Editorial: Time to sound the alarm on Illinois’ miserable economic performance

As Chicago Bears President Kevin Warren pushed for a new football stadium on the lakefront, he said that if you look around today’s Chicago, you see a paucity of cranes in the sky.  That’s visual evidence of the moribund nature of the Illinois economy.

But it’s yet more bracing to view the Land of Lincoln’s stagnant state of affairs laid out in depressing facts and figures that even the most loyal civic booster cannot dispute.

A recent report from the Illinois Commission on Government Forecasting and Accountability provided the unhappy totals. In the first quarter of this year, the state was in the beginnings of a recession. Annualized real gross domestic product in Illinois fell 1.3% in the first three months of 2024 while the nation as a whole generated real GDP growth of 1.4%. That put Illinois in the bottom six among U.S. states on that metric, besting just South Dakota, North Dakota, Iowa, Nebraska and Kansas. Other than Iowa, every state surrounding Illinois managed to generate GDP growth.

Illinois’ woeful record is not just a recent phenomenon. Since the end of 2019, just before the pandemic, Illinois has generated real GDP growth of just 2.8%, badly lagging the nation’s growth in that period of 8.6%. That’s good for 46th in the nation among states.

Employment is much the same. Illinois’ total number of non-farm jobs only recently edged past the state’s total employment just before COVID struck. The nation as a whole has produced 6.2 million more jobs in that time frame. Illinois’ share of that growth is a paltry 14,000, good for 45th among states. Not exactly impressive.

Personal income in Illinois is growing far more slowly than in the U.S. as a whole as well, reflecting in part the state’s well-documented struggles to boost its population.

The report lays the blame for what it bluntly calls a “poor economic performance” mainly on the state’s past fiscal instability, although it does briefly cite “relatively high business taxes” as a possible reason.

Of course, one might think that if the fiscal chaos of the Rauner years were the primary cause of the state’s crummy economic showing, six straight balanced budgets under Gov. J.B. Pritzker and ensuing higher credit ratings would have rendered Illinois’ fiscal management much less of a factor at this point. The state’s economic showing, one might imagine, would have reached at least middle of the pack by now rather than 45th in the nation if that explanation was the root of the problem.

We would suggest Pritzker and his economic development team look harder for causes of Illinois’ ongoing malaise. They ought to start with taxes. Illinois’ taxes on business aren’t just “relatively high,” as the state report describes. They’re really high.

Illinois’ corporate tax rate is 9.5%, second highest in the nation, behind Minnesota. If other taxes in Illinois were commensurately lower, that might be tolerable. But they’re not. Illinois has the second highest property taxes in the U.S., trailing just New Jersey. The burden in the past has fallen quite heavily on businesses, as municipalities sought to shield homeowners (aka voters) as much as possible from rising levies.

With Democrats in complete control of state government, as well as in Chicago and Cook County, there’s next to no discussion about how to reduce this burden in order to make the state more attractive to business. Instead, our political leaders are quick to declare victory if they manage not to increase taxes in a given year.

A state’s business environment isn’t determined only by taxes, of course. The cost of doing business includes wages and benefits. There, too, the city and state tends to increase the pressure on private sector employers, most notably in Chicago with ordinances just now taking effect requiring businesses to provide the nation’s most generous paid leave and substantially increasing the minimum wage restaurants and other service industries must pay tipped workers.

At the state level, progressive politicians are pushing for Chicago’s policy on minimum wage for tipped workers to be adopted statewide.

Apart from the drag such policies exert on the affected industries, they send a message to the business community writ large that Illinois’ economic policies are mainly about extracting as much cash from private sector employers as possible to fill government coffers and currying favor with voters through mandates on businesses. That consistent message hurts efforts to land outside business investments (unless massive government subsidies are employed), and it depletes morale among those employers who’ve long called Illinois home.

The progressives who currently run Chicago may well be beyond hope in terms of fostering a healthier business climate. For private sector investors, their obsessive focus on how to increase government revenue through taxation flashes like a neon warning sign of danger.

But for Pritzker, who played an instrumental role in nurturing Chicago’s tech community before winning the state’s highest office, this sorry economic performance has to be acknowledged and confronted directly. Yes, the governor has been an able marketer of Illinois’ many virtues — abundant water, enviable transportation infrastructure, a world class set of universities among them — and has worked hard to land splashy developments such as the expansion of electric vehicle manufacturer Rivian’s factory in Normal and Gotion’s EV battery plant set for Manteno. He deserves credit for those accomplishments.

We would like to see more attention from him on easing the load for businesses that are here and are chafing at the rising costs of doing business in this state. That kind of governmental work often goes unheralded, but if it’s pursued in a way that convinces Illinois’ business community Pritzker cares about their ability to thrive here, it will generate returns which will be reflected eventually in far better numbers than that deflating recent state report showed.

Illinois, still the nation’s sixth largest state, has no business being a bottom-10 economic performer.

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