Illinois: “Policies in Springfield Are Holding the State Back”

In January, Rauner laid out an ambitious plan to close the state’s projected $6.7 billion operating gap for 2015 and to attack a $111 billion unfunded-pension liability by slashing public-sector pension benefits, spending $400 million less on public universities and cutting disbursements for mass transit and health care. He wants to lift Illinois’s credit rating, which now is lowest among the 50 states, and make it attractive to business again.

The self-made millionaire and former investment banker also wants to reform worker’s comp, cut unemployment-insurance costs and curb plaintiffs’ lawyers. Furthermore, Rauner has already suggested giving Illinois communities a “home-rule” approach to right-to-work.

“Right now, Illinois companies look at neighboring states and see much more inviting places to grow and add jobs,” Governor Rauner told Chief Executive. The state’s GDP grew by just 0.9 percent between 2012 and 2013 compared with a national average of 1.8 percent.

MacNeil, founder and CEO of WeatherTech in Barrington, Illinois, loves Rauner’s plan. “It’s exactly right,” said MacNeil, whose $400-million-plus company makes premium floor liners and other automotive accessories. “The policies coming out of Springfield have been holding the state back. Folks understand this is our last, best chance to turn things around. Bruce is the right person, at the right time, in the right place to finally get it right.”

But Smolyansky, CEO of Lifeway Foods in Morton Grove, Illinois, couldn’t disagree more. Rauner’s proposals “are a step backward in regard to the types of investments we need to be making to produce healthy and safe communities and a state ready to compete and grow over the long term. Only by supporting and investing in our people,” said the second-generation chief of the $100-million maker of probiotic dairy beverages, “can Illinois truly grow, and it is that growth more than anything else that will solve our fiscal challenges.”

Predictably, Rauner’s aggressive approach to reform has enraged political opponents and prompted some leaders of the Democrat-controlled state legislature to declare his biggest ideas non-starters. Chicago Teachers Union President Karen Lewis called Rauner “Scott Walker on steroids.” And Senate President John Cullerton said that “the basic math still doesn’t work” in Rauner’s plan.

Some experienced observers of economic development in the Midwest believe the Illinois legislature will give Rauner some of what he wants, in part because recent big tax increases forced the state to do one-off incentive deals with major employers including Navistar, Caterpillar and Sears to keep jobs in the state, says Larry Gigerich, president of Ginovus, an Indianapolis-based site-selection consulting firm.

Rauner’s program also includes “major investments in infrastructure, which has been a major problem” for Illinois, Gigerich says. “That will create opportunities in economic development—and put a ton of people to work on construction,” most of them in union jobs.

Still, some pundits said that even if Rauner succeeds in getting big chunks of his plan through the legislature, it may not come strong enough or fast enough. There are other problems, such as the fact that Illinois’ economic-development apparatus is poor compared with those of surrounding states, which in turn puts more pressure on localities to make themselves attractive to businesses.

“Illinois could hit bottom soon,” says Alex Frei, co-head of the business-incentives practice for Cushman & Wakefield consultants in Chicago. “Will states still completely eliminate Illinois from their lists? I think so.”

But Rauner believes he can find a way to bring Illinois’ formidable, inherent strengths to the fore. “We have everything going for us,” he says. “We have hard-working, industrious people, good infrastructure, a great location in the center of the country and the economic capital of the Midwest,” he says. “The problem [has been] bad policies coming out of Springfield.”