In 2001, Boeing announced it would move its corporate headquarters from Seattle to Chicago. Today, you wonder if Boeing is having buyer’s remorse.
Illinois has become one of the nation’s most unfriendly states for business. According to the Illinois Policy Institute, 850,000 people have left the state over the past 15 years, headed for other states like Texas, Florida and neighboring Indiana. If you are bleeding one person every 10 minutes, something is deeply wrong with the way the state is being run.
For example, Forbes ranks Texas as the sixth best place for business. Washington and Florida, states without an income tax, rank eighth and 19th, respectively. Indiana, a right-to-work state, ranks 13th. Illinois is 40th.
Forbes rates Texas best for economic climate and growth prospects. Dallas-Fort Worth – one of the cities Boeing considered before choosing Chicago – has among the lowest costs of doing business. Chicago’s business costs rank among the highest.
Illinois is like Greece in one obvious way: it overpromised and under-delivered on pensions and has little appetite for dealing with the problem, says Hal Weitzman of the University of Chicago Booth School of Business.
In 2011, former Gov. Pat Quinn (D) convinced fellow Democrats in the legislature to significantly raise taxes so the state could begin to dig itself out of its financial hole. They obliged, raising income and corporate taxes by 67 and 37 percent respectively on the promise there would be spending and pension reforms.
But when the unions for teachers and government employees pushed back, lawmakers adjourned in 2013 without passing a single reform. Two years of rancorous debate produced nothing — and they didn’t vote to give the people their taxes back. As a consequence, the typical Illinois family saw taxes increase $1,594 a year while watching pension costs rocket upward by $17 million a day.
Voters didn’t forget Quinn’s debacle and last November they voted him out of office – a highly unusual move for a deep blue state that votes Democrat. In fact, every county except Cook County where Chicago is located went for Republican newcomer Bruce Rauner.
Rauner will take over a state with the highest number of public-pension funds close to insolvency. One is Chicago’s police and firefighters’ fund. According to the Civic Federation, a budget watchdog, it has piled up a whopping $111 billion in unfunded pension liabilities, in addition to $56 billion in debt for health benefits for pensioners.
Today, Illinois is spending more of its general fund on pensions than on K-12 education. One in four tax dollars goes to pay for retired workers’ benefits. The financial crisis has gotten so bad that last year the state had to defer paying $7 billion owed to contractors.
The level of debt is staggering. According to a recent report by Statista Inc., Illinois residents owe $24,959 each as their share of the outstanding bonds, unfunded pension commitments and budget gaps the state has accumulated. The state’s A-minus bond rating is the worst of any state in the nation.
Compare that to Washington, where our state’s per capita debt is $12,988 and our bond rating is AA+.
Michael Lucci, director of jobs and growth at the Illinois Policy Institute, notes that Illinois’ population drain accelerated following the 2011 state tax increase.
“We can’t ignore that high taxes play a major role in encouraging people to jump the border. If Illinois wants to stop the bleeding, it must abandon its tax-and-spend policies and look at pro-growth reforms being implemented in other states.”
That’s good advice for Washington as well if we are going to keep Boeing and other companies from jumping ship.
