The True State of the Illinois Economy: Chronicle of Orphe Divounguy
Next month, Pritzker will address Illinois with his annual State of the State address. Here’s a look at Illinois’ true position.
The problem for the people of Illinois has gotten much worse. According to the latest census estimates, Illinois’ population declined in 2021 for the eighth consecutive year, and internal emigration is driving all of that decline. From July 2020 to July 2021, Illinois lost 122,000 residents to other net states, resulting in a decline in the state’s population of 114,000 residents after accounting for net births and inflows. international immigrants.
The problem is that fewer people move to Illinois than the number of residents who leave each year, according to the Census Bureau. And this problem only gets worse over time.
The risk of coronavirus infections and differences in how state officials have responded to the COVID-19 pandemic have accelerated remote working.
Although no longer constrained by proximity to employment, Americans have moved to Texas and Florida – states where they were already flocking before the pandemic – as well as Idaho, Utah and Montana. As a result, these states have benefited from increased economic activity and job creation. In October 2021, these five states averaged 2.2 jobs per job seeker, compared to 1.7 in the rest of the country. Illinois barely managed 1.1 jobs per unemployed person.
What did all these states have in common?
They were less densely populated, with fewer COVID restrictions, fewer regulations, less taxes, and more economic freedom overall. According to the North American Index of Economic Freedom, economic freedom and well-being are consistently higher in these states.
Research shows that Americans migrate to states with relatively lower tax burdens, fewer employment regulations, less dependence on public sector employment, lower unionization rates, and more government services .
In contrast, Illinois is third in most regulatory restrictions, has the 10th highest state and local tax burden, and has arguably the strongest public sector unions of any state. And while government spending has risen rapidly in Illinois, that’s because retirement costs for public employees have soared, crowding out government services. In fiscal year 2021, pension contributions consumed 26.5% of the state’s general fund budget, up from less than 4% two decades ago.
Pritzker proposed tax increases in every state budget during his tenure and gave in to every demand from government union leaders. As government union demands grew, the cost of government rose to Illinois, even as services declined.
When the COVID-19 pandemic hit, tighter-than-average restrictions in Illinois kept economic activity suppressed longer and delayed recovery compared to the rest of the country. A year into the pandemic, 35% of small businesses in Illinois have closed.
Pritzker’s command-and-control approach has worsened Illinois’ relative economic position during the pandemic. And it’s hard to blame anyone else since the state was under one-man rule via executive orders for more than half of the governor’s term.
Turning the state around will require a complete reversal of policy, which prioritizes Illinois over the governor’s policy preferences. That means working with the legislature to put a constitutional amendment on pension reform on the ballot so that future state budgets can finally prioritize spending on education and social services for those in need. . Pension reform will make government work for Illinoisans of all talents and backgrounds, not just a small group of government employees.
Crain’s contributor, Orphe Divounguy, is chief economist at the Illinois Policy Institute.