The Washington PostDemocracy Dies in Darkness

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

Outside Caterpillar offices in Peoria, Ill., in 2017. (Bloomberg/Photographer: Bloomberg/Bloomber)
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Matt Paprocki is president of the Illinois Policy Institute and host of the podcast “Stay & Fight for Illinois.”

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

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

If you’re an Illinois business owner or resident, as I am, the economics of staying are tough and the enticements to move away are many. But I intend to live here until die, and that’s why, after the Caterpillar news (oh, and that $50 billion hedge fund Citadel is considering leaving Chicago), I feel a particular urgency about what Illinois needs to do — at long last — to fix the state’s dire finances and stop driving businesses away.

A billboard along Illinois's Kennedy Expressway sells Chicago police officers on moving to Florida. For the past decade, Indiana has courted Illinois businesses with billboards and print ads asking if they’re “Illinoyed” or “Stillinoyed.” Michigan has targeted Chicagoans with a “Move to Michigan” campaign, offering up to $15,000 and other incentives to relocate.

Illinoisans are responding: According to the U.S. Census Bureau, last year the state had the third-largest loss of residents due to domestic migration in the nation (-122,460), trailing only California and New York.

What needs to be done isn’t that complicated; the state’s leaders just have to act instead of relying on wishful thinking and leaving the ever-worsening trouble for the next generation to handle.

A decade ago, Caterpillar’s CEO at the time, Doug Oberhelman, warned in an op-ed for the State Journal-Register that Illinois was increasingly inhospitable to business. He begged lawmakers to quit trying (unsuccessfully) to balance budgets by raising taxes. He urged 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 respond? Crickets.

In 2017, Illinois lawmakers raised the personal income tax rate to 4.95 percent, from 3.75 percent, and hiked the corporate rate to 7 percent, from 5.25 percent. When J.B. Pritzker took office as governor in 2019, he passed another 24 tax and fee hikes costing taxpayers over $5 billion. And about $650 million of those tax hikes were targeted specifically toward businesses.

With 278,475 regulatory restrictions and requirements — double the national average — Illinois has the third most heavily regulated environment in the country.

The first, most essential reform needed would involve the state’s famously disastrous commitments to state employee pensions. Illinois owes over $139 billion in state pension debt as of last year, and local governments owe about $75 billion, which is the primary driver for Illinois’ spiraling property taxes, second-highest in the nation.

Lawmakers should amend the state constitution’s ironclad pension guarantees in a way that would protect benefits that retirees have already earned while allowing for changes in future benefits. Such a “hold harmless” pension reform plan would tie all pension cost-of-living adjustments to inflation rather than a fixed rate of annual growth, saving $2.4 billion for the state budget in the first year and more than $50 billion by 2045. It’s also politically popular, with polling showing enough support to pass on the ballot.

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

The state government’s spending must stop running on autopilot. Lawmakers largely ignore department performance data and just renew budgets regardless of whether a program has failed or is unneeded. Enacting a spending cap would ensure that each fiscal year ends with a truly balanced budget — in contrast to the jury-rigged budgets that Pritzker calls balanced.

But that’s the governor’s style: pretend all’s well instead of admitting problems and trying to solve them. Thus he seemed unperturbed by the news that Caterpillar was moving its headquarters from Deerfield, outside Chicago, to Irving, Tex. He said, “So it is true that they are moving 240 of their personnel, those are not manufacturing personnel, they’re office personnel, to another location.”

As he noted, the company does have thousands of other workers in Illinois — but for how long? They see the billboards too.

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