Last month, Texas Gov. Rick Perry made national news by mounting a campaign to recruit businesses from Illinois to Texas. Perry aired $80,000 worth of radio ads in Chicago warning businesses and individuals that, "you need to get out while there's still time." Feeding on the angst about the disastrous condition of Illinois' public finances, the ads continued by stating, "the escape route leads straight to Texas, where limited government, low taxes and a pro-business environment are creating more jobs than any other state."
Shortly after the ads aired, Perry traveled to Chicago to personally meet with business leaders about the benefits of relocating to Texas. When reporters asked why he made the trip, he replied in his unforgettable drawl, "You fish where the fish are."
Perry's recruiting efforts in Chicago are a significant escalation in the nationwide competition between states to attract employers. It is not surprising to me to see this occur. During the course of the great recession, we have witnessed the economic balkanization of the United States. Some states took responsible action to live within their means, address long-term structural issues and foster pro-growth economic policies. Other states chose to maintain a pre-recession mentality, delaying or ignoring the structural reforms, using short-term accounting gimmicks and tax increases to shore up budgets.
As the economy begins to recover and businesses look to the future, states that acted responsibly, like Texas, have a significant competitive advantage over the states, like Illinois, which did not. Political leaders in well-run states are now reaping the benefits.
Needless to say, the politicians in Illinois were not pleased with Perry's approach. Gov. Pat Quinn waved off Perry's recruiting efforts by stating, "We know how to do it in Illinois — we don't need advice from Governor Perry." But the facts argue otherwise.
Illinois is broke. According to estimates by the American Enterprise Institute, Illinois pension funds are $192 billion in the red. Illinois has tens of billions more in other debts, and is currently $6 billion behind in paying its bills. Unemployment is high, job prospects are poor and business leaders are skittish about how politicians in Springfield will handle the crisis.
Just two years ago, Gov. Quinn and the Democratic-controlled Legislature increased personal and corporate income tax rates by 67 percent and 46 percent, respectively. Now they are considering raising income taxes once again. It is not surprising that national credit rating agencies have tagged Illinois with the worst bond rating in the country.
The largest impediments to structural reforms in Illinois are the public sector unions that dominate the political scene. Every politician in Illinois knows that the public employee pension systems must be overhauled if the state is to survive. But union leaders ruthlessly target anyone who proposes substantive pension reforms.34 comments on this story
Now, with behind-the-scenes support of unions, Democratic House Speaker Mike Madigan is rushing a "pension reform" bill through the Illinois Legislature that guarantees 100 percent of all existing pension obligations and that prioritizes funding for union pension benefits over all other state spending (except bond payments). Madigan's bill will almost certainly result in huge tax increases in the near future.
I expect that Gov. Perry's fishing expedition into Chicago will pay off. Businesses require predictability and stability to invest and grow. They will find neither condition in Illinois with the current political environment. Thankfully, the business refugees from states like Illinois, California and New York can find new homes in Texas, Florida, Utah and a dozen or so other states that understand how to create environments where businesses can grow.
Dan Liljenquist is a former state senator and U.S. Senate candidate.