5 signs Illinois’ economy is failing, and 5 ways to fix it

The people of Illinois – workers, entrepreneurs and business owners – have been held back by policy errors that have plagued the state for decades. But with the proper policy framework, the state can come back to life and lead the Midwest.

At long last, Illinois is poised to begin a comeback.

The people of Illinois – workers, entrepreneurs and business owners – have been held back by policy errors that have plagued the state for decades, and in particular since the Great Recession. Free-enterprise has been repeatedly thwarted by policies in Illinois, causing tremendous economic hardship for Illinoisans. However, relief will be on the way as soon as policies are changed. With the proper policy framework, the state can come back to life and lead the Midwest.

First, five facts showing Illinois’ desperate economic situation:

1. Former Gov. Pat Quinn’s claims of an Illinois comeback were a myth. Despite two months of strong jobs growth after the November elections, Illinois still lays claim to the worst recovery from the Great Recession in the U.S. From January 2008 – December 2014, Illinois has 216,000 fewer people working and 114,200 fewer payroll jobs, the worst and second-worst record of any state.

2. The 2011 tax hikes were a historic policy mistake, and a major reason why Illinois’ recovery ran out of steam. In the first year of recovery from the Great Recession, Illinois was ranked 5^th in the Midwest. Then came the 2011 tax hikes, which slammed the breaks on Illinois job creation.

Since the tax hikes, Illinois has fallen to last for job creation in the Midwest, putting Illinois last in the Midwest for overall recession recovery. (The obvious solution to this policy error is to allow the tax hike to sunset as scheduled in January 2015, and then roll back the income tax rates all the way to 3 percent.)

Over the long term, Illinois will experience generational benefits if the state moves towards eliminating the state income tax.

3. Out-migration is a serious problem in Illinois. Illinois lost a record 95,000 people on net to other states in 2014. The 1 reason people said they wanted to leave Illinois was for better job and business opportunities. And this out-migration is breaking state and local budgets. The past 20 years of flight from Illinois have cost state and local governments more than a million residents and $7.6 billion of annual tax revenue.

4. Illinois has the worst employment rate for youth workers and black men in the Midwest. Fewer than half of all adult black men are working, and youth employment is at historic lows.

The Great Recession showed that when Illinois’ economy struggles, the pain is felt by the most vulnerable – youth and minority workers. In addition, Illinois has the highest minimum wage in the Midwest.

5. Food-stamp enrollment is at all-time highs, and has outpaced job creation by a 3-to-2 ratio since the state’s jobs recovery began in January 2010. Illinois is the only state in the Midwest that has been putting more people on food stamps than in jobs through the course of the recovery. Simply put, the Illinois economy is not doing enough for families that need to put food on the table.

Thankfully for Illinoisans, solutions to these problems are within reach:

1. An agenda for entrepreneurship would help keep Illinois’ talent in-state, and encourage the Midwest’s creative talent to relocate to the Land of Lincoln. It would include:

• Repealing the death tax, which would keep family farms and businesses intact and in Illinois. The death tax drives out-migration from Illinois, and encourages business relocation to other states.

• Eliminating the anachronistic franchise tax, slashing LLC fees by 90 percent and processing corporate and LLC licensing requests within 24 hours.

• Creating alternatives to occupational licensing for entrepreneurs and workers in low-income occupations.

• Allowing small businesses to do online crowdfunding to finance their startups.

2. Local governments can do their part too. Local governments can take on reforms to:

• Make it easier and faster to start-up a business. Starting a professional-services business currently takes 32 days in Chicago, compared to eight days in the second-worst city, New York.

• Foster the shared economy by liberalizing laws for home-based food production, and creating a favorable climate for ridesharing and homesharing services.

• Bring back manufacturing and production through local Right-to-Work legislation.

3. Illinois’ manufacturing sector has had the worst jobs recovery in the Midwest – and it’s not even close. Through December 2014, Illinois has only recovered 22 percent of the manufacturing jobs that were lost during the recession. And three policy issues speak directly to this issue:

• Right to Work, which can be reformed by local communities.

• Workers’ compensation, which must be addressed by the General Assembly, specifically to put in reasonable “causation” standards for on-the-job injuries.

• Property taxes, which can be controlled by removing unfunded mandates for local governments, and enacting property-tax caps.

As it is, manufacturers don’t even consider Illinois for locating new factories, and local manufacturers regularly hop the border for Indiana. Reforming the state’s workers’ compensation system and giving workers the freedom to choose whether to join a union would put Illinois back on the map as a destination state for manufacturers.

4. Energy production can help Illinois boom. Unfortunately, the state slow-walked the rules-writing and permitting process for fracking for so long that there was never a chance to drill until energy prices fell below an economical level. Thousands of jobs have been lost, and millions in tax revenue has been delayed because of the state’s regulatory ineptitude.

Counties in southern Illinois have some of the highest unemployment rates in the state. They will benefit tremendously from energy production – in the same way that workers in North Dakota have, where the booming economy has caused the effective minimum wage to shoot up to $17 per hour.

Local energy production will also help the rest of the state by driving down the cost of business for manufacturers in Illinois.

5. In political terms, Illinois’ dire fiscal and economic climates present a crisis but also an opportunity. The state may have very well hit bottom with record out-migration in 2014, serving up the opportunity to rebound. Lawmakers should take advantage of this timing by refusing to back into piecemeal fixes, and instead demanding the bold reforms Illinoisans desperately need. The need for reform is obvious, and Gov. Bruce Rauner’s rhetoric shows he understands both the problems and the solutions necessary for Illinois to transform from an out-migration state to a destination state.