by Elizabeth Austin, Innovation Illinois VP for Policy

in the State Journal Register 10/7/15


What does it really mean for a state to be business friendly?

Gov. Bruce Rauner claims he is holding the state budget hostage month after month because he believes Illinois needs “structural reform,” including an overhaul of the state’s “lawsuit climate.”

To underscore the need for reform, Gov. Rauner played a starring role in the recent release of a survey by the U.S. Chamber Institute for Legal Reform, which ranked Illinois 48th in the nation when it comes to creating the kind of “fair and reasonable litigation environment” needed to draw businesses and jobs to the land of Lincoln.

The survey’s methodology was more than a little biased. The authors polled 1,200 executives, including corporate attorneys, at giant corporations and asked them: “Wouldn’t you rather do business in a state where you’re unlikely to pay a severe penalty if you violate a contract, harm a consumer or break a federal law?”

Not surprisingly, 75 percent of those surveyed responded with a resounding, “Yes, we sure would!”

I am sure it’s shocking to learn that some high-powered corporate lawyers say they would prefer to do business in states that take a more relaxed approach to things like contract law and equal employment. But a closer look reveals that these big corporations are not putting their money where their mouthpieces are. In fact, the Institute for Legal Reform study ranks Illinois just one slot above No. 49, California.

So if a state’s lawsuit climate creates severe obstacles to business success, one might expect California to be gasping for jobs and investment. Not so much. In fact, California ranks third in the nation in the number of Fortune 500 companies headquartered in its state, with 53. That’s behind New York with 55 and Texas with 54, and ahead of Illinois’ 34.

According to Fortune magazine, California’s 53 companies boasted an aggregate market capitalization of $3.7 trillion, up 14 percent over the previous year and accounting for a whopping 21 percent share of the entire Fortune 500 market cap. Those companies also saw their total year-over-year sales rise by a total of $100 million.

Let’s do the math. California is home to more than 50 of the nation’s strongest companies. The state added nearly 500,000 jobs in 2014, for a total of more than 1.3 million over the past five years. Standard & Poor’s recently upgraded California’s general-obligation debt to its highest rating since 2000.

And all these good things are happening in a state that raised income and sales taxes substantially in 2013 and that, like Illinois, remains consistently at the bottom of that silly survey on states’ lawsuit climate.

If Gov. Rauner really thinks fair taxes and a fair court system make a state unfriendly to business, well, with friends like him, Illinois business doesn’t need enemies.