State of the State: Illinois

Illinois Governor Bruce Rauner’s State of the State Address earlier this year does give some reason to be optimistic about the future of the state. His address mainly focused on the issues that he campaigned on in 2015, which include streamlining state government, reigning in Illinois’s high tax rates and education reform. Rauner’s address acknowledges the horde of Illinois local government units that need consolidation, the state’s dismal credit rating, the enormous unfunded pension liabilities and the low rates of job growth.

Governor Rauner deserves credit on a number of policy fronts. He has called for term limits on members of the General Assembly, renegotiated contracts with state unions and made significant progress on criminal justice reform. The governor also deserves praise for cutting red tape by moving applications for professional licenses and license renewals online, and for reducing processing times. And before Rauner took office, the state income tax rate was cut from 5 percent to 3.75 percent.

Still, the road ahead for Rauner and his state is unclear as there remain serious problems and there has been no formal state budget in more than a year and a half. Governor Rauner mentioned that the state has unfunded pension liabilities of $130 billion, but even that astronomical number is optimistic. When one uses a more realistic rate of return for state pension plans, such as in the ALEC report Unaccountable and Unaffordable 2016: Unfunded Public Pension Liabilities Near $5.6 Trillion, Illinois’ unfunded pension liability exploded to more than $360 billion. In addition, Illinois’ property tax remains the second highest in the nation, with a statewide average rate of more than 2 percent. In addition to enforcing a (state and local combined) 7.75% corporate income tax rate, Illinois’ regulatory structure still remain an impediment to starting or moving a business in the state. The Pacific Research Institute ranks Illinois 38^th in the nation in severity of regulatory burdens as of July 2015. Despite the large education spending increases, the state’s education record is still bleak, earning a ‘C’ in ALEC’s Report Card on American Education.

From Illinois’ crushing taxes and regulations to the state’s fiscal problems, it is easy to see why people are voting with their feet and leaving the state at disproportionately high rates. If the Land of Lincoln wishes to stop the bleeding, Governor Rauner can’t be the only one with good ideas—members of the General Assembly and the general public need to get behind necessary reform efforts to save the state.