Illinois leaders should resolve to foster economic reform in 2023
If there's a New Year's resolution the Illinois business community needs from its political leaders in 2023, it's this: Stop relying on short-term tricks to drive business growth and start acting on the need for long-term structural changes that attract businesses, encourage entrepreneurship and draw residents.
It's clear that quick fixes are not helping our state. Illinois suffers from one of the worst unemployment rates in the nation and one of the worst economic recoveries from the COVID-19 pandemic. Illinoisans have been leaving for better opportunities in other states for nine years straight.
Illinois' failure to draw manufacturers in the electric auto industry illustrates the limitations of purely offering short-term fixes such as tax incentives. When Illinois Gov. J.B. Pritzker signed the Reimagining Electric Vehicles Act in 2021, the governor hoped the package's tax credits for electric vehicle and parts manufacturers would help Illinois "become one of the leading EV hubs in the entire nation." Since then, as WTTW reported, only one parts manufacturer has inked a deal under the act.
Similarly, relying on temporary federal funding for business development programs only goes so far. At the end of 2022, the U.S. Treasury announced $354.6 million in federal funding to support four State Small Business Credit Initiative programs designed to help small and minority-owned businesses in Illinois gain access to capital. Although the programs may help entrepreneurs start their businesses, short-term funding will not guarantee they survive and thrive in Illinois' overtaxed and over-regulated environment.
Business owners deserve more. Especially given the many obstacles they encounter as they strive to grow in Illinois.
More entrepreneurs apply to start but then fail to open businesses in Illinois than nearly every other Midwestern state. In 2021 Illinois received more new business applications than any other Midwestern state, but only 6.7% of those applications were expected to result in business formation within one year of applying.
That means Illinois has a poor track record for turning applications into real businesses that offer jobs. Something unique in the Illinois process is hindering entrepreneurs.
There are too many compounding costs specific to the state that present challenges. Illinois has the third-most cumbersome regulatory code in the United States with 278,475 individual restrictions and requirements. And the state just increased its high unemployment taxes in an effort to refill the unemployment trust fund - an unforced error caused by mismanagement of federal COVID-19 relief aid.
Structural reforms that lower taxes and reduce regulations would give all Illinois businesses freedom to flourish when they start and continue to grow.
Where to begin?
Political leaders could build on their quick fixes and take clear steps to identify outdated, arduous regulations for repeal. Trimming Illinois' costly regulations would free up resources that small business owners could use to reinvest in their businesses.
Next, pension and property-tax reform would provide some assurance of security for businesses considering making an investment. Those reforms would also help them attract and keep talent here. Adopting a hold-harmless pension reform plan would uphold the state's pension promises to current workers and retirees while allowing for adjustments to future benefits. This could put the state's financial affairs in order and help offer property tax relief.
Lastly, a property tax freeze would prevent local governments subject to the Property Tax Extension Limitation Law from increasing property tax hikes without voter approval. This would provide restraint in government spending so businesses and workers can find stability.
Long-term structural reforms are a must to help Illinois' short-term economic development programs deliver on the business growth they promise. We have an opportunity to make 2023 a year of growth in Illinois, but our elected leaders need to find the resolve.
• Matt Paprocki is president of the Illinois Policy Institute, a nonpartisan research organization.