Who’s Who of Illinois CEOs Call for $8 Billion Revenue Hike
A just-released report from Chicagoland’s premier group of business executives says Illinois needs $8 billion in new and increased taxes to get back on track.
The Civic Committee of the Commercial Club of Chicago’s “Bringing Illinois Back: A Framework for our Future” was released Thursday after Gov. Bruce Rauner announced new leadership for the privately-funded economic development nonprofit Intersect Illinois, which he founded via executive order early last year.
Intersect refused to say how much its new leader – Mark Peterson, who currently runs Rochester, New York’s regional economic development enterprise – will make once he takes over June 15. Peterson will be bolstered by an expanded board that includes more Illinois titans of business, including retired Caterpillar chairman Doug Olberhelman, BMO Harris President and CEO David R. Casper, and President & CEO of Archer Daniels Midland Juan R. Luciano.
The framework is gaining attention given that Rauner rode into office bolstered by support from business organizations – support he maintains, at least from the likes of Illinois’ wealthiest man, hedge fund manager Ken Griffin, who on Wednesday contributed $20 million to Rauner’s campaign. In a statement, Griffin said Rauner “cares deeply about the future of our state and making it a better place to live and work. He has the winning plan to create jobs, improve our schools and put Illinois on the right path forward.”
Thus far, that plan has been to prioritize making workers’ compensation less expensive for businesses, to lower property taxes, and to pass government changes like term limits. Rauner says he won't agree to higher taxes until Democrats get onboard.
“Clearly the budget matters. Clearly it matters. People care. Everybody cares about having a balanced budget. The tragedy for Illinois is we haven’t had balanced budgets in decades. It’s one of the reasons we’ve had terrible job growth for decades,” Rauner said Thursday. “It’s not because of one budget impasse these past 18 months. It’s because we’ve had constant budget deficits.”
While the Civic Committee’s report suggests improvements to Illinois’ program for compensating injured workers, it emphasizes the lack of budget as the main reason for Illinois’ deteriorating condition.
“The uncertainty created by State government's lack of responsible, long-term financial planning, and overall poor fiscal health, as well as the prospect of ad hoc, poorly-planned tax increases in the future will increasingly make Illinois a bad bet for business investment and job creation,” the report says.
“The objective of the report was to describe a framework that’s designed to bring Illinois back into financial solvency and improve the state as a place to live and work,” Civic Committee President Kelly Welsh said in an interview. “It’s a multi-part framework. It includes expenditure reductions. It includes long-term financial planning to help improve investor and financial market confidence in Illinois, and is designed to take away the uncertainty about the state’s fiscal prospects which our committee members had focused on as the most significant challenge to improving the business climate in Illinois.
The report explicitly states that the group is not backing specific spending or revenue proposals, but nonetheless claims that Illinois needs to modify its budgets by $10 billion a year to reach stability — with $2 billion of that coming through cuts, and a whopping $8 billion through new taxes or tax hikes.
“There are a number of places the task force (responsible for the report) found where Illinois was pretty much an outlier in terms of the tax policies that it followed and bringing Illinois more in line with the tax policies and best practices of other states as a way to least painfully raise more revenues … and enhance the business climate,” Welsh said.
Incoming Intersect CEO Peterson says he's aware of Illinois' struggles the past couple of years, but that after leading the Rochester region through losses at companies like Kodak, he's prepared to sell companies on Illinois despite the budget uncertainty and festering political stalemate.
“I’m coming from a state that’s highly regulated, that has a higher tax rate than the state of Illinois. So I think I’ve improved my situation. I’m doing pretty well. Yes, would it be better to have a better regulatory environment? Yes, would it be better to have a budget? Would it be better to have some of those incentives in place? Yes, it would be better,” Peterson said.
“That’s not really my concern. My concern is: We are going to win whether we have those things or not. We are going to do it by targeting the right companies, by being strategic about our communications to them and our marketing to them. And we are going to be put feet on the street to go out and talk to those companies on an ongoing basis.”
Illinois government has an economic development agency, the Department of Commerce and Economic Opportunity, but Rauner created Intersect because he says as a private not-for-profit it can be more nimble.
“For example if we’re going to do a trade mission to Germany, very tough to get government folks to be able to have the resources to do that, and the permissions and all of that. And there might be an opportunity very immediate. And so we will have the flexibility, as long as we have the resources in place from the private sector, to get on an airplane and go and negotiate a deal and bring a new company here,” he said.
“So that’s just one example, is to do the kinds of things that you have to do. Some of these companies are moving at the speed of sound. They’re going to make a decision – a legacy decision to spend $200 million, $300 million, maybe a billion dollars – and they’re going to do that decision in 90 days. If you’re not ready to play and you can’t move at that speed, you’re going to lose that opportunity.”
Government watchdogs and Democrats, however, have raised concerns about transparency and ethics. The original head of Intersect was Effingham venture capitalist Jim Schultz, who stepped down from the economic development post in January to return to the private sector. He’s listed in state elections records as the chairman of Citizens for Rauner, Inc. and newly-appointed chairman of Intersect’s board, BMO Harris’s Casper, previously served as a treasurer for the Rauner campaign.
Intersect’s Sarah Schwartz says the quasi-public private entity is “not disclosing” Peterson’s salary at this time.
Peterson likewise declined to share details about his compensation package.
“That’s probably going to be public knowledge sometime, but we haven’t worked that all out yet so,” he said. “Well, we have … but we haven’t figured it all out, so.”
The news comes as Illinois is without one of its prime ways to lure businesses: Authority for the Economic Development for a Growing Economy, or EDGE, tax credit program, which expired April 30.
Rauner has proposed redubbing EDGE to Transforming, Helping, and Reviving Illinois' Versatile Economy, or THRIVE, and changing its parameters. Measures to do so are stalled in Springfield.
“We really reward new job creation, not job maintenance and we also move away from what we’ve had in EDGE— is an employer who had a factories in two locations: They could have layoffs in one, hire in others, they’ll get a tax credit for the hires but no offset for the layoffs,” he said. “That’s not fair to the … state as a whole.”
But he says that a failure to renew it would be a “big” deal.
Rauner blames Democrats, who hold majorities in the Illinois House and Senate, for the lack of movement.
“That’s a critical development tool to bring jobs to the state. It’s tragic that the General Assembly has refused to act on renewing the EDGE tax credit program,” Rauner said. “The General Assembly has been in a no-change mode and it’s hurting, it’s hurting everything.”
Springfield has just weeks left to pass a budget before the end of the legislative session.
The Senate Wednesday passed a handful of bills that are part of a bipartisan "grand bargain” compromise attempted by the chamber’s leaders, but only some measures, like casino expansion and a pension overhaul, received Republican support, meaning both the battle and negotiations continue.
Follow Amanda Vinicky on Twitter: @AmandaVinicky
May 9: The political inertia that’s left Illinois without a budget can’t continue, according to a report released Tuesday by the non-partisan Civic Federation.
May 8: Lawmakers are in the final weeks before the legislative session ends – is there a “grand bargain” in sight?
April 27: The ringleaders of Illinois’ partisan impasse – Gov. Bruce Rauner and House Speaker Michael Madigan – met Thursday morning for the first time since before Christmas.