Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.
Today the Illinois Economic Policy Institute (ILEPI) released A Turnaround or a Turn Aground? Fact Checking Governor Rauner’s First Claims (PDF). The report evaluates statements made by new Governor Bruce Rauner during his first month in office. Governor Rauner’s ambitious policy agenda aims to fix Illinois’ fiscal crisis mainly through a constitutional amendment on public sector pensions, changes to the state’s tax code, and adjustments to the state’s labor laws– including banning political contributions from certain labor unions and implementing local right-to-work laws which reduce the power of unions. Would his proposals, if enacted, accomplish his goal of making Illinois a “competitive” and “compassionate” state? Are his policy proposals supported by evidence and fact? Of the eleven claims analyzed, ILEPI finds that:
- Two (18.2 percent) were found to be true,
- Three (27.3 percent) were rated as only half true, and
- Six (54.5 percent) were deemed to be false.
A summary of the fact check is below:
ONLY HALF TRUE: Illinois Job Creation Lags Behind Neighboring States
Rauner’s numbers are misleading and may be out of date. While the Illinois labor market has lagged slightly behind the economies of neighboring states, the actual disparity is much smaller than Rauner suggests. The largest year-over-year unemployment rate decline in America occurred in Illinois, where the unemployment rate fell by 2.7 percentage points. Using correct payroll data, this claim is found to be only half true.
FALSE: Illinois is Currently a Bad Place to Do Business
Outcomes matter. Rauner uses rankings of corporate executives to suggest that Illinois is a terrible place to do business, but the claims have no predictive power of a state’s unemployment rate and are negatively correlated with average wages in a state. A good state for business should be statistically related to lower unemployment and higher worker wages. The appropriate policy is to attract high-road employers with sound infrastructure and a skilled workforce. After completing the rest of the story, the claim that Illinois is a bad state in which to do business is found to be false.
TRUE: Raising the Minimum Wage to $10.00 Will Increase Earnings
To generate full economic benefits, the minimum wage should be expanded to cover employers with 2 or more employees, indexed to the chained-Consumer Price Index, paired with an expansion of the state’s Earned Income Tax Credit, and be applicable to workers in their first 90 days of employment. Without these additions to the new minimum wage law, this claim will only be half true. With meaningful change, this claim is found to be true.
FALSE: Right-to-Work Would Help Workers in Illinois
First, it is disingenuous for Rauner to suggest that right-to-work laws are “employee empowerment laws” when they reduce the ability of workers to come together to demand higher wages and improved working conditions. Second, right-to-work laws reduce wage and salary incomes by 3.2 percent on average, increase employment by a minimal 0.4 percentage points, are associated with reductions in health insurance coverage, lead to increased reliance on government programs such as food stamps. Finally, at 7.3 percent, the unemployment rate is higher in Indiana counties bordering Illinois than it is in Illinois counties which border Indiana (6.0 percent). RTW actually has no discernible impact on employment outcomes but significantly reduces worker incomes, so this claim is false.
TRUE: Families Are Leaving Illinois Because of the State’s Fiscal Woes
Although over 275,000 more people chose to leave Illinois than settle in the state, Illinois still enjoyed a population growth of over 543,000 people during the past decade. Even with the departure of over 275,000 net migrants, Illinois added more residents than every neighboring state except Indiana. In addition, data suggests that people with lower levels of educational attainment are a significant component of those who are exiting Illinois, while the number of residents with at least a bachelor’s degree continues to rise. Still, this Rauner claim– although a bit more complicated than presented– is found to be true.
FALSE: Prevailing Wage Laws Cost Schools $160 Million Per Year
The source cited by Rauner to support this claim has been completely discredited by an academic economist at the University of Utah. Instead, the preponderance of economic research finds that prevailing wage laws have zero impact on total construction costs, including in cases where school construction was exempted from prevailing wage regulations. If Illinois’ prevailing wage law was repealed, the state economy would lose 3,300 jobs, see a $1 billion contraction in economic output, and forgo $44 million in lost state and local tax revenues. Rauner’s claim that prevailing wage costs schools millions of dollars is false.
FALSE: State Employee Payroll Costs are Out of Control
Rauner’s graphical representation of state employee payroll costs is devoid of context and seems to cherry-pick an unrepresentative component of the workforce employed by state government. For state employees, total income was $49,662 in 2013 compared to $50,915 for their counterparts in the private and non-profit sectors. Additionally, in Illinois, more than half of state and local government workers in Illinois have a bachelor’s degree compared to just three-in-ten private sector workers. Rauner makes no effort to compare the rise in state employee compensation with either private sector increases (after controlling for education) or with payroll trends for other governmental bodies across America.
ONLY HALF TRUE: State Workers Must Pay Higher Shares to Fix the Pension Problem
Fully 78 percent of workers in state government do not receive Social Security coverage when they retire. In his rallies against public sector workers, Rauner leaves out that state contributions returned 12.3 percent on average in the market in for the past five years, that pension payments are constitutionally-protected and must be paid even if an amendment is passed, and that pension payments have an impact on the state economy. Retirees spend the money in local restaurants, grocery stores, and department stores, supporting almost 85,000 jobs. Notions that state employees are somehow at fault after years of underfunding from legislators during both Republican and Democratic administrations are more ideologically driven than based on fact.
FALSE: State Workers Are Forced to Pay Union Dues for Political Purposes
Illinois law does not prohibit labor organizations with state collective bargaining agreements from contributing to elected officials, but it also does not mandate that workers must pay for political activities that are endorsed by their representative union. An employee can exercise his or her constitutional right to free speech and make “voluntary political contributions in conjunction with his or her fair share payment.” If the Governor would like to limit special interest influence in Springfield, he should also ban political contributions from businesses and corporations that receive either direct or indirect tax breaks or incentives. Why single-out labor unions, banning organized workers from lawfully and transparently exercising their freedom of political speech? This proposal is very clearly ideologically motivated and politically driven.
ONLY HALF TRUE: Raising Taxes Alone Won’t Work to Fix the Illinois Fiscal Crisis
Illinois households paid 10.4 percent of their income in (all forms of) taxes on average to the state, the 19th highest tax burden in the nation. This is behind Minnesota, Wisconsin, Indiana, and Kentucky. While Voters have demonstrated that they are willing to incur an additional 3.0 percent tax on incomes greater than $1.0 million to provide additional revenues to school districts. In the 2014 election, 60.0 percent of voters favored the “millionaire’s tax.” Small tax increases must be paired with smart infrastructure and education investments to boost the economy.
FALSE: State Medicaid Spending is Unsustainable
Federal spending paid for most of the recent increase in Medicaid costs. In addition, Illinois ranked 47th in Medicaid spending per enrollee. Rauner has also not provided any context comparing Medicaid costs to cost inflation for private health insurance plans. For each of these reasons, this claim is considered false.
With sound economic and fiscal policies, Illinois can become the greatest state in the nation. Those policies which invest in the future of Illinois and the region, improve the knowledge and skills of the state’s workforce, advance high-quality jobs for working families, and foster transparent governments will help accomplish this goal.