Data centers emerging as key issue in Illinois governor’s race

When Gov. JB Pritzker signed tax incentives for data centers into law in his first year as governor in 2019, Republicans and Democrats celebrated the plan as an economic driver.

“In today’s world, data centers are as critical a part of our infrastructure as our roads, trains and schools,” Pritzker said in October 2019. “With the legislation I signed into law, we are welcoming a surge of economic development, labor income, and good union jobs to Illinois.”

Now, eight years and nearly two full terms later, the governor has paused those incentives as the onset of data centers has stressed energy and water resources and public opinion has swiftly turned against the tech behemoths.

At the crux of the changing debate on data centers is the advent of artificial intelligence. The technology requires a new class of data center: hyperscale, always-on facilities that require massive amounts of energy.

“We weren’t talking about AI hyperscalers back in 2019,” Pritzker said earlier this month. “I've already taken action. We've taken away the data center tax credits that existed, but it’s with the goal of getting legislation that will ensure that the people of Illinois, the businesses of Illinois, are not having burdened upon them higher electric rates, higher water rates, or having environmentally unsound practices by these data centers.”

Polling conducted this spring on behalf of the Illinois Clean Jobs Coalition, which has led the push for data center regulations, showed Illinoisans from across the political spectrum favoring legislation that would require hyperscale data centers to bring their own energy and establish new reporting requirements on water use and environmental impacts.

Pritzker’s Republican opponent Darren Bailey has also evolved in his support of data centers. While seeking to seize on their unpopularity by blaming the governor for the incentives package, he’s making AI a major piece of his campaign strategy.

“To be anti-AI, anti-data center, that’s not what this is about at all,” Bailey said in an interview. “This is about protecting the people.”

Evolving tech landscape

The changing public perception of data centers tracks with the evolution of the industry — and that’s led political candidates to take notice.

“I think political candidates have sort of realized more within the last year or so just how important this issue is to voters because it goes so far beyond just energy bill impacts,” Illinois Environmental Council spokesperson Hannah Flath said. “Regardless of your political affiliation, regardless of where you live in the state of Illinois or across the country, you have a reason, at least one reason, to be concerned about data centers.”

Per the Clean Jobs Coalition survey, when respondents were asked whether they would support regulations on data centers “to minimize their impact on our utility bills, climate and water while still allowing them to be built,” 68% of respondents said they would somewhat or strongly support such legislation. Support was slightly stronger at 71% among Democrats and Independents, though 62% of Republicans also supported the idea.

Bailey told Capitol News Illinois that finding ways to regulate data centers falls back to one of the themes of his campaign: affordability. He said new utility regulations for the facilities will help lower Illinoisans’ utility bills while ending tax credits will lower property tax burdens as data centers cover a greater share.

He pointed to Pritzker’s signature on the 2019 law establishing a tax incentive program designed to attract data centers to Illinois. Bailey voted against it when he was a state representative. Though he opposed the original bill, he — and every other member of the Senate at the time — supported a law in 2021 that expanded it.

That program committed more than an estimated $650 million in tax exemptions to 34 data center projects before Pritzker put it on pause in June, according to the Department of Commerce and Economic Opportunity, after lawmakers failed to act on his request for new data center regulations in the spring session.

Pritzker celebrated the groundbreaking of several new data centers in Illinois before AI significantly burst onto the scene, including the opening of Meta’s data center in DeKalb in November 2023.

A year later, he was present at the groundbreaking for CyrusOne in Aurora, where he said electricity in Illinois is “readily available and reliable.”

But by the beginning of this year, Pritzker’s focus shifted to new regulations as the industry evolved. The governor asked lawmakers in his February State of the State address to impose a two-year moratorium on new data center tax credits and further demanded data centers now supply their own electricity.

“We need to think critically about our future energy usage with the needs of Illinois households at the forefront,” Pritzker said at the time.

‘ An essential service’

Advocates — including the same organizations that criticized the governor this spring for a “lack of engagement” on passing data center regulations — said no one, not even Pritzker, could have foreseen the challenges data centers would bring.

Andrew Rehn, policy director of the Prairie Rivers Network, said 2019 was “a different world” in terms of data centers.

While traditional data centers have existed for decades in Illinois, the new hyperscale data centers needed for AI require significantly more energy, water and space. Some of the largest proposals, Rehn said, would consume half the energy of the entire city of Chicago, and take up a space as big as Central Park.

“It feels like, well, why is this conversation new? And of course, the answer is generative AI,” Rehn said. “It’s not just that we’re aware of something that wasn’t there. It is that what they’re doing has changed, or the scale of what is happening has changed in a meaningful way.”

Advocates for the data center industry say they know public opinion views them unfavorably. Brad Tietz, director of Midwest government affairs for the Data Center Coalition, said in an interview much of that comes down to misconceptions, and that the industry should listen to communities and address their concerns.

“You can't discount the fact that the data center industry is providing an essential service that we all rely on as residents and businesses,” Tietz said. “And data centers bring significant economic benefits to the communities in which they locate.”

Current policy positions

At a forum last month in Lake Zurich, Bailey said data centers are necessary, though he’s wary of tax incentives for them.

“We've got to have the data centers, in time. We had the race for space; we had the arms race,” Bailey said. “This new race is technology, and we cannot let China beat us in the race.”

Pritzker also hasn’t adopted an anti-data center position, despite his support for more regulations.

“Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families and local communities as the data center industry rapidly expands,” Pritzker said in June.

Pritzker said he wants data centers coming to Illinois to bring their own resources rather than depending on the same utilities and water residents and other businesses use.

The pause was designed to give lawmakers more time to pass new regulations when they return to session in November after the midterm election. But it also upset labor leaders who see the projects as a benefit to their unions.

“This pause does nothing to lower utility bills, protect the grid, or advance clean energy,” labor leaders said in a statement in June. “Instead, it will send billions of dollars in investment and thousands of union jobs to Indiana, Kentucky, and Ohio — states that sit on the same electrical grid, where those data centers will be built anyway, just without Illinois workers protected by nationally leading labor standards and without the clean energy requirements we’ve collaboratively fought to establish here.”

More recently, prominent labor leaders have circulated a proposal for a legislative framework that would restart the tax incentive program and reshape the state’s biometric privacy law to be more favorable to AI developers, while setting baseline transparency standards around the use of nondisclosure agreements.

Pritzker said last week the idea is “not a bill” and declined to take a position on it. He said in June the state needs to focus on “responsible growth” for the industry that also protects the state’s resources.

Bailey wants to go a step further and pause tax incentives for all data center projects, even ones currently getting a break from the state.

“I think we need to have an immediate halt because ultimately, if we continue on this path that we’re going on, energy prices are going to continue to skyrocket,” he said.

To solve the energy problems from data centers, Bailey agreed they should provide their own energy, but also advocated a rollback of the state’s landmark climate legislation to allow fossil fuel operators to continue generating energy. He added that data centers should also pay into a fund that would be given back to consumers as relief of their utility bills.

While the candidates battle over data centers on the campaign trail, Pritzker said last week that passing new regulations should be a priority when lawmakers return for their fall veto session.

“This has been going on for quite some time, but they need to come to a conclusion, and I believe that something should be voted on in the November veto session,” Pritzker said.