Writing

Want to Fix Illinois’ Economic Development Agency? Put it Out to Pasture

by Hilary Gowins, posted in huffington post

Originally published on Huffington Post.

Illinois’ economy is sputtering. And it’s not because the state’s economic development agency isn’t doing its job. In fact, it’s partly because the agency exists in the first place.

For years, Illinois’ economic development agency, the Department of Commerce and Economic Opportunity, or DCEO, has thrown hundreds of millions of dollars at the biggest companies in the state, leaving taxpayers with the bill and small-business owners struggling to succeed on an unequal playing field.

The growth-through-giveaway approach has failed miserably – Illinois has 56,000 fewer people working since the DCEO’s biggest program got started in 2001. And privatizing the agency – as state lawmakers are now suggesting – won’t make it work.

A new proposal from state politicians, House Bill 574, would privatize much of the DCEO’s responsibilities, creating a public-private partnership entity called the Illinois Business and Economic Development Corp. This entity would “focus on business development, small and minority-owned business incubation, trade and investment, tourism and film.”

But whenever the state gives big businesses grants or tax credits, the money has to come from somewhere: namely, taxpayers and other businesses.

The DCEO’s model has already proven a simple truth: Healthy economic growth doesn’t come from selective government handouts. If you measure the DCEO based on results, it has failed miserably. The largest DCEO tax-credit program is the Economic Development for a Growing Economy, or EDGE, tax credit, which began in 2001. The entire purpose of the EDGE tax credit is to incentivize businesses to expand and create new payroll jobs in Illinois. But after more than 13 years and nearly $1 billion in EDGE tax credits, the state is actually down 186,500 payroll jobs, a stunning record of failure.

What’s worse, for more than a decade, Illinois has been giving select businesses many millions of dollars more in tax credits than the law allows. The EDGE program is intended for companies seeking to expand and hire more workers in Illinois; not to help companies maintain existing workers.

But the DCEO has been giving tax credits to companies that simply retain employees. The Liberty Justice Center has filed a lawsuit, Jenner v. DCEO, which seeks to stop this illegal practice. The lawsuit alleges it’s possible that as much as half of the nearly $1 billion in EDGE tax credits approved over the life of the program violated the limits established in the law.

Not only is the DCEO handing out illegal subsidies, but politicians also make use of it to curry favor and create the illusion of jobs growth.

Former Gov. Pat Quinn did just that in October 2014, one month before he was up for re-election. That month alone, Quinn authorized $37.4 million in major grants to four big companies and two influential incubators.

Failed economic stimulus and rampant abuse of tax dollars always come into play when government gets into the business of picking winners and losers.

Knowing the DCEO is broken might make it tempting for politicians to create a public-private partnership to carry out similar functions. But public-private partnerships like the proposed Illinois Business and Economic Development Corp. won’t solve these fundamental problems.

In fact, privatizing could help shield the group from the same scrutiny that brought the DCEO’s usefulness into question in the first place. Transparency requirements, such as Freedom of Information Act requests and open records reporting, often do not apply in the case of public-private partnerships, leaving taxpayers in the dark on how their money is spent.

For example, Jobs Ohio, a similar program, has been plagued with a lack of transparency because the “public-private” hybrid structure allows it to be considered a private organization. The program regularly subsidized donors to Gov. John Kasich and his legislative allies, and Jobs Ohio ran ad campaigns to trumpet its economic success – not unlike how Quinn used Illinois’ DCEO.

The DCEO has been a mess – but in attempting to fix one problem, the state shouldn’t create new ones. Illinois shouldn’t have to bribe big businesses to set up and invest here.

Subsidizing legacy businesses misses the point of what actually drives jobs growth: Kauffman Foundation research shows that job creation is driven by younger firms in their first five years. Nationwide, businesses with fewer than fifty employees represent 95 percent of all U.S. companies.

Politicians should embrace economic reforms that make the state a place to which employers want to flock. That includes keeping the tax burden low, eliminating unnecessary red tape and reforming out-of-control workers’ compensation costs.

Illinois needs a lot less DCEO favoritism, and a lot more real economic reform.

Chicago’s Problems Run Much Deeper Than a 76-foot Hole

by Hilary Gowins, posted in huffington post

Originally published on Huffington Post.

The Chicago Spire was supposed to be the tallest building in the United States. Instead of soaring 2,000 feet into the sky, today the foundation plunges 76 feet below ground, sitting abandoned and undeveloped right across from Navy Pier and along iconic Lake Shore Drive. What was to serve as the base for an opulent architectural landmark is just a deep, dark hole taking up prime real estate and reminding the city of what could have been.

The pit is a physical reminder of the unrealized promise of the Spire, but its imagery also reflects the depth of its city’s financial despair.

Behind a veneer of affluence, gilded by the prosperity and staying power of neighborhoods such as the Gold Coast, River North and Lincoln Park, the city’s foundation is crumbling beneath the weight of perilous debt. Chicago and its sister governments are officially on the hook for more than $32 billion in unfunded pension debt. With just over a million households in the city, that staggering figure means each Chicago household is on the hook for $32,000 to cover these liabilities. Chicago’s pension debt exceeds the state’s total proposed operating budget for the upcoming fiscal year.

At the same time the city’s obligations are skyrocketing, its population is growing at a snail’s pace, gaining just 6,000 residents in 2013 after a decade of population decline. With 2.7 million residents as of 2013, Chicago’s population is the same as it was in 1920.

But the city used to be a beacon of hope and prosperity.

In 1884, more than 120 years before the Spire project was unveiled, Chicago became the birthplace of the skyscraper upon the completion of the 10-story Home Insurance Building.

In 1916 author Carl Sandburg gave birth to the nickname, “the city of big shoulders,” a nod to Chicago’s grit and work ethic. By 1890, its population topped 1 million, and it was the fastest growing city in the world. The year before, it had officially become the second-biggest city in the country, according to records from the University of Illinois at Chicago.

Business was booming then, driven mostly by the growth of railroads. Continued rail growth led to the birth of the Union Stockyards, a centralized slaughterhouse built to accommodate Chicago’s growth in the livestock industry. Around 1900, Chicago’s meatpacking industry employed more than 25,000 people and produced 82 percent of the meat consumed in the United States, according to theChicago History Museum. The late 1800s and early 1900s were also the era of the iconic State Street Marshall Field & Co., originally a dry goods store that eventually became one of the biggest department stores in the country.

Chicago was a center of commerce and culture, a booming hub where East met West.

But today, despite activity on the tech front, job opportunities are scarce. The Chicago area has 46,000 fewer people working compared to before the Great Recession, according to the Bureau of Labor Statistics.

In 1851, writers at the Chicago Tribune wrote in the “Annual Review of Commerce” something that still holds true today:

“Essential to the prosperity of cities … It matters but little how great the natural advantages with respect to a location upon navigable water, if [cities] fail to avail themselves of this new element of power, a decline is inevitable.”

Back then the “essential power” was the railroad, and the Tribune writers recognized that this industry would serve as the driver behind future prosperity. Today, economic drivers that would make the city great once more are set backon multiple fronts: the city buries would-be entrepreneurs in paperwork for the fees and permits required to set up shop; it can take weeks or months just to get approval from City Council to start a business; and anyone thinking of opening a business here has to consider the prospect of having to shoulder the city’s heavy debt burden if City Hall can’t embrace reform.

The Spire and those who held its financial obligations filed for bankruptcy in 2013. They owed $77.3 million on the project, according to the Chicago Tribune. Without swift action, the city could suffer a similar fate.

Unlike the Spire, Chicago doesn’t have to keep sinking. If city officials change the way Chicago handles spending and debt, as well as how it fosters business and jobs growth, the city of big shoulders can boom once more.

When the Punishment No Longer Fits the Crime: Cook County and Illinois Seeking Solutions to Broken Criminal-justice System

by Hilary Gowins, posted in huffington post

Originally published on Huffington Post.

Bad guys aren’t the only ones who go to jail.

One in 99 adults are living behind bars in the U.S. This marks the highest rate of imprisonment in American history, according to the Pew Center on States.

Prison overcrowding is an issue across the country, and Illinois is no different.

Its state prisons are operating at 150 percent capacity, with a system designed to hold a maximum of 32,075 prisoners housing 48,653 inmates. Illinois’ prison population has grown 700 percent over the last 40 years.

Overcrowding isn’t a result of increasing criminality (Chicago ended 2014 with crime and murder rates at record lows; violent crime is also down statewide, according to the FBI) — it’s symptomatic of basic flaws in the criminal-justice system, one of which is unjust incarceration.

Cara Smith, the executive director of the Cook County Jail, explains unjust incarceration as the arrest and confinement of people who commit victimless crimes, such as trespassing and retail theft.

What does this look like? A pregnant 30-year-old in jail for 135 days for stealing two plums and three candy bars. Smith said this woman, who she referred to asM.H., was still in jail for this offense when she gave birth to a baby girl she named “Miracle” on Veteran’s Day.

Smith said at the time the jail had about 600 inmates who were there for criminal trespassing or retail theft for under $300.

“I would bet for all 600 of these people, whether you give them a $10 bond or a million dollar bond, they won’t be able to bond out,” Smith said.

Cook County Sheriff Tom Dart released a case study of another instance of unjust incarceration, this time a homeless 51-year-old woman referred to as T.Y. who was arrested for criminal trespassing at Rush Hospital. She sat in jail for 38 days. T.Y.’s case study indicated that, at her last court date, the judge ordered a “behavioral clinical exam” to determine her psychological fitness to stand trial.

Even if the human side of these stories doesn’t prove sympathetic, the financial impact might: These two cases cost taxpayers $24,739.

Offenders are being locked away — sometimes for months — for petty crimes, often for what Smith referred to as “crimes of survival.” Those who commit repeat offenses are not being rehabilitated; they are simply being kept at bay under lock and key.

It’s a system that’s not working — more than half of Illinois’ prisoners end up incarcerated again within three years of release — but the tendency to leap too quickly to new solutions is one that politicians should resist.

“Before we can decide what we need to do to make a change, we have to expose who’s in custody,” Smith said. “Without that information, the public is under the misapprehension that people are in custody because they are bad guys. By exposing these case studies, I think the rest of the system that put people in custody should feel uncomfortable about their policies.”

There’s movement at the state level to seek solutions to Illinois’ broken criminal-justice system as well. As one of his earliest acts in office, Gov. Bruce Rauner issued an executive order creating the Illinois State Commission on Criminal Justice and Sentencing Reform. The commission includes prosecutors, defense attorneys, judges and other experts, all tasked with reviewing sentencing structure and practices, community supervision and the use of alternatives to incarceration, with the goal of finding solutions to the ineffective and expensive system.

Rauner said his goal is to reduce the prison population 25 percent by 2025.

Criminal-justice reform is necessary to remedy a system that is failing on moral and fiscal levels. Today’s system doesn’t rehabilitate inmates and fails to address the underlying causes driving petty crimes. This doesn’t just have ethical consequences — it also eats away at state budgets.

Illinois’ $1.3 billion prison budget was on track to run out at the end of April, and was only saved when the legislature passed supplemental budget appropriations at the eleventh hour.

While structural changes should come only after officials thoroughly assess the system, a simple way to start making sure people like T.Y. and M.H. don’t languish in jail is to move cases through the system more efficiently. The Chicago Sun-Times reported that Sheriff Dart is working on legislation aimed at moving shoplifting and trespassing cases through the system within a month; judges would also be able to “release the defendants on a non-cash bond or electronic monitoring until their trials.”

Other possibilities include imposing tickets and fines for low-level offenses instead of making arrests. Illinois could consider joining 17 states and Washington, D.C., which have already decriminalized marijuana. An Illinois state representative has proposed a new bill that would punish marijuana possession under 30 grams with a fine of $100, and would lower penalties for possession of over 30 grams but less than 500.

Dolly Decorator, or: How to Lobby for Laws That Bully Your Competition

by Hilary Gowins, posted in huffington post

Originally published on Huffington Post.

The class bully is an archetype of American childhood. Maybe he was the biggest kid in the fifth grade. Maybe she cut class and stole lunch money.

Today, school bullies are more skilled in the digital art of mental abuse, using venues such as Facebook and Instagram to troll their victims.

But grown-ups can be bullies, too.

And some of them use the full weight of the law to inflict pain and suffering on the outsiders they don’t want to let in.

Eva Maria Locke knows this all too well. Eva is from Delray Beach, Florida. She has a degree in interior design, and has been approached by friends and acquaintances who want to work with her on design projects. A few years back, she was offered a job revamping a hair salon. Soon after, a friend who practices Chinese medicine reached out about designing a new lobby.

But Eva had to turn down these jobs because she lives in one of just three states that have “practice act” laws on the books, which limit who can practice interior design.

“Florida law says that if you’re a registered interior designer, you can perform design services in commercial spaces – but if you’re not registered with the state, you can only offer design services in residential spaces,” said Ed Nagorsky, general counsel for National Kitchen & Bath Association, a trade group that works in the interior-design industry.

Nagorsky explained that to become registered, prospective designers have to pass the National Council for Interior Design Qualification, or NCIDQ exam. Before you can sit for the test, however, you must have a degree in interior design, complete an internship for two to five years (or more) and pay $1,265 just to take the exam.

“These costs price a lot of people out of the market,” Nagorsky said. “That’s how existing designers restrict the profession.”

These requirements have kept Eva out of a big chunk of potential business. After raising her family, she went back to school in 2005, graduating with her degree in interior design in 2007. After that, she apprenticed under a licensed designer for two years … until that designer had to close up shop in the wake of the Great Recession. Under Florida law, because Eva earned a two-year degree, she needs four years of apprenticeship work under a licensed designer. That left her two years short in the wake of one of the worst recessions in the country’s history, with little hope of finding work that would get her enough apprentice experience to qualify for the exam.

Now she’s in limbo – Eva has a client base and the knowledge to do the job well, but Florida’s regulations have left her unable to get off the ground. People who favor regulations like the ones that exist in Florida might call Eva a “Dolly Decorator,” what Eva described as a derogatory term for unlicensed designers.

“When it suits their interest, pro-regulation people will talk as if there is a clearly recognized distinction between interior design and decoration,” said Clark Neily, an attorney with the Washington, D.C.-based Institute for Justice. “It’s an ego thing.”

The “ego thing” takes on a life of its own in states where interior-design groups like the American Society of Interior Designers, or ASID, try to manipulate the law to limit professional competition. Neily, who represented designers like Eva in a lawsuit over Florida’s interior-design title act in 2009, said ASID has a straightforward approach to molding licensing requirements.

First item on the docket is to get a law on the books called a “title act,” which establishes the precedent for government involvement and a degree of separation between those who are licensed and those who are not. Title acts are less menacing than practice acts – at least on the surface. But according to Neily, these rules are simply the gateway policies through which ASID gets its foot in the doors of statehouses across America.

“They go to the legislature, convince them to pass a law regulating who can use the term ‘interior designer’ and create a board responsible for enforcing that law,” Neily said. “Once they get the title act in the books, the group comes back a while later and says to lawmakers, ‘we’re regulating the title, we really ought to be regulating the work, too.'”

That’s happening now in Illinois, which already has a title act. In March, a state senator presented a new bill that would make the Land of Lincoln the fourth state to license interior-design professionals. The qualifications for a license are rigorous: anyone wishing to practice the full scope of interior design would first need a total of six years of combined education and training experience. An applicant also would have to sit for – and pass – the $1,265 NCIDQ test.

The bill language makes it unclear what design work is legal or illegal for anyone without a license. Guessing incorrectly has serious consequences: The first offense is a Class A misdemeanor; subsequent offenses qualify as a Class 4 Felony, which is punishable by three to six years in prison and a fine of up to $25,000. The bill would also allow the Department of Financial and Professional Regulation to impose a civil penalty of up to $5,000 for each violation.

A law like this does not bode well for anyone not already in the design industry – especially minorities.

Economists Jaret Treber and David E. Harrington of Kenyon College found that“black and Hispanic interior designers are nearly 30 percent less likely to have college degrees than white designers. Thus, regulations with academic requirements disproportionately keep minorities out of the field.” Treber and Harrington also estimated that the number of interior designers fell by 1,300 between 1990 and 2000 in regulated states, “demonstrating that regulation is limiting economic opportunity in interior design.”

Illinois’ proposal is exceptionally harsh. So is Florida’s practice act, especially considering that 47 other states don’t currently limit who can practice interior design.

Trade associations often lobby state legislatures for rules like these to make it difficult for new talent to set up shop, according to the Institute for Justice’s Beth Kregor.

“The laws are shaped by people who have a clear interest in keeping business for themselves, rather than opening the occupation to competition, especially competition that would charge lower prices,” Kregor said.

Regulations like the ones that affect interior designers in Florida cost individuals dearly, and are often the difference between a successful career and putting professional aspirations on the backburner.

“I’m Cuban-American. I came here when I was 3 years old,” Eva said. “I saw my parents lose their home, property and start over with nothing. To me, this was the land of opportunity. But I’ve gotten a huge wake-up call. There are so many people out there who don’t want competition, and once they get in their little club they fight tooth and nail to keep other people out.”

Illinois General Assembly’s top three legislative priorities

by Hilary Gowins, posted in op-ed

Op-ed posted on Watchdog.org.

2015 promises to be an exciting year in a state desperately in need of major fiscal reform.

For the first time in 12 years, Illinois has a Republican governor. He’ll be working alongside Democratic supermajorities in the House and Senate – and everyone’s waiting to see what happens.

It would take a crystal ball and some strong political connections to accurately predict what will happen in the Illinois General Assembly in the coming months, but at least three fronts are likely to see movement: wages, jobs and growth reforms, and pension reform.

Wages

The Illinois Senate passed in December 2014 a bill that would raise the state’s minimum wage. Politicians may look to pass an increase this session, which would costs employers big. If so, it’s possible that this increase could be tied to other business measures intended to offset the added costs of a wage hike.

This could include: a reduction in LLC fees, which cost each new business that falls under this category $500 in its first year and then $250 each year the business remains active; and reform to the state’s workers’ compensation law, under which employees can file compensation claims for injuries that are not incurred on the job.

Jobs and growth reforms

Though many are anticipating clashes between the Republican executive branch and the Democrat-controlled Legislature, the good news is that both sides have common ground when it comes to issues of employment.One of these bipartisan policy areas is licensing reform. Occupational licenses cost time and money. Today, almost 1 in 3 workers need the government’s permission to do their job – 60 years ago, that figure was just 1 in 20, according to “License to Work,” a 2012 report from the nonpartisan Institute for Justice.

Illinois is no exception when it comes to burdensome licensing rules. For example, under the state’s Barber, Cosmetology, Esthetics, Hair Braiding, and Nail Technology Act of 1985, anyone wishing to work as a barber must complete expensive training at a barber or cosmetology school for no less than 1,500 hours in a program lasting at least nine months before they can even take the state-required licensing exam and pay the associated licensing fees.

“Scope of practice” in health care is another aspect of occupational licensing that has supporters on both sides of the aisle. Seventeen states and the District of Columbia have laws granting “full practice authority” to professionals who have advanced nursing degrees and have passed national exams. This adjustment provides greater access to care for low-income residents and reduces wait times to see doctors and specialists, and also can majorly reduce health-care spending for the Illinois Department of Human Services.

Pension reform

No pension reform will move forward until the Illinois Supreme Court rules on the constitutionality of Senate Bill 1, the pension bill the General Assembly passed in 2013 and the Sangamon County Circuit Court ruled unconstitutional in November 2014. At the end of 2014, Illinois Attorney General Lisa Madigan’s office filed a motion to expedite the court’s ruling, and the court granted this request.

A decision is likely to be finalized in March or April, near the end of spring legislative session.

The sooner the state learns the fate of SB 1 the better, because its $111 billion pension debt will only continue to grow without true reform. No one on either side of the aisle truly believes SB 1 is a comprehensive pension bill – if the court strikes it down, lawmakers will have the chance to go back to the drawing board to find real solutions.

No matter how the court finds, the right thing to do would be to offer all government workers the chance to opt out of the failing pension funds. Nearly 20 percent of state university employees chose to enter a 401(k) plan instead of the State Universities Retirement System, or SURS, pension fund in 2014. But SURS is the only state retirement system that offers employees that choice.

The surest way to stop the bleeding is to enroll all new public employees in self-managed plans going forward. This move is constitutional, would save the state immediate millions and would protect worker retirements.

Illinois is a state rife with policy problems, and it’s tough to predict where momentum might shift. But in terms of combined importance and immediacy, these three issues sit atop the pile for state lawmakers in 2015.