Survey: CEO say taxes, government challenges suburban businesses

Taxes — as the adage goes — are one of the few certainties of life.

But it's uncertainty about those taxes that's draining the life from suburban business.

Taxes, government, health care and finding skilled workers are the top challenges facing suburban business, according to the 2017 Illinois Business Climate Survey of Business Leaders. The survey, conducted by Northern Illinois University's Center for Governmental Studies in conjunction with the Daily Herald Business Ledger and the Daily Herald, reveals a snapshot of what suburban business owners and executives see as the good and the bad of doing business in Illinois.

Overall, 55 percent of the business leaders surveyed said taxes — including income, real estate and sales taxes — are the biggest challenge to doing business in the state. Two out of five surveyed felt current business conditions in Illinois are worse than they were six months ago. A slightly higher number — 47.4 percent — believe those conditions will get worse within the next six months.

Compared to neighboring states, 83 percent of the respondents said doing business in Illinois is worse.

However, the business leaders noted a number of good things keeping them from packing up and moving.

A sizable majority — 80 percent — feel their business and industry is healthy and plan to maintain or increase staff levels over the next year. Many also said the state has a lot of advantages, from its geographic location to its diverse talent pool and large market size.

As a result, 55 percent of the respondents said they have no plans of moving their business out of the state in the next year.

“While business leaders' perceptions of the business conditions in Illinois are negative, their outlook for their company's and industry's business conditions are more optimistic,” the study concluded.

While not providing any surprises, Mindy Schneiderman, assistant director of the Center for Governmental Studies, said the study highlights the uncertainty that's keeping Illinois businesses from growing.

“I think you all know what doing business in Illinois is like,” she told a group of suburban executives at a forum on the study last month in Schaumburg.

Taxes and government

When asked what is the greatest challenge or obstacle to doing business in Illinois, 53 percent of the respondents pointed to taxes, while 22.3 percent said it was a dysfunctional state government.

While the survey was conducted before the General Assembly approved a state budget after a 2-year standoff, that has not been enough to assuage business owners' fears, experts note.

“I have clients who hold off on doing things. They miss opportunities because they're worried about what's going to happen next,” said Tom Jordan, a principal with the Naperville accounting firm DHJJ.

While Jordan said the state income tax increase approved last summer will reduce some of that anxiety, unresolved federal and local tax reform plans still make suburban owners hesitant about investing in and growing their businesses.

“Nobody knows what's going to happen and when it's going to happen,” he added.

Daniel Coman, a partner with the law firm Ice Miller, added businesses are also saddled by the number of taxes from many levels of government.

“We've got so many taxes in the state,” from sales taxes to property taxes, that affect business owners, Coman said.

“When you look at all the different taxes that companies pay in their operation, Illinois is an extraordinary heavy tax burden,” Coman said. “And some of that is the function of so many local governments. We have more government units than any other state in the country.”

Health care costs

The vast majority of business leaders — 77.7 percent — cited growing health care costs as a major concern for their companies.

The inability to enact reforms — from the federal government's continued fight over the Affordable Care Act to continued increases in the cost of prescription drugs — just adds to the uncertainty business owners face in trying keep up with the markets.

Marty Koehler, vice president in the employee benefits division of Schaumburg-based Assurance, said businesses have traditionally accepted health care as an uncontrollable business costs, and that focus needs to change.

Adopting health care programs that educate employees on maintaining healthy lifestyles and giving them “skin in the game” to select cost effective services can help companies gain more control over costs, Koehler said. For example, he noted the cost difference between getting an MRI from a clinic instead of a hospital.

“We need to think of health care in the context of how do we educate (employees) to be better consumers,” Koehler said. “At the end of the day, it's the employee making the decision of when they need health care and where they're going. Those are the opportunities that we have control of.”

Finding skilled workers

Business leaders are also worried about finding enough skilled workers to fill jobs. A total of 74.9 percent said it is somewhat or very difficult to recruit high-quality job candidates, while 31.8 percent said skilled labor is lacking in the state.

Brian Richard, assistant director of the NIU Center for Governmental Studies, said that job growth has occurred mainly in highly-skilled professions since the Great Recession, a flip from what was happening before the recession. In addition, he said the labor participation rate has decreased over the years as Baby Boomers retire and fewer college-age people look for work.

“There's more competition for higher-skilled workers,” Richard said. “As a result, it's harder for workers and companies to find a good fit.”

NIU's Schneiderman noted the industries that specifically noted the skilled labor shortage included manufacturing, IT and engineering.

Ice Miller's Coman said companies need to become “talent scouts,” continually looking for new talent even if they do not have a current opening.

Many businesses are becoming more involved with high schools and educational facilities in order to get young people interested in skilled labor jobs, according to Oscar Johnson, regional president and head of Illinois business banking for BMO Harris.

“It's getting the students who we know may not ultimately choose college as their option and actively recruiting and training them so once they're finished, you have your own talent pool to choose from,” Johnson said.

Staying put

While business leaders are down on the state, the survey found a more positive feeling within their companies and industries. Just over 80 percent of the respondents said the economic condition of their company was good or excellent, and a majority of them felt revenues and profits will increase over the next 12 months. More than 80 percent of the businesses plan to maintain or increase staff levels over the next year.

“Most business leaders rate the economic condition of their company as excellent or good and think that their company's sales revenue and profitability will increase in the next 12 months,” the study concluded.

The 2017 Illinois Business Climate Survey of Business leaders, conducted by Northern Illinois University's Center for Governmental Studies in partnership with the Daily Herald Business Ledger, was conducted through a sample of 3,000 companies with 10 or more employees in the six-county Chicago metropolitan region and collected data during the period between December 2016 and May 2017.

Surveys were sent to business leaders — either CEOs, executive directors, owners, or persons with similar titles — and the businesses were categorized by size — small (10-499 employees), medium (500-1,000 employees) and large (More than 1,000 employees).

The companies were randomly selected across several industries and the responses did not oversample any one specific industry, according to Dr. Mindy Schneiderman, assistant director of the Center for Governmental Studies.

A total of 211 responses were received AMD 365 business owners opted out of participating.