Economic Development

CTBA, commissioned by the Daily Herald and ProPublica, performed an analysis of the 1989 economic development agreement (“EDA”) entered into by Hoffman Estates with Sears, Roebuck, and Company (“Sears”). The purpose of the analysis was to determine how effective the EDA proved to be and to quantify the impact the resulting development had on Hoffman Estates. The results of the analysis were utilized in a series of articles published by the Daily Herald and ProPublica.

Using a difference-in-differences model, the following report compares the economic performance of Hoffman Estates to a control group in order to isolate and identify the impact of development as a result of the EDA. The results suggest that the impact of the development generated by the Sears EDA was temporary, with a short-term spike in property values but no lasting impact on the growth trajectory of property value in Hoffman Estates, while failing to generate the job growth promised by the EDA.

The Economic Development for a Growing Economy ("EDGE") Tax Credit program has released more than $1.6 billion in credits to companies promising to create or retain jobs in Illinois since its creation in 1999. But the evidence that tax incentive programs like EDGE produce real economic growth is limited, and EDGE credits in particular have been abused by companies simply moving jobs from one part of the state to another, as found by a 2015 Chicago Tribune investigation.

Now, a bill would reform and extend EDGE (under the name "THRIVE") with a twist that will only make the benefits of the program even more dubious: "transferability." Currently, companies cannot receive more in EDGE credits than their total state tax liability. But a "transferable" credit would allow companies to sell their excess credit to another company with a large enough tax liability to use it. That means that the state would end up directing resources to companies that had not even stated an intent to create or preserve jobs, reducing funds available for core services like education, health care, human services, and public safety.

Given the sluggish job growth during the recovery that has followed the Great Recession, decision makers both nationally and here in Illinois have indicated an interest in pursuing policy initiatives that will help spur the economy. Many have identified supporting small businesses and entrepreneurship as key to this effort. While various regulatory, spending and other policies (e.g. grants, technical assistance, incubators, and technology transfers) can directly and/or indirectly impact small businesses, the primary policy tools available fall into two distinct categories. On the one hand, policymakers can opt to reduce business and/or individual taxes in the hope that the tax relief will incentivize hiring and business expansion. Indeed, the Speaker of the House recently introduced a bill to reduce the state’s corporate income tax to stimulate job growth.

On the other hand, policymakers can make adequate investments in core public services and goods that businesses need to thrive, like education and infrastructure. Of the two primary policy tools available, the evidence overwhelmingly indicates that the latter approach is the best choice for supporting small businesses.

Knowing that the evidence shows business tax relief is not the best approach to stimulating the economy is one thing. What is crucial is that policymakers actually use this knowledge to craft effective, long-term solutions to one of the most challenging problems facing Illinois today—effectively stimulating the economy while dealing with the state’s fiscal shortcomings. After all, the state has an accumulated deficit of at least $7.6 billion in its General Fund budget for FY2014, the current fiscal year. This accumulated deficit is a very real problem that constrains the state’s ability to make the very investments in education and infrastructure that are so crucial to small businesses.

This Report highlights the best practices and policy initiatives decision makers could take to support small businesses in Illinois.  

An introduction to public transit in Illinois: what it is, how it’s funded, who the major stakeholders are and how to get involved. Includes a glossary of transit terminology.

An analysis of the state's fiscal system finds that Illinois’ state deficit will increase to more than $6 Billion over the next five years, without adding or expanding any programs. This deficit increase is the result of a tax system that does not generate enough revenue to continue funding the current level of public services into the future, adjusting solely for inflation and population growth. This fiscal mismatch is called a “structural deficit.” In addition to an unsustainable state revenue system, the study also found that increasing the number of high paying jobs in the state will not solve the problem. This limited impact of high paying jobs on the state’s ability to generate revenue is a direct result of the longstanding structural flaws in the state fiscal system that severely limit Illinois' ability to generate revenue that responds adequately to economic growth.