Moody’s: Get a sustainable budget already
Wednesday, Jan 18, 2017 - Posted by Rich Miller
* Moody’s Analytics has prepared yet another economic forecast for the state. The whole thing is worth a read, but here’s some of it…
Illinois is one of the Midwest’s weakest links, reflecting both soft job creation and the state’s descent into fiscal quicksand. The state trails the nation in most metrics and political gridlock is imposing significant economic costs. The jobless rate has resumed its descent after rising late last year into early 2016, but much of the decline owes to a sharp drop in the labor force and population losses. […]
To be a solid-performer longer term, the state must navigate its fiscal challenges without doing lasting damage to its business climate. The state’s demographics present it with another challenge, as an aging population coupled with a trend toward fewer workers hampers job and income gains, which are forecast to be below average over the extended forecast horizon. […]
Aside from private industries, the state’s fiscal problems have worsened. Repeated credit downgrades will harm Illinois’ economic climate. […]
Illinois’ budget problems are its biggest headache, and an escalation of the state’s fiscal problems and weakness in the public sector suggest limited upside potential even as other parts of the economy improve. […]
Business climate. Illinois, and Chicago in particular, is in general an appealing location to corporate headquarters and companies that need highly skilled workers and are willing to pay for top talent. Despite Illinois’ advantages, however, uncertainty stemming from the state’s fiscal crisis threatens to discourage firms from locating or remaining in the state. This is a concern since manufacturing in the state is already sputtering, and downstream industries have been strong performers for Illinois during the recovery and in years past.
Although lawmakers are mindful of their state’s business tax climate, in the past they have often opted to entice businesses with lucrative tax incentives and subsidies instead of broad-based reform aimed at reducing the above-average personal and corporate income tax burdens prevalent in the state. There is a recurring pattern of such behavior in Illinois, and it is not clear whether business incentives will generate enough money to pay back these costs. A far more effective method to improve the business tax climate over the longer term is to focus on more broad-based income tax reforms and provide firms more certainty as to what their future tax burdens might be. This can be accomplished only by getting the overall budget situation on a more sustainable, and certain, path. […]
The state’s longer-term outlook is tarnished primarily by its budget woes and weak population trends, not its high costs relative to nearby states. Business costs in the state are lower than they are nationally and have trended downward for the past few decades. Costs are lower than those in Wisconsin and Michigan but higher than those in neighboring Indiana, Iowa, Kentucky and Missouri. Firms in Illinois tend to pay less in taxes and their utility costs are below average, but labor is on the expensive side. By and large, though, business costs are pretty favorable and lower than those in states that have similarly large metropolitan areas with unique features that appeal to businesses such as California and New York.
- PublicServant - Wednesday, Jan 18, 17 @ 4:12 pm:
Doesn’t agree with the IPI propaganda now does it?
- very old soil - Wednesday, Jan 18, 17 @ 4:13 pm:
“instead of broad-based reform aimed at reducing the above-average personal and corporate income tax burdens prevalent in the state.” HUH???Above average personal income tax burden?? Makes me not likely to believe anything they write
- Sir Reel - Wednesday, Jan 18, 17 @ 4:14 pm:
Interesting that Moodys say Illinois’ potential is good. It’s fiscal crisis is the problem.
That kinda contradicts Rauner’s contention that the TA is needed. A budget is needed. Paying the bills is needed. But Moodys says zip about the TA.
Oh well. It was never about the State’s economy or how to increase State revenues.
- Honeybear - Wednesday, Jan 18, 17 @ 4:21 pm:
Ruh roh, the corporate/manufacturing welfare queens are going to be squealing like piglets at this report. How dare they say that business costs are reasonable!
- Harvest76 - Wednesday, Jan 18, 17 @ 4:22 pm:
That last paragraph makes BVR’s demands seem a little… disingenuous.
- Lefty Lefty - Wednesday, Jan 18, 17 @ 4:23 pm:
So pretty much everyone in the state–businesses doing business, citizens paying their taxes, schools educating their students– are doing their jobs except for the the horrible people in charge of of the government in Springfield.
Shameful, Absolutely shameful.
- wordslinger - Wednesday, Jan 18, 17 @ 4:28 pm:
From Page 7:
–Business climate. Illinois’ business climate outshines its regional rivals, but the state’s shaky finances have some firms questioning
whether they want to expand in the state or elsewhere. Illinois has what it needs to remain a top business center, as long as it can solve the fiscal problems that are eroding its edge in the
competition for talent, jobs and capital.
Specifically, Illinois has a huge talent pool of highly skilled workers, world-class universities, more money for investment, and better transportation with an airport with direct connections around the globe. The state has these advantages because it has Chicago, the nation’s third largest metro area. No neighboring state has a city even half as large.–
Not a word about term limits, workman’s comp, prevailing wage, blah, blah, blah…..
So how’s about we quit messing around with one rich retiree’s Bucket List zealotry, and get on with building on our advantages already?
- Huh? - Wednesday, Jan 18, 17 @ 4:32 pm:
Didn’t 1.4% say that he didn’t care what the bonding companies said, that he didn’t work for them?
- Cassandra - Wednesday, Jan 18, 17 @ 4:39 pm:
Old Soil–
That’s the first think I noticed. I wonder if the writer was referring to the overall individual tax burden, which I believe is comparatively high, possibly because of reliance on property taxes.
- Wow - Wednesday, Jan 18, 17 @ 4:41 pm:
NO business, let me repeat myself NO BUSINESS moves to a State because they have term limits. Z-E-R-O!!!!
- Blue dog dem - Wednesday, Jan 18, 17 @ 5:59 pm:
I guess Moodys learned a lesson from Detroit and GM.
- Anon - Wednesday, Jan 18, 17 @ 8:30 pm:
It strikes me that Moody’s has more positive things to say about the Illinois economy than our governor does.
- facts are stubborn things - Wednesday, Jan 18, 17 @ 8:49 pm:
Sounds a lot like what MJM has been saying for 2 years…..the number one problem facing the state of Illinois is the need for a budget.
- Maximus - Thursday, Jan 19, 17 @ 9:22 am:
The State of Illinois needs a balanced budget but if a short term one is out of whack then it wouldn’t be the first time that happened. I’m curious where the pols came up with a 4.9% tax rate. Is that the amount that is needed or is that the amount they think will be ok with the public? I want them to put the tax rate at the number that makes the budget sustainable and balanced. Whether that number is 5% or 15% lets figure it out and if the number is too high then let’s figure out other ideas.