Hoping to capitalize on negative reaction to the substantial income tax increase Gov. Pat Quinn signed in January, opportunistic politicians in other states launched high-profile efforts to lure business and jobs away from Illinois to their states.

• Wisconsin Gov. Scott Walker slapped an “Open for Business” plaque onto the “Welcome to Wisconsin” sign that greets Illinois motorists as they cross the border at Beloit heading to Madison or the Dells.
• Indianapolis Mayor Greg Ballard appeared in full-page ads in several Illinois newspapers touting his city’s “friendlier business climate.”
• New Jersey Gov. Chris Christie flew here to woo business leaders to pull up stakes and head east. His timing could have been better, though: he arrived in Chicago the same day Quinn was in central Illinois, trumpeting a decision by Mitsubishi Motors to produce a new SUV crossover at the company’s plant in Normal, assisted by $29 million in state tax incentives. Back in Jersey, local media were not impressed. The (Newark) Star Ledger noted Christie picked up “one very solid lead” after meeting with about 18 business leaders and reported that several of the city’s largest companies couldn’t find time to hear his pitch.

So far, Christie and his fellow opportunists have triggered no mass exodus from the Prairie State — in part, perhaps, because tax rates are still higher in New Jersey than here, and the Garden State ranked dead last in the Tax Foundation’s 2010 state business tax climate index.
Meanwhile, Illinois could brag about other coups besides Mitsubishi. Just in the two weeks following the tax increase, the state welcomed an aluminum extruding company from Wisconsin, a major scrap recycler from Missouri and a steel producer from Oregon. And a group of major Illinois exporters signed business deals worth $1.8 billion with Chinese companies shortly before Chinese President Hu Jintao arrived in Chicago for a two-day visit in late January.

Still, no one would argue that the state's business climate is ideal; in fact, the widespread perception among economic development professionals is that the state “is no longer deemed conducive for business,” wrote Illinois Chamber of Commerce President Doug Whitley in the foreword to the business group’s Jobs Agenda, a comprehensive new report analyzing the state’s weaknesses in attracting employers and prescribing specific steps toward growing jobs in Illinois. The 28-page report is available online at www.ilchamber.org.

The agenda is the product of a year-long effort by Whitley and Chamber staff, using surveys, focus groups, face-to-face interviews and other techniques, to get a sense of what state business leaders thought needed to be done to create jobs here.

The report reviews nine key areas, including such topics as economic development, environmental regulation, workforce preparation and transportation.

But the “most telling” finding of the extensive research, Whitley said, was the business community's belief that the first step to a better business climate was to fix the state’s fiscal house.

“The business community is made up of people who are managers,” he said. “It’s frustrating to them that the politicians don't manage government. ... For all practical purposes, the ship of state has been without a captain for eight years, without a true, committed CEO-type manager. Now we have a new governor and a new General Assembly. Let’s start over, let’s chart a new course.”

On the No. 1 agenda item, the report acknowledged that political leaders in recent months “have undertaken unprecedented steps to begin confronting the state's fiscal condition,” including imposing higher income tax rates, restructuring the pension systems so that new hires must work longer for fewer benefits and enacting cost-saving reforms in the Medicaid program.

“However, government leaders have not yet taken the hard votes to reduce expenditures and limit pensions,” the report noted. Specifically, the Chamber calls for state leaders to commit to “an absolute reduction in year-over-year spending levels” and “an honest budget that matches spending and revenues.” Business leaders also want pension and bond payments made and all bills paid in a timely manner, goals few would dispute. 

Two other recommendations have drawn strong opposition from public employee unions and other workers’ groups. But legislative leaders already are considering, and ultimately may approve, requiring current and retired public employees to pay more of their health care costs. Reducing future retirement benefits for current workers seems unlikely, though, given that many lawmakers, including Senate President John Cullerton, believe benefits are protected by the Illinois Constitution.

The Chamber’s second highest priority is reducing the cost of doing business in Illinois, in particular through reforms to workers’ compensation, the insurance program that replaces lost wages and covers medical costs for job-related injuries. Underscoring the urgency, the report noted that from 2006-2010, states nationwide averaged a 19 percent reduction in workers’ compensation insurance rates, while Illinois experienced a 14 percent rate increase, according to an analysis by the Workers’ Compensation Research Institute, an independent, not-for-profit research organization.

Major changes sought by the business community would require the workplace to be the primary cause of the injury, rather than a contributing factor; allow the employer to choose the physician who will treat the injured worker; reduce benefits for injuries involving use of alcohol or drugs; scale back the schedule of fees paid to doctors; provide additional training and merit review for the arbitrators who hear compensation cases; and beef up efforts to root out fraud.

Suggestions elsewhere include sharpening the focus of the state’s lead economic development agency, streamlining the environmental permitting process and strengthening ties between business and education to match real-world skill needs with what is being taught in school.

Some agenda items, such as workers’ comp reform, require legislation, but others — a commitment to balanced budgets, for example — need only the political will to change longstanding practices, or in the case of unresponsive bureaucrats, a clear message from the governor that efficiency and professionalism are to be the hallmarks of his administration.

The Jobs Agenda is not gospel, of course; other voices in the political arena will differ with its recommendations. But its underlying premise is solid: Policy makers need to find ways to create an environment conducive to job growth.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois Springfield.

Illinois Issues, March 2011