Over the past year, Illinois has been dogged by numerous news stories about the state’s poor jobs climate and negative economic outlook. The latest employment numbers indicate the trend isn’t poised to end anytime soon.
In 2011, Illinois experienced the largest increase in unemployment rate of any state in the nation, according to a new report by the Illinois Policy Institute.
Illinois’ unemployment rate increased to 9.8 percent in December 2011, up from 9 percent in January 2011. This bucks a national trend of slow but evident economic recovery. Over the same period, 46 states saw a decline in their unemployment rates. Illinois was one of only four states that experienced increases in the unemployment rate.
Poor Policy Decisions
Illinois’ weak economic performance was made worse by poor public policy decisions, including a 67 percent personal income tax hike and 46 percent corporate tax hike that were enacted in January 2011, according to the Institute.
“Any progress Illinois made in putting people back to work was wiped out by the tax hikes,” said Kristina Rasmussen, executive vice president of the Illinois Policy Institute. “Rather than pursuing job-friendly policies like our neighboring states did, the Democrat-led legislature made it harder for families to pay their bills and for businesses to hire more employees.”
The average family sent an extra $1,400 to state government in 2011 because of higher taxes. But the tax hike that generated $7 billion statewide hasn’t improved the state’s finances.
Illinois has more than $8 billion in unpaid bills and more than $100 billion in unfunded pension liabilities, problems that will have to be dealt with in the coming years.
Lawmakers failed to make progress on either of those major issues in 2011, creating an environment of uncertainty for businesses.
‘Fundamental Distrust in Leadership’
“There is so much bad news coming down the pike that the threat of another tax hike is always hanging over the head of businesses,” said state Rep. Tom Morrison (R-Palatine). “There is a fundamental distrust in the leadership coming out of Springfield. Business owners I talk to are worried about when the next shoe will drop.
Illinois’ governing approach stands in contrast to the ones pursued by many of its neighbors. Governors Scott Walker (R) in Wisconsin and Mitch Daniels (R) in Indiana have pursued policies to strictly limit government spending and improve their business climates by lowering tax and regulatory burdens.
Mark Cavers ([email protected]) is a policy analyst at the Illinois Policy Institute.