Corruption costs Illinois an estimated $556M per year

Illinois’ high levels of corruption damage the state’s economy, costing it $10.6 billion since 2000. States with higher levels of corruption average lower levels of economic growth.

Illinois’ culture of corruption costs voters’ trust and damages the state’s reputation, as national headlines about Mike Madigan’s bribery implication show, but there is also an economic price tag: $556 million a year, according to an analysis of recent data.

The data also shows Chicago is the most corrupt city in the nation, and Illinois is the second-most corrupt state. Those findings are contained in the current annual study of federal corruption convictions compiled by the University of Illinois at Chicago.

Corruption in Illinois comes with social and economic costs on par with some of the state’s most important programs. It decreases economic growth and discourages investment in the state.

Illinois’ public corruption convictions cost the state an estimated $556 million every year from 2000-2018, according to an Illinois Policy Institute analysis of a peer-reviewed 2011 paper published in the academic journal Public Choice. Since 2000 that is a total of nearly $10.6 billion, or $830 per Illinoisan.

Statewide, federal corruption convictions per capita in Illinois were almost 7% more common on average than in the rest of the nation during that time.

The annual loss of economic activity means that even in normal economic times, the 705,600 Illinoisans actively seeking employment will find it harder to land a job, and that the state economy will likely continue to lag the rest of the nation well after the COVID-19 threat dissipates.

Illegal corruption runs rampant

It is no secret Chicago and Illinois have a longstanding tradition of political corruption, which most recently has been illustrated by criminal investigations involving Illinois and Chicago politicians, including Illinois House Speaker Madigan.

• On July 17, Madigan was implicated in a federal bribery investigation and served with grand jury subpoenas for documents regarding Commonwealth Edison, AT&T, Walgreens and Rush University Medical Center.
• In January, former state Sen. Martin Sandoval pleaded guilty to taking $250,000 in bribes and to tax fraud. Sandoval is cooperating with federal authorities and faces up to 13 years in prison.
• In October 2019, then-state Rep. Luis Arroyo was arrested and charged with bribery of a state official. According to the federal complaint, Arroyo tried to steer $2,500 a month to another state senator in exchange for backing legislation related to gambling sweepstakes. State Sen. Terry Link has been identified as the bribe recipient, but was wearing a wire for the FBI to help in his own criminal case. A tax evasion charge was filed against Link Aug. 13. If convicted, Arroyo faces up to 10 years in prison.
• In August 2019, state Sen. Tom Cullerton, D-Villa Park, was indicted in federal court on 41 counts for embezzlement, conspiracy and making false statements. He allegedly pocketed about $275,000 in salary and health benefits from the Teamsters for a do-nothing job. Cullerton pleaded not guilty to the charges.
• On June 24, 2019, former Chicago Ald. Willie Cochran, 20th Ward, was sentenced to more than a year in prison for wire fraud. He became the 34th Chicago alderman convicted of corruption since 1972.
• On June 19, 2019, Ald. Carrie Austin, 34th Ward, had her offices raided as part of a corruption investigation.
• In May 2019, Chicago Ald. Ed Burke, 14th Ward – the city’s longest serving alderman – was indicted on 14 counts, including racketeering, attempted extortion, conspiracy to commit extortion and using interstate commerce to facilitate an unlawful activity.
• In 2017, former Chicago Public Schools CEO Barbara Byrd-Bennett was sentenced to prison as the result of a $23 million corruption scandal.

Corruption in the city of Chicago can be traced back decades and earns the city recognition as the most corrupt in the nation. Federal prosecutors in the judicial district covering Chicago and northern Illinois have obtained 1,750 corruption convictions from 1976 through 2018.

But corruption in Illinois extends beyond Chicago. Four Illinois governors have gone to prison since 1973. FBI tapes of recorded conversations in 2008 between one of the four, Rod Blagojevich while he was still in office, and J.B. Pritzker when he was still a private citizen, revealed a potential appointment of Pritzker to public office in the same conversation about future campaign donations to Blagojevich. Blagojevich had his sentence commuted and is now free.

Pritzker has since come under federal investigation for a $331,000 property tax reduction scheme on his Gold Coast mansion that was revealed during the campaign before he was elected governor.

The Blagojevich tapes also reference Madigan, with Blagojevich saying he thought the speaker would have been willing to push through Blagojevich’s legislative priorities if the governor in turn appointed Madigan’s daughter, then-Illinois Attorney General Lisa Madigan, to the U.S. Senate seat vacated by President Barack Obama.

A criminal investigation of Chicago Ald. Danny Solis, 25th Ward, also included recorded conversations between Madigan and a hotel developer who had been directed to Madigan’s law firm by the alderman. The investigation into Solis hasn’t resulted in any allegations of illegal conduct for the nation’s most powerful House speaker. However, in addition to illegal corruption under investigation, the case also points to the fact that Madigan, as a property tax attorney, could benefit financially from the legal system whose provisions are subject to his votes. This highlights another issue with Illinois’ political machine: legal corruption.

What is legal corruption?

Corruption is often defined as using public office for private gain. While bribes and other criminal tactics garner the most attention, they barely scratch the surface of corruption in Illinois. Legal corruption refers to legal establishments such as aldermanic privilege that give aldermen total control over ward matters, gerrymandering that allows elected officials to draw maps that favor their re-election, procedural rules that give unchecked power to the House speaker and ethics laws that allow legislators to double as property tax appeals attorneys or leave public service one day and return to lobby their former peers the next.

Cumbersome and highly restrictive governments such as Illinois’ foster environments where corruption festers. They give greater authority to legislators and make collusion between corporations and legislators more likely, because excessive regulation affects companies’ market activities and opportunities.

Across the country, both Democrats and Republicans have long engaged in legal corruption such as pay-to-play schemes. Illinois is no exception. According to a study by Harvard University that ranks all U.S. states, excluding Louisiana, Illinois ranks in the top 10 for both legal and illegal corruption.

The study also notes that Illinois is ranked as the second-most corrupt state when all types of corruption are included – both legal and illegal – falling behind only Kentucky. Beyond individuals who are convicted of corruption-related crimes, Illinois’ executive, legislative and judicial branches all measure in the top 10% of most corrupt states in the U.S. when evaluated individually.

While lawmakers are using both legal and illegal methods to line their pockets along with those of their friends and associates, Illinois residents are paying for it through fewer job opportunities  and a stalling economy.

Economic effects of corruption

Corruption lessens residents’ faith in the government. It also decreases economic growth by discouraging investment in the state.

While the most visible cost of corruption is the monetary value of bribes given, corruption – both legal and illegal – also results in the misuse and misallocation of resources. Illinois’ history with corruption not only lowers economic growth by reducing investment but bolsters the state’s reckless and unethical spending – spending that for the third time since 2011 has state leaders seeking an income tax hike.

Governments that distort the budget-making process and delay permits and licenses also impact the economy, inhibiting individuals from investing and remaining in the state.

Private businesses are often unable to overcome corrupt and burdensome regulator practices, limiting their prospective growth, diminishing productivity and hindering innovation. Entrepreneurs may limit new investment in fixed capital so they can credibly threaten to leave a state should bribe demands become too high. At the same time, uncertainty raises transaction costs above those for a tax of the same magnitude.

Corruption has been directly correlated to decreased investments from abroad and slower economic growth. It is no surprise Illinois is lacking in economic and job growth. States with higher levels of corruption experience slower economic growth, which is associated with higher levels of residents moving out. In a study that compared all 50 states’ gross state product, states with higher levels of corruption convictions have lower production per worker and slower economic growth.

New York, Florida, California and Texas all have lower levels of corruption than Illinois, with Texas having the lowest levels of corruption of the five largest state economies.

Illinois has the slowest economic growth and the highest level of corruption of the five most populous states in America. As tax burdens increase for Illinois residents and corruption remains prevalent in all levels of Illinois government, Illinois residents will continue to suffer from a sluggish economy compared to other states.

Illinois’ role in the national economy has declined steadily since the 1960s. An economy that was once the third-largest contributor to the nation’s GDP has continued to slip, being passed over by Texas and Florida. States with higher levels of corruption on average see lower levels of investment and economic growth. Using data from all 50 states from 1975-2000, corruption was found to play a significant and causal role in reducing economic growth.

To put the findings in context, Illinois’ public corruption convictions cost the state an estimated $556 million every year from 2000-2019. Again, that is $830 out of each Illinoisan’s pocket.

So with high corruption damaging an economy, it follows that Illinois ranks 40th in cumulative economic growth from 2000-2019 out of 50 states and Washington, D.C. With real economic growth averaging just 1.2% annually, Illinois trails the U.S. economy’s real economic growth of 2.1%.

The nation’s fastest-growing state economy, North Dakota, has one of the nation’s lowest levels of corruption. Idaho and South Dakota are also in the top 10 fastest-growing economies in the country and both fall in the lowest quartile of corruption by state. Kentucky is the most-corrupt state and its economic growth is 46th. Alabama is the fourth-most corrupt state and is ranked 37th.

If Illinois wants to break out of its trend of underperformance and compete with the other big-economy states, it needs to do something about its corruption problem.

Rooting out corruption

Both Chicago Mayor Lori Lightfoot and Pritzker need to address the long-standing corruption within the state’s most populous city and the state at large. For one thing, taxpayers can no longer bear the burden of reckless spending associated with corruption. Addressing the problem could lead to job growth and bring economic investments back to the state.

There is some movement in the right direction. Lightfoot – whose campaign slogan was “It’s time to bring in the light” – pledged to end aldermanic privilege. Privilege lets the city’s 50 aldermen micromanage the day-to-day activities of businesses and homeowners through power over permitting, zoning and more rather than concern themselves with citywide policy. As scandals engulf Chicago, aldermen should commit themselves to increased transparency and structural reforms that would change the culture of corruption and focus on governing.

Lightfoot has also advocated for independent ward maps  to reduce aldermanic control over the process. But while Pritzker campaigned on a fair maps initiative at the state level, he didn’t touch the policy during two different legislative sessions.

The governor should also follow Lightfoot’s lead in advocating for legislative reforms. A starting place would be to ask state lawmakers to reform the legislative process to allow for bills to more easily move out of the Rules Committee, improving the legislative calendar so lawmakers know when bills will be discussed, and limiting the House speaker’s ability to appoint committee chair positions and dole out the generous stipends that come with them.

The governor could also borrow initiatives from previous General Assemblies, such as barring legislative leaders from acting as party chairperson and banning state and local lawmakers from participating in property tax appeals cases.

Pritzker and Lightfoot both must do more to reduce the harmful effects of Illinois’ notorious political machine. Curbing both legal and illegal corruption is the first step in ensuring families and businesses feel their investments are safe in Illinois, including investing in their state government.

Illinois voters are being asked Nov. 3 to increase income taxes by  $3.7 billion and trust state leaders with greater authority to expand who is taxed by removing the Illinois Constitution’s flat income tax protection. But how can voters trust there is a real need for higher taxes when too many of those dictating the spending needs face federal corruption investigations or prosecutions?

It takes nerve to ask taxpayers for even more when illegal activity by lawmaker costs Illinoisans $556 million each year.