A new report places Illinois in the middle of the pack when it comes to its appeal
to manufacturers.

The news comes from an annual Manufacturing Scorecard produced by the Center
for Business and Economic Development at Ball State University. The researchers
identified the areas that matter most to the profitability of manufacturers
and the factors that influence decisions on where to locate or expand facilities.

Illinois got an overall “C” grade on the scorecard, with plusses and minuses
found across several different areas.

“There’s a huge logistics industry and some real advantages in some categories,”
said Dr. Michael Hicks, director of the Center for Business and Economic
Development, “but some stunning weaknesses, in terms of tax climate and the
expected tax climate due to the unfunded liability gap.”

The state received the lowest grade possible, an “F,” on its tax

“Taxes are relatively high across Illinois,” Hicks said. “In the more productive
areas, outside of Chicago, where manufacturers might want to locate, they remain
very high. And tax rates have been going up at a time when most other state taxes
have stabilized.”

For manufacturing firms that can operate virtually anywhere, the report said that
tax rates matter in location decisions.

“A generic manufacturing firm that wants to be part of a supply chain … you
wouldn’t go to Illinois,” Hicks said. “You wouldn’t go to southern Illinois. The
taxes are high and the communities are largely indistinctive from those in
Wisconsin, Ohio, Indiana, or Michigan. It all looks the same to a manufacturer
except for the tax bill.”

Illinois also received an “F” in the category of expected fiscal liability gap, largely
due to unfunded pension costs. Hicks said business owners know that eventually,
someone will have to pay that bill.

“The state of Illinois is the worst in the union [in that category],” Hicks said. “If
you’re a manufacturer or logistics firm considering putting capital there, you’re not
only facing steep taxes now, but the expectation has to be that taxes are going to
rise in the coming years. Or there will be a big cut back in public services that you
expect from those high tax bills.”

In a statement, Illinois Manufacturing Association president and CEO Mark
Denzler acknowledged some of the headwinds.

“Illinois manufacturers … face challenges including massive pension debt, costly
and onerous regulations, and high taxes along with a misguided effort to impose a
graduated tax on Illinois job creators,” Denzler said.

Despite an outmigration flow over the recent years, the report gives the state good
marks for human capital, largely due to the high number of productive workers
with a high share of advanced degrees in the Chicago area.

The state’s lone “A” grade was given for the relative strength of its logistics

“The state has done a pretty good job of keeping in mind the role of logistics in
sustaining all the other things Illinois would like to be,” Hicks said. “A
manufacturing place, a place that grows and ships agriculture. I think that’s one
area where Illinois enjoys an extraordinarily strong advantage.”

According to a recent analysis conducted for the Illinois Manufacturing
Association, the manufacturing sector employs 592,000 women and men in the
state while contributing the single largest share of the gross state product.

“Illinois has many great attributes that should make us an economic engine for the
nation including our central location, global airport, skilled workforce,
comprehensive infrastructure system, access to water, and competitive and low-
priced energy markets,” Denzler said.

Illinois is almost completely surrounded by states that achieved higher overall
marks on the report card. Iowa, Indiana, Michigan, and Kentucky all received “A”
grades, while Wisconsin grabbed a “B.” Hicks said one reason is that more should
be expected from a state with a tax climate like the one Illinois has.

“If you have really strong schools and extraordinary productivity at universities
partially supported by state funding, those are some of the potential benefits of
public investment in education,” Hicks said. “If you have really high taxes and
those are absent, then that’s a disincentive.”

Denzler said he remained optimistic about the future.

“If we can get the correct policies in place, Illinois is poised to lead the nation in
manufacturing growth," he said.


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