Illinois’ main economic development programs don’t have enough safeguards in place to make sure taxpayers get quality jobs from companies receiving incentive packages, according to a national analysis of state programs to be released Wednesday.
Good Jobs First, a Washington-based nonprofit that researches economic development subsidies, gave Illinois a D in the report, saying the state doesn’t require companies to offer workers health benefits or set goals on their pay. Those drawbacks more than offset the state tying incentives to jobs.
Illinois lags most other states in requiring that high-quality jobs result from its business relocation and retention incentives, a new study found. […]
“For a state that’s a big spender, to be rated this low and to be under the gun with high-profile deals like Sears or Motorola Mobility or CME, Illinois needs to be sure the jobs it is subsidizing pay good wages and have health care,” said Greg LeRoy, executive director of Washington, D.C.-based Good Jobs First, a non-profit critic of corporate subsidy programs, which conducted the study.
* The problem with this study is it looked at statutes and not results. So, for instance, a few of the major beneficiaries of state incentives over the past year have included Ford, Motorola Mobility, CME Group and Sears. All of those companies have solid wages and benefits at their headquarters and/or factories. But, the study doesn’t look at that.
Also, on the basics like job creation, job retention or training requirements, Illinois gets a perfect score in all but one of its incentive programs. In fact, in its “Performance Requirements” category, Illinois scores 140 out of 175, and has perfect scores 11 out of 15 times.
* However, the group does make a good point. The race to the bottom shouldn’t be happening here. We shouldn’t be using tax credits to create minimum wage jobs, which has happened in other states. Illinois has no market-based or even non-market based wage requirements, no healthcare coverage requirements and no other benefit requirements.
* One other point, according to Good Jobs First, states spent $11 billion on business incentives last year. Illinois spent $148.7 million in 2010. That’s just barely over 1 percent of the total spent nationally. We have a long ways to go before we’re spending more than other states.
…Adding… From Good Jobs First…
Rich,
Just thought I’d respond to your criticism that we only looked at statutes. We looked at both statutory language (statutes, administrative code, rules, other publications by the agency) as well as interviewed officials about what is typically included in subsidy contracts. DCEO was surprisingly difficult to get a straight answer and required us to file a number of FOIAs just to learn what the practices were with these programs. Ultimately, they rejected our most of our requests. Other states are very clear on what their programs require. Take, for instance, Virginia. It puts up documents detailing what each program requires. DCEO doesn’t do that. Conducting economic development on an ad hoc basis behind closed doors is not the standard set in other states.
While it’s true that Illinois does “only spend” $150 million in this fiscal year, we also know that many of the EDGE tax credits are not utilized (per Chicago Tribune investigation) because companies don’t have liabilities these days. Single Sales Factor apportionment, other than the down economy, is the most likely reason why many companies don’t have tax liabilities. When the economy bounces back in Illinois, it is quite likely that these blank check tax credits will bump up costs to the state. Since taking office, the Quinn administration has awarded $600 million in EDGE tax credits alone. These will cost the state at some point in time, even if it’s not today.
These state figures also ignore how much Illinois spends on local subsidies like TIF and property tax abatements. The last time anyone counted, in 2008, TIF alone diverted over $1 billion in property tax revenues from local governments. It could be the case that state aid to local governments is picking up the tab for the revenue loss from local subsidies.
Best,
Thomas Cafcas
Good Jobs First
…Adding More… Response from DCEO…
While it is not the department’s usual practice to engage in political rhetoric through the media, we feel it is important to address a number of the claims made by Thomas Cafcas to the Capitol Fax. After Mr. Cafcas contacted DCEO regarding film subsidies, we arranged a conversation with the director of the Illinois Film Office and other DCEO officials. Following that conversation, DCEO sent him the attached letter, which included the offer to provide any additional information he needed.
We make every effort to provide the public with adequate and timely information related to our programs, which is why much of the information related both to our services and our program expenditures is now posted online. It’s unfortunate that Mr. Cafcas seems to be more concerned with garnering headlines than serving as the public watchdog his agency purports to be. Were they genuinely interested in productive dialogue aimed at boosting job creation, perhaps they would have shared their findings with states – rather than just the media.
A fact that is missing from Mr. Cafcas’ letter is that the $150 million or so the state has made in EDGE investments, it has supported nearly $11.5 billion in actual and projected investment, and created and retained tens of thousands of jobs. Since January 2010, Illinois has added 108,100 jobs and saw the largest job gain in the nation (more than 30,000) in the month of October. We acknowledge there is still more work to be done, and this administration is committed to continuing our work to bring businesses to Illinois by highlighting our tremendous assets such as reforms to unemployment insurance and the workers’ compensation program; investments in our infrastructure, innovation and foreign trade; and of course highlighting our world-class workforce. Those are the headlines that matter to us in Illinois.
Thanks,
Marcelyn Love
Communications Manager
Illinois Department of Commerce and Economic Opportunity
CME’s earnings per share will be about 4.76% higher than they would have been; CBOE’s will be 3.16%, [Chicago exchange analyst Niamh Alexander of Keefe Bruyette & Woods Inc.] estimated.
Did anybody buy stock this week?
* And while CME Group was lobbying for a big tax cut, it was also angering traders, who say the firm’s new rules could leave them out of a job…
CME said it will start incorporating data from electronic trading to set grain and livestock closing prices by next spring, a move that could sharply limit the role of the trading pit where closing prices have always been set.
We essentially leave it up to the governor’s office to make sure that these incentives aren’t being doled out to companies that don’t care about their employees. […]
While the pits are typically quiet for much of the day, the final minutes of each trading session are marked by frenetic buying and selling because only pit-traded dealings are used to set the official end-of-day price. […]
CME has a long history of adopting rules that tend to push trading to the computer screens, in large part because once contracts are traded electronically, volume historically rises. […]
“Basically it will be a pit killer,” said Jim Clarkson, an analyst for A&A Trading. “My feeling is big traders, including funds with the big volume, want the business on screens. But I believe the more traders you have, the better markets you have. In the end, all electronic trade will be much more volatile with bigger price moves.”
* House Republican Leader Tom Cross is having a press conference today at 9:30 about the corporate tax rate. I may do a live blog. We’ll see. Check back…
House Republican Leader Tom Cross, of Oswego, who has called for rolling back the temporary increase in the corporate income tax, is expected to unveil legislation regarding that tax Wednesday morning.
* And Gov. Pat Quinn and Senate GOP Leader Christine Radogno both offered up observations yesterday…
“Sometimes when you have an emergency, where another state is trying to take a big employer… we’re not going to stand on the side of the road and watch them do it,” [Quinn] said. “We’re going to roll up our sleeves and protect our jobs.” […]
Senate Minority Leader Christine Radogno, R-Lemont, said she’s willing to say “no more” to individual business tax breaks until the state’s corporate income tax structure is reviewed.
“I don’t call the shots entirely, but I think that’s one approach,” she said. “We need to say, ‘We recognize we have a problem,’ I think you heard a lot of recognition of that today. We need comprehensive reform, and that may be one way to hold our feet to the fire to get it done.”
*** UPDATE 1 *** Leader Cross’ presser is starting, so let’s go to the ScribbleLive session feed. BlackBerry users click here, iPad and iPhone users remember to use the “two-finger” scrolling method…
*** UPDATE 2 *** From Senate Republican Leader Christine Radogno…
“We’re hopeful the House effort is successful and we’ll have the opportunity to repeal the tax increases that are driving jobs out of Illinois and hurting families. Our similar efforts in the Senate have so far fallen on deaf ears. But perhaps, with the spotlight now clearly shining on the failure of the Democrats’ tax increases and fiscal management, they will join with us to take a comprehensive look at Illinois’ tax structure, business regulation and over-spending.”
* Cat: R&D provision ‘a small step’: “Passage of this bill does not alter the fundamental dynamic for the state as a place to do business. From a financial standpoint, Illinois is a patient in critical condition. Yet Springfield continues to react in crisis mode, using Band-Aids rather than developing a long-term plan to get the state on the road to being healthy,” Dugan said. “We hope our political leaders can move away from this crisis approach and develop and implement a long-term strategy that moves Illinois away from being rated 48th out of 50 states in terms of business climate to a ranking that will encourage job creation, business growth and business involvement.”
* Rosenthal: Tax wishes keep Sears, CBOE, CME Group home in Illinois for holidays and beyond - Incentive package, worth an estimated $371 million a year, heads to governor for approval
* Press Release: Chamber Commends Illinois Governor and Legislature’s Support for Business
* Press Release: Sears Holdings Applauds Illinois Lawmakers for Recognizing Company’s Value to the State
* Bill to ease rules for small cemeteries sent to governor
