Illinois is a world-class place to live, work, and do business. The State’s economy is one of the largest in the world and represents a diverse mix of industries.
The City of Chicago, the economic engine of the Midwest, has been the top city in the United States for direct foreign investment for the last six years2 and was the top location for corporate relocations and expansions in 2017.3 The State’s workforce is skilled and well-educated, with approximately one-third of the State’s workforce holding at least a bachelor’s degree.4 In addition, Illinois’ central location and diversified transportation network have solidified the State as an essential transportation hub for the entire country.
Despite Illinois’ many competitive advantages, it faces significant challenges. The State’s fiscal uncertainty and instability hurt our economy and cause many families and businesses to leave Illinois and others not to come here. Illinois’ population has declined each year from 2014-2018, and population loss as a percentage of the State’s population for 2017-2018 was second highest in the nation behind West Virginia. These challenges have been abundantly covered by local, national, and global media and shape a negative narrative of Illinois.
Given this context, Civic Committee leadership has grown increasingly concerned about the deterioration of the State’s finances and its effect on the jobs climate. As a result, in 2015 Civic Committee leadership created a Tax Policy Task Force (“Task Force”) to analyze the State’s financial challenges and identify tax and budget policies to address them. The Task Force met with a variety of tax policy and state finance experts and developed a financial framework (“Framework”) for the State of Illinois that if implemented fully would put the State government back on the path to fiscal solvency and help restore confidence in the State’s fiscal future.
In 2017, the Task Force released Bringing Illinois Back: A Framework for our Future. This report addressed the key issues facing the State and included the Task Force’s Financial Framework, as well as several additional reforms to improve the jobs climate.
The State has made progress on many fronts, but there is still a long way to go to ensure stability and certainty in the State’s jobs climate going forward. In addition, having a new Governor and General Assembly presents an opportunity to pursue the bold action necessary to stabilize Illinois’ finances and lay a foundation for economic growth. As a result, the Task Force has produced an updated and expanded report, Restore Illinois: A Foundation for Growth, to evaluate the progress that has been made since 2017 and to identify actions that still need to be taken by State government to improve its financial standing and jobs climate.
The Task Force selected a five-year time frame for full implementation of our recommendations, reflecting our belief that swift and comprehensive action is required to improve Illinois’ fiscal health and combat the narrative that the State is a questionable choice to live, work, and do business
Although we recognize that not every recommendation may be adopted on the schedule we have prescribed, some policy prescriptions should be a higher priority, such as eliminating the structural budget deficit and increasing contributions to the State’s pension funds up front to stop the growth in the State’s pension debt faster than under the current schedule. The key is instituting a plan that will achieve our recommendations in a defined time frame rather than deferring action on critical issues to the future.
While this report focuses primarily on State finances, we recognize that the impact of solutions to the State’s problems will not occur in a vacuum and that Illinois taxpayers are already burdened by high taxes, particularly property taxes. Our recommendations focus on the areas in which the State has room to make changes without increasing its negative outlier status in order to mitigate the overall impact on the State’s jobs climate and Illinois taxpayers wherever possible.
This report represents a comprehensive set of recommendations that can be enacted immediately. These recommendations do not require constitutional amendments, which at the earliest would take several years to go into effect because it is critical that the State move forward with implementing fiscal reforms now to ensure Illinois is on a viable path to fiscal health and stability. If the State enacts these reforms, Illinois will have addressed its financial challenges and given people and businesses certainty about the State’s future, which is a critical element in promoting job growth in Illinois. Without a growing economy, the State will not be able to move forward to provide vital services to all Illinoisans and focus on other future growth initiatives.
Although there have been several policy changes enacted since we published Bringing Illinois Back, the legislature has not yet implemented many of the recommendations of the Framework. We continue to believe that the State should adopt the Financial Framework created by the Task Force and pursue policy solutions consistent with it. Part 1 of this report provides an overview of the components of the Financial Framework.
It is critical that the State move forward with implementing fiscal reforms now to ensure Illinois is on a viable path to fiscal health and stability.
1 “Chicago Technology Initiative Fact Pack,” p.42. Updated January 26, 2018. Prepared for the Civic Committee of the Commercial Club of Chicago.
2 “Chicago Named Top Major City for Foreign Direct Investment Strategy,” World Business Chicago, http://www.worldbusinesschicago.com/chicago-top-foreign-direct-investment-strategy/. Accessed November 13, 2018.
3 “Chicago Ranked Top Corporate Metro for Fourth Consecutive Year,” World Business Chicago, http://www.worldbusinesschicago.com/top-metro-four-years/. Accessed November 13, 2018.
4 Federal Reserve Bank of St. Louis, “Educational Attainment, Annual: Bachelor’s Degree or Higher by State,” 2016, https://fred.stlouisfed.org/release/tables?rid=330&eid=391444&snid=391458. Accessed October 26, 2018.