Reviews | When even Caterpillar flees Illinois, you know the state is in trouble

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Matt Paprocki is president of the Illinois Policy Institute and host of the “Stay & Fight for Illinois” podcast.

When Boeing announced last month that it was moving its headquarters from Chicago to Arlington, Va., it sent tremors through the Illinois business community and the state capital. But last week, when heavy-equipment maker Caterpillar announced it was moving its headquarters to Texas, it sounded more like a bulldozer barreling into the news.

Boeing had been based in Illinois since 2001, after leaving Seattle; Caterpillar has been in the state for nearly a century, a seemingly permanent fixture – until it isn’t.

If you’re a business owner or resident of Illinois, like me, the economy of staying is tough and the incentives to leave are plentiful. But I intend to live here until I die, and that’s why after the Caterpillar news (oh, and this The $50 billion hedge fund Citadel plans to exit Chicago), I feel particular urgency about what Illinois needs to do — finally — to fix the state’s dire finances and stop chasing corporations.

A billboard along Illinois’ Kennedy Highway sells Chicago Police officers on their move to Florida. For the past decade, Indiana has wooed Illinois businesses with billboards and print ads asking if they were “Illinoyed” or “Stillinoyed.” Michigan has targeted Chicagoans with a “Move to Michigan” campaign, offering up to $15,000 and other incentives to move.

Illinoisans Respond: According to the US Census Bureau, last year the state had the third highest loss of residents to internal migration in the country (-122,460), behind California and New York.

What to do is not that complicated; state leaders need only act instead of relying on wishful thinking and leaving the growing problems to the next generation to deal with.

A decade ago, then-Caterpillar CEO Doug Oberhelman warned in an op-ed for the State Journal-Register that Illinois was becoming increasingly inhospitable for business. He pleaded with lawmakers to stop trying (unsuccessfully) to balance budgets by raising taxes. He called for reform of an onerous regulatory environment.

“Caterpillar is not threatening to leave Illinois,” Oberhelman wrote, but the implication of what inaction would risk was clear.

How did Springfield react? Crickets.

In 2017, Illinois lawmakers raised the personal income tax rate to 4.95% from 3.75%, and the corporate rate to 7% from 5.25%. When JB Pritzker took over as governor in 2019, he passed 24 more tax and fee hikes that cost taxpayers more than $5 billion. And about $650 million of those tax hikes were targeted specifically at businesses.

With 278,475 regulatory restrictions and requirements, double the national average, Illinois is the third most regulated environment in the nation.

The first and most essential reform needed would involve the state’s notoriously disastrous commitments to state employee pensions. Illinois owes the state more than $139 billion in pension debt since last year, and local governments owe about $75 billion, which is the main driver of skyrocketing property taxes in Illinois. Illinois, the second highest in the nation.

Lawmakers should change the rock-solid retirement guarantees of the state constitution to protect benefits that retirees have already earned while allowing changes to future benefits. Such a ‘harmless’ pension reform plan would tie all pension cost-of-living adjustments to inflation rather than a fixed rate of annual growth, saving the public $2.4 billion. state budget in the first year and more than $50 billion by 2045. Also politically popular, with polls showing enough support to pass the ballot.

Another common-sense reform: Consolidate duplicative school districts and their bureaucratic officials. If Illinois reduced its general administrative expenses for superintendents and deputy superintendents to the national average, it would save nearly $732 million that could be reinvested in the classroom or returned to property taxpayers. A bipartisan bill to that effect progressed through the legislature in 2019 and 2021 before stalling amid opposition from teachers’ unions and administrators.

State government spending needs to stop operating on autopilot. Legislators largely ignore departmental performance data and simply renew budgets whether a program has failed or is unnecessary. Adopting a spending cap would ensure that each fiscal year ends with a truly balanced budget — unlike the jury-rigged budgets that Pritzker calls balanced.

But that’s the style of the governor: pretending that everything is fine instead of admitting to problems and trying to solve them. So he didn’t seem disturbed by the news that Caterpillar was moving its headquarters from Deerfield, outside of Chicago, to Irving, Texas. He said: “So it is true that they are moving 240 of their staff, they are not manufacturing staff, they are office staff, to another location.

As he noted, the company has thousands more workers in Illinois, but for how long? They also see billboards.

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