoisans are leaving the state in droves. Many Illinoisans who drop out of the workforce pick up and leave for other states. The rate at which people are leaving the state is accelerating, and actually reached a new all-time high in 2014. Illinois lost 95,000 people on net to other states in 2014, the worst year in state history. Over the last decade, 675,000 more people left Illinois than entered the state. Over the last two decades, the net loss of Illinoisans to other states is more than 1.3 million, according to the U.S. Census Bureau.
4. The nation’s most severe pension crisis. Taxes in Illinois are already high, and skyrocketing pension obligations mean they will only go higher. At the state level, the unfunded pension liability is $111 billion, giving Illinois the worst funding ratio in the country. Despite record tax hikes in 2011, the pension liability kept climbing higher. Only true reform can fix the problem.
5. Local governments have their hands tied. The pension problem isn’t just a state one. Springfield mandates generous pensions for local communities and then puts the burden on the locals to figure out how to fund the state’s generosity. For example, Chicago’s pensions are only 42 percent funded, leaving a $32 billion unfunded pension liability. Chicagoans, like residents of other cities, can sense the impending property-tax hikes.
6. Property taxes are squeezing the middle class. Chicago is far from being the only trouble spot, as pensions in municipalities across the state are dangerously underfunded. Pension costs are causing property taxes to balloon across the state, leaving Illinois homeowners with the second-highest average property taxes in the country, only a few dollars behind New Jersey. Illinois’ average property taxes are two and a half times as high as Indiana’s.
7. Uncompetitive business climate. Illinoisans can’t get back to work and pensions can’t be funded without strong and sustainable economic growth. Illinois’ growth is consistently at the bottom of the region and nation, which is why the state’s recovery from the Great Recession is only halfway done in terms of putting people back to work. Gov. Bruce Rauner’s “Turnaround Agenda” address major hindrances to economic growth, such as high property taxes and Illinois’ broken workers’ compensation system, where insurance premiums are dramatically higher than neighboring states for blue-collar industries.
8. Manufacturers save millions by moving next door. Workers’ compensation is so expensive in Illinois that manufacturers can save millions of dollars in insurance premiums by simply moving to Indiana. Headlines show they are well underway in exiting the Land of Lincoln, especially steel manufacturers. A mill employing 1,000 steel fabricators can save more than $3 million every year in premiums by heading to the Hoosier State.
9. Illinois lacks worker freedom. Rauner’s economic agenda also addresses worker freedom, and would grant local communities the power to decide what rights workers should enjoy. Illinois is currently a forced-union state. The states surrounding Illinois, on the other hand, are lining up in favor of worker freedom. That means workers in Indiana, Michigan, Iowa and Wisconsin don’t need to join a union or pay union fees in order to keep their jobs. This deregulation of labor is attractive to workers because it allows workers to organize unions if they feel mistreated by management, and it allows them to leave the unions if they feel mistreated by union leadership. Meanwhile, in every year since Michigan and Indiana enacted statewide Right-to-Work laws, personal incomes in those states have grown faster than those in Illinois, destroying various predictions that worker-freedom laws cause incomes to fall.
10. Right-to-Work Indiana poaches thousands of Illinois jobs. The effects of worker freedom have been dramatic in Indiana. Since Indiana’s Right-to-Work law was enacted in March 2012, the Hoosier State has produced nearly 40,000 new manufacturing jobs, while Illinois has lost 3,500.
11. Right-to-Work Michigan poaches thousands of Illinois jobs. The same story played out in Michigan. Since Michigan’s Right-to-Work law was enacted in March 2013, the Wolverine State has added 39,500 manufacturing jobs, while Illinois has lost 4,600 in the same time period. This has allowed Michigan to make a dramatic comeback and surpass Illinois for total manufacturing work, even with a workforce only three-quarters the size.
12. The secret to union membership. The unspoken secret in all of the discussion about Right to Work is that unions are shrinking in forced-union states, and growing in Right-to-Work states. Over the last decade, union membership is up 1.3 percent in Right-to-Work states, while it is down 8.9 percent in forced-union states. In Illinois, union membership is down 10 percent in the last decade. But since Indiana passed its Right-to-Work law, union membership has increased by 53,000 in the Hoosier State.
The failures of Springfield are many, the state and local crises are real, and the time for action is now.
Rauner has proposed that local communities pass resolutions in support of a statewide “Turnaround Agenda.” This agenda, if enacted, would do just what it says: turn around one of the worst-run states in the country. The choice has been put to local communities whether to endorse a new path forward or accept the clearly failing status quo.
Rauner’s proposal would jump-start the Land of Lincoln’s sluggish economic growth, address the state’s dramatically unfunded pension liabilities and mandates weighing on local communities, and revamp the state’s generally negative business climate. The proposal includes a set of policies that have worked in other states, and others that are unique innovations to address Illinois-specific problems.
Many local communities have begun passing resolutions in support of the Turnaround Agenda. Others have tabled the resolution for later discussion. And a few have rejected the resolution outright. Through it all, one fact is absolutely clear: Springfield leadership has dramatically failed the people and local leadership of Illinois. Almost no local-government officials can deny this, and it is these failures that the Turnaround Agenda addresses.
If local communities support the Turnaround Agenda, they would be endorsing the following ideas:
- Local communities should have control over local issues so that communities can fix the problems that have been blown up by Springfield’s malfeasance.
- An agenda that will bring economic growth back to the Land of Lincoln, so that Illinois can re-take its rightful position of Midwest leadership.
There are a variety of individual issues addressed by the agenda. They include giving local communities a number of new powers, including:
- Allowing local communities to decide what issues government unions can bargain over with the local government.
- Allowing local communities to decide whether a worker should have to join a union or pay union fees in order to keep her job.
It would also relieve local communities of billions of dollars of state mandates by:
- Repealing the Prevailing Wage Act, which prevents local governments from getting the most competitive bid for government work, costing taxpayers a pricey premium on every project.
- Relieving local communities from some of the 280 budget-busting unfunded mandates.
- Reforming pensions for local communities, which are the major driver of property-tax increases.
Local communities are being asked to put this agenda to a vote. Despite the alarming evidence taken directly from Illinois’ past, the Turnaround Agenda does not present an easy vote for local leaders who are being pressured by unions and other interest groups to reject the reform plan. It’s not an easy vote, but it is a necessary vote.
The questions are ultimately simple ones: Should Illinois move forward on a new path, or should the state continue to embrace the policies of complete and utter failure? Should Illinois once again embrace the individual rights and free-enterprise system that serve as the backbone of our nation and state, or should the economic misery and human exodus continue at breakneck speed from the once-mighty Land of Lincoln?
The checkered history of Illinois’ last decade is a backdrop, and the possibility of transformational reform is on the table for the here and now. It’s up to local governments to speak their voice, and for local leaders to help chart the course toward a future of restored state pride, where human potential turns into flourishing, dreams are realized and families can set down roots that will last generations.
Michael Lucci is Director of Jobs and Growth for the Illinois Policy Institute.