-By Warner Todd Huston
On Wednesday I attended a “government day” event at Patten Industries, a 78-year-old Illinois Caterpillar dealer situated in Elmhurst, a northwest suburb of Chicago. The event, led by current General Manager Garrett Patten, featured a discussion on the severely unfavorable business climate in Illinois and why the state is lagging so horribly behind the leading economic indicators of every surrounding state.
Patten Industries has been guided by four generations of Pattens, the company having been founded by B. C. Patten, Sr. in 1933. But Illinois has not been good to the company or its employees over the last decade or so. Unfortunately, the company has gone from employing some 700 employees in 2006 to only about 400 today due to the harsh economic climate in the Land of Lincoln.
This contraction is most certainly not something the Patten family wanted to see happen to their long-standing Illinois-based company. Patten Industries has faced a whole host of negative forces causing them to scale downward. And Patten is just one of many Illinois businesses facing the same problems — problems faced in much less severity by businesses in other nearby states.
Even as many corporations are just starting to see an upturn in their fortunes, Illinois government has set up so many hurdles to growth that other states are either taking our customers or even welcoming Illinois businesses themselves as new residents.
Garrett Patten says that at least three major problems face Illinois businesses. Workman’s comp, labor unions, and corporate taxes.
With workman’s comp, for instance, Illinois businesses have to pay 2.5 or 3 times more than surrounding states. A $1.5 million case in Illinois, for instance, would only cost around $500,000 in Wisconsin. This drives up the cost of business terribly in Illinois and causes Illinois to lose bidding wars to companies in states that don’t burden their business sector with such onerous costs.
The corporate tax rate in Illinois is also so much higher than the surrounding states that our own companies constantly lose business to those other states.
Thirdly, the recalcitrance of labor unions drives up the cost of labor so much that it makes Illinois businesses uncompetitive. Wisconsin, for instance, cost 2.5 times less in labor costs than Illinois.
Like the pensions troubles seen in the public sector, the cost of pensions is also a problem in the private sector. Granted it is not nearly as bad in the public sector. Still, and most people are unaware of this, but business owners are required by federal law to make up the shortfalls in the pensions of labor unions. So, if a labor union has its officers embezzle millions — as happens so frequently — or if a labor union invests pension funds badly and loses its member’s money — another frequent problem — the business owners are forced to make up the loss out of their own pockets. And those businesses aren’t even allowed to have a say in how those badly run union pension funds are invested.
But it is also government that is hurting Illinois businesses. “There is nothing pro-business coming out of Springfield,” said Crane Patten ruefully. Crane is the third generation Patten currently heading the company.
Crane Patten told us that Illinois contractors find the costs of road building rings in at 2.5 times higher in Illinois than surrounding states due to government requirements. He bemoaned the fact that he and many other Illinois businesses are losing work and jobs to right-to-work states such as North Carolina and Texas. The hurdles that Springfield puts in front of business in Illinois is killing her economy.
Representative Randy Ramey and State Senator Kirk Dillard
State Senator Kirk Dillard, State Representative Randy Ramey, and former State Senator Steve Rauschenburger were also in attendance. The trio attended to hear Patten’s presentation of the trials and tribulations faced by Illinois businesses as well as to answer questions of Patten employees at the lunchtime meeting.
Dillard shared the 30 point job recovery plan offered jointly by the Senator and the Senate GOP caucus. But, as both Rep. Ramey and Dillard attested, the General Assembly reuses to even try to improve the anti-business climate in Illinois.
The state legislature is still on a spending binge despite being a state with one of the worst economies and highest debt in the nation. In fact, each Illinois citizen owes $42,000 in state debt, says Dillard.
Medicaid is also a major problem. Dillard shocked the room by telling them that Illinois largest single budget item is Medicaid and the Democrats won’t even make a single attempt to limit the at least 10% of fraud in the program.
Even the Chicago Bears aren’t immune, Dillard told us. Illinois is one of the only states in the nation that doesn’t exempt professional athletes from worker’s comp laws. The Bears have to pay millions into the system, money that no other team is saddled with paying out. Worker’s comp laws often insist that workers retire at 65 years of age but no professional athlete has such a long career, hence why most other states exempt athletes. When a pro athlete gets hurt in Illinois the team is often forced to pay workers comp payments for two and three times longer than do teams in other states. Business-wise this hampers the Bears competitiveness compared to other NFL teams.
If some more pro-business policies don’t start coming out of Springfield soon, Illinois will sink to even lower depths, if that is even possible.
Thanks to Patten Industries for inviting me to witness their presentation.