gov. bruce rauner on labor, economy: jan. 27, 2015

8/9/2019 Gov. Bruce Rauner on labor, economy: Jan. 27, 2015

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TheIllinoisTurnaround

Governor Bruce Rauner


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Our Goal:Make Illinois the Most

CompetitiveandCompassionateState in

America


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Illinois OnUnsustainable Path

Raising Taxes Alone Wont

Work


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Net Migration 2003 - 2014

68,585

31,069

132,716

81,771

22,354

-277,725-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

Indiana Iowa Kentucky Missouri Wisconsin Illinois

Source: U.S. Census Bureau


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Illinois Domestic Migration 2003-2014

-94,956

-67,313

-73,453

-66,452

-49,843-48,249

-52,349

-60,265

-68,661

-79,525

-70,968-73,980

-100,000

-90,000

-80,000

-70,000

-60,000

-50,000

-40,000

-30,000

-20,000

-10,000

0201420132012201120102009200820072006200520042003

Source: U.S. Census Bureau


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Declining Real Median HouseholdIncome

Even with a 9% spike in 2013, real median householdincome is still nearly 12% below its 1999 level

Source: U.S Bureau of Economic Analysis; income figures in 2014 dollars

$50,000

$52,000

$54,000

$56,000

$58,000

$60,000

$62,000

$64,000

$66,000


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Job Creation vs. Neighboring States20032014

Source: U.S. Bureau of Labor Statistics

IL IN IA KY MO WI

Total percentage employmentgrowth

0.2% 3.8% 8.0% 5.3% 3.6% 4.3%

Annual compound growth rate 0.01% 0.3% 0.7% 0.4% 0.3% 0.4%

Cumulative job growth 10,300 109,900 115,900 94,500 96,300 120,500

Cumulative job growth per 1,000people

0.80 16.66 37.30 21.41 15.88 20.93

Multiple of Illinois growth 20.8x 46.6x 26.8x 19.9x 26.2x


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Workers Compensation Costs 7thHighest in the Nation

Source: 2014 Oregon Workers Compensation Premium Rate Ranking Summary

$2.35

$1.98$1.92

$1.88

$1.51

$1.06

$1.87

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

$2.40

$2.60

Illinois Missouri Wisconsin Iowa Kentucky Indiana National Average

Employer Workers Compensation Cost Per $100 ofSalary


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Unemployment Insurance Tax Costs -9thHighest in the Nation

$693

$612

$566

$315 $308 $298

$473

Illinois Iowa Wisconsin Kentucky Missouri Indiana National Average

Unemployment Insurance Tax on Average FTE

Source: U.S. Department of Labor, Employment and Training Administration, UIData Summary


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State Lawsuit Climate RankingsOne of the Worst in the Nation

Source: U.S. Chamber Institute for Legal Reform2012

46

38

34

15 14

10

IL KY MO WI IN IA


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How Illinois Ranks

48thBest States for Business2014 Chief Executive Magazine

FSmall Business Friendliness2014 Thumbtack.com Small Business

Friendliness Survey

35thSmall Business Policy2014 Small Business andEntrepreneurship Council

31stState Business Tax Climate2015 Tax Foundation
http://www.google.com/url?url=http://taxfoundation.org/&rct=j&frm=1&q=&esrc=s&sa=U&ei=mNW-VOrkEMWdygTciIHwBg&ved=0CBYQ9QEwAA&usg=AFQjCNEgyRHoPkQ2j7kZZ4fJugoKLtnbmQhttp://www.thumbtack.com/http://chiefexecutive.net/


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Nations Second Highest Property Taxes

Mean Property TaxesPaid

Mean Property Tax as a Percent ofHome Value

Kentucky $1,339 0.92

Indiana $1,200 0.93

Missouri $1,767 1.19

Iowa $2,398 1.6

Wisconsin $3,530 2.07

Illinois $4,469 2.28

Source: Urban-Brookings Tax Policy CenterNov. 18, 2013


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Root Causes of High PropertyTaxes

Pensions - $2 billionin 2013, and localgovernments neither control benefits norcontribution levels

Over one decade, state and localgovernments lost $1.6 billion due toprevailing wage requirements on educationconstruction projects alone

Project Labor Agreements can increase costsup to 18%

Nearly 7,000 units of government


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Illinois Gives Billions to Local GovernmentBut Costs Billions Too

The State of Illinois SharesMore than $6 Billion inRevenue with LocalGovernments.

But More than 280 StateImposed UnfundedMandates on LocalGovernments Cost

Communities Billions

StateLocal

Government$6B State

LocalGovernment

Source: GOMB, Illinois Municipal League


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Narrow Sales Tax Base

Services Covered by Sales Taxes

Source: Federation of Tax Administrators


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Top States for Business2014

Rank State

1 Georgia

2 Texas

3South

Carolina

4 Alabama

5 Tennessee

6 Louisiana

7 Indiana

8North

Carolina

9 Ohio

10 Mississippi

Rank State

1 Texas

2 Florida

3 Tennessee

4North

Carolina

5South

Carolina

6 Indiana

7 Arizona

8 Nevada

9 Louisiana

10 Georgia

48 Illinois

Ranking Criteria1.BusinessEnvironment2. Labor Climate3. Infrastructure

Ranking Criteria1. Tax andRegulatory Regime2. Quality of theWorkforce3. Quality of Living

Environment
http://chiefexecutive.net/


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Employee Empowermentvs. Forced Unionism

A study by a leading Canadian think tank (Fraser Institute) examined findings from aneconometric model of state gross product and total employment for 49 states from1977-2010

The resultsEmployee Empowerment Laws:

Increase economic output by 1.8% for the average state

Increase employment by 1% for the average state

A 1.8% increase in Illinois GSP would equal roughly $13 billion in increased economicactivity, which could result in approximately $675 million in tax revenue

Based on 2013 estimated GSP of $720.7 billion (St. Louis Fed data)

A 1% increase in Illinois employment would equal over 61,000 jobs

Based on BLS estimate of November 2014 IL employment of 6.1 million


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Employee Empowerment IncreasesJobs and Income

Percentage Growth in Non-Farm, Private-Sector Payroll Employment (2003-2013)Employee Empowerment States 9.2%Forced-Unionism States 4.0%National Average 6.1%Source: Department of Labor, Bureau of Labor Statistics (BLS)

Percentage Real Growth in Private Sector Employee Compensation (2003-2013)Employee Empowerment States 15.1%Forced-Unionism States 8.2%National Average 9.6%Source: BEA; BLS

Cost of Living-Adjusted Per Capita Disposable Personal Income (2013)Employee Empowerment States $38,915Forced-Unionism States $36,959National Average $37,878Source: Missouri Economic Research and Information Center; BEA


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Ability to be

Compassionate


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Medicaid Spending vs. Population Growth

12,000,000

13,000,000

14,000,000

15,000,000

16,000,000

17,000,000

18,000,000

$5,700

$6,700

$7,700

$8,700

$9,700

$10,700

$11,700

$12,700

$13,700

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Medicaid Spending Population

Source: GOMB, U.S. Census


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Spending vs. Job Growth Spending is 62% higher than its 2003 level while employment is less

than 0.5% above its 2003 level

Source: Illinois Office of Management and Budget; U.S. Bureau of Labor Statistics

Expenditures in current dollars

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Employment Total Expenditures


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Unfunded Pension System Liability, and Bondand Unpaid Bill Debt per Capita

Excludes Retiree Health Care Liabilities

Source: GOMB and Illinois Comptroller

$-

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14


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State Employee Payroll vs. Numberof State Employees

Source: State Employees Retirement System

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

$4,000,000,000

$4,500,000,000

$5,000,000,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

199419951996199719981999200020012002200320042005200620072008200920102011201220132014

TotalStatePayroll

NumberofEmployees

Active Members

Payroll


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Source: Pew Charitable Trusts

Average Total Premium

Per Employee

Wisconsin $1,331Illinois $1,181Indiana $1,018

Missouri $1,004Iowa $982

Kentucky $875

Average EmployeePremium Contribution

Percentage

Kentucky 24%Missouri 22%Indiana 19%

Wisconsin 13%Illinois 12%

Iowa 3%

Illinois Has theSecond-Highest

Premiums Amongour Neighbors

But the Second-Lowest Employee

ContributionShare


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Sample State Worker Pension Payout

A state worker retiring this year with an average career salary of

$38,979:

Contributes $40,539 in pension contributions over a 26-yearcareer

Receives $821,588 in total pension benefits after 20 years of

retirement

Source: State Employees Retirement System

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

Total Employee Contributions Total Employee Pension


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Guaranteed Pension Spiking

Prior to 2005, there was a 20 percent annual cap on salary spiking.

In 2005, this was fixed with a 6% PerYear Salary Increase Ceiling for TeacherPensions

(f) If a teacher's salary for any school year used to determine final average salary exceeds the member's

annual full-time salary rate with the same employer for the previous school year by more than 6%, theteacher's employer shall pay to the Systemthe present value of the increase in benefits resulting from theportion of the increase in salary that is in excess of 6%.

Source: 40 ILCS 5/16-158

But Teacher Contracts Make the Ceiling a Floor

An eligible teacher will receive a maximum total increase in creditable earnings equal to 6% of the prior years

creditable earnings for each of the final three (3) years of employment.

Source: Actual Teacher Contract Language


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Project Labor Agreements=

Uncompetitive Bidding

Estimates show that mandatory Project LaborAgreements can drive up the cost of a project by

roughly 18 percent.

In Illinois, the Tollway, the Illinois Department ofTransportation, and the Capital Development

Board have increasingly used and required PLAsover the past decade.

Source: The Impact of Government-Mandated Project Labor Agreements (PLAs):

A Review of Key Reports and Studies (2014 Edition)


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Uncompetitive Bidding Costs Toll Payers$1 Billion

100% PLA requirement under Multi-Project Labor Agreement(MPLA).

From 2005 to present, the Tollway has awarded 419 construction

contracts at a value of $6.1 billion. Since 2012, the Tollway hasawarded 166 contracts, representing $2.18 billion that haveincluded the MPLA construction contracts.

Estimated Resources Lost Because of PLAs since 2005:

$1,098,000,000


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Uncompetitive Bidding Costs TaxpayersMore than $100 Million Per Year Just on

IDOT Projects

Year

Number ofawardedcontracts

% oftotal

amountawardedas PLA

Estimated savings ifno PLA (18 percent)

2004 827 2.5% $6,188,459

2005 801 3.0% $6,157,613

2006 821 0.7% $1,871,340

2007 905 2.3% $4,590,173

2008 1035 4.0% $9,017,543

2009 1560 5.5% $21,397,479

2010 1444 25.0% $108,968,900

2011 1008 30.2% $99,179,671

2012 876 62.6% $164,851,405

2013 982 62.3% $224,139,254

2014 1011 57.7% $195,319,310

TOTAL

11,270

$841,681,146


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Uncompetitive Bidding Costs Taxpayers $250Million on Capital Development Board Projects

Year

Number ofawardedcontracts

% of total

amountawarded as

PLA

Estimated Savings ifNo PLA (18 percent)

2004 498 15.7% $6,794,451

2005 274 12.8% $4,537,734

2006 356 71.2% $23,241,922

2007 349 61.0% $14,581,640

2008 443 23.0% $4,939,086

2009 371 42.8% $9,571,854

2010 375 92.0% $36,974,934

2011 339 92.6% $25,481,348

2012 404 96.8% $42,570,075

2013 352 96.1% $28,674,165

2014 364 99.0% $65,688,501

TOTAL 4,125 $263,055,710


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Prevailing Wages Cost SchoolsOver $1 Billion

All government projects in the state are forced to useprevailing wage requirements.

From 2002-2011 state and local governments overspentby $1.6 billion on education construction projects alonedue to our prevailing wage laws.

Illinois schools could save nearly $160 million a yearwith prevailing wage reforms.

Source: Anderson Economic Group, LLC, Illinois Prevailing Wage Law and the Cost of Education Construction (2014)


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Conflicts of Interest in State PoliticalContributions

Illinois state law bans contributions from businesses that domore than $50,000 worth of business with the state (30 ILCS500/50-37)

But Illinois law does not prohibit labor organizations with statecollective bargaining agreements from contributing to theelected officials who negotiate their contracts.

Numerous states already have bans on labor contributions,

including Arizona, Michigan, Ohio, Texas and Wisconsin.


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A Corrupt Bargain

Union PoliticalContributionsto Quinn andBlagojevich

HigherUnion Dues

BiggerBureaucracyTaxesIncreaseJobs Leave

Illinois


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Union Dues Cut State Worker TakeHome Pay

State union members pay $884 peryear on union dues despite already

having civil service protections.


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Top Seven GovernmentUnions InIllinois

SEIU AFSCME AFL-CIO Teamsters

Illinois Federation of Teachers Illinois Education Association Chicago Teachers Union

$25.5 Million To BenefitGubernatorial Candidates Since

2002

Virtually All (99.9%)to Quinn andBlagojevich


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Ability to be Compassionate

Tax Revenues

Individualsand Families

in Need

Consumers/Recipients

Classrooms

Government

Bureaucracy

Education

Bureaucracy

Service Providers


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Competitiveness

Tax Ratesx Tax Base

x Economic Activity=

Tax Revenues


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Illinois OnUnsustainable Path

Raising Taxes Alone Wont

Work


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Our Goal:Make Illinois the Most

CompetitiveandCompassionateState in

America


40/40

TheIllinoisTurnaround

Governor Bruce Rauner

gov. bruce rauner on labor, economy: jan. 27, 2015

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