Many people from this area love to visit Chicago for shopping, professional sports and cultural events. The tall buildings, O’Hare Airport (where many flights originate to other destinations), Shoreline Drive, Miracle Mile, architecture, all are part of a visit to Chicago.
But don’t let the hustle, bustle and vibrancy of the “big city” fool you – it is as broke, if not more so than Detroit, they just haven’t declared bankruptcy yet. With no ideas coming from politicians to solve the problems, like Detroit, they are dominated by a Democrat mayor, city council, department heads and have been for generations. Recently re-elected Mayor Rahm Emanuel had no fresh ideas while on the campaign stump to solve Chicago’s economic slide to oblivion.
Let’s examine Chicago’s problems, so we all have a basic knowledge of understanding:
- Population decline of 6.9% to 2.7 million from 2000 to 2010.
- Municipal bond market now treats Chicago’s debt as speculative grade. (Update: Just last week, it was announced Chicago’s municipal bonds may be moved to “junk” status!)
- $32.6 Billion in liabilities, when including liabilities of its park district, water agency and school board.
- School budget is short $1 billion; the operating deficit is at more than $3 billion.
- Public Pension System is underfunded by $20 Billion.
While the mayor, city council and others responsible for administering the city’s fiduciary responsibilities are trying to figure out a fix, the flight of businesses from Chicago and the state of Illinois to friendlier tax climes exacerbate the situation for both the city and the state.
According to Fox News Chicago, a Nov. 19, 2013, report reveals factory owners dominate the ranks of those leaving. Some simply cross the state lines. Wisconsin recently gained Kenall, Hanna Cylinders, Emco Chemical and Norak Electric among other Illinois companies. Indiana says at least 31 Illinois-based employers have recently moved 2,700 jobs to the Hoosier State.
One reason for the move – raising state income tax by 67% and made its corporate income tax the highest in the nation and workers compensation costs are a problem. Indiana has the lowest cost for workman’s compensation in the nation – Illinois’s cost is 4th highest in the country. For a $50,000-a year worker, Illinois employers pay about $1,415. Employers in Indiana pay $580 for the same worker – a difference of $835.
The Illinois Policy Institute found 13 years ago – Illinois had 640,000 more jobs than it has now. Between 1995 and 2009, Illinois lost a net 366,616 taxpaying households and a staggering $26 billion in taxable revenue.
An example of the typical Illinois employer moving to another state, Greg Heim, owner of Modern Drop Forge states, “My family’s been in business in Blue Island for 97 years. To make a move like this, besides being a business move, it’s also a very emotional move.” They are moving to Merrillville, Indiana, to a new factory.
A former mayor of Blue Island, Donald Peloquin stated, “What I understand is that, when they move to Indiana, they’re going to save $300,000 to $400,000 a year just on their premium for workers compensation.”
Morale of the story: every time operating costs are lowered, it frees up capital for other things (factory improvements, employee benefits, salary increases, etc.). Money goes where it is treated best. Illinois is not cognizant of how business works because it is ingrained with Democrats, most who have never run a business, or knowing how to run governments within a budget and with the revenue they have to work with.
If you need more money, get it from the taxpayer or businesses – until there are fewer and fewer taxpayers and businesses to squeeze for more cash. Businesses eventually can’t take the fiscal beating and look for ways to avoid paying taxes and fees that are crushing them.
University of Illinois Professor David Merriman says it best, “I’m afraid that Illinois is getting a reputation as being a state that cannot function, the perception that individuals are out only for their own gain and only for their own political survival.” Well stated! Professor, I hope you are close to retirement, because you will be attacked by Democrats for making statements such as these. The University will get pressure to have you fired —
so much for free speech.
The rotting of America from within continues…..
