The Associated Press May 2, 2012, 6:45PM ET

Surveyed CEOs find Illinois business climate poor

Illinois' economic image has been battered by budget deficits, tax increases and very public campaigns to lure the state's businesses elsewhere, and a new survey of chief executives indicates many hold the state in low esteem.

The survey of 650 corporate CEOs released Wednesday by Chief Executive magazine ranked Illinois 48th among the 50 U.S. states for its business climate, the same position as a year ago. Texas was ranked No. 1 in the current survey. Indiana -- a state whose governor has publicly campaigned for Illinois firms to move to his state -- is ranked fifth.

But one of Illinois' toughest critics, Peoria-based Caterpillar Inc., noted Wednesday that the state is taking steps to address many of its problems.

The magazine noted that Illinois received low marks in particular for taxes and government regulations, and noted that states favored by many of the respondents shared lower taxes, less regulation and other factors.

"It may be no accident that most of the states in the top 20 are also right-to-work states, as labor force flexibility is highly sought after when a business seeks a location," the magazine noted, referring to laws in place in 23 U.S. states that bar unions from requiring non-members to pay dues.

But a spokeswoman for the state economic development agency pointed out that Illinois added 32,000 jobs last year. She also noted Gov. Pat Quinn's recent proposals that would cut state spending on pensions and Medicaid to help address a multibillion-dollar state budget deficit.

"Under Governor Quinn's direction, we are taking the necessary steps to strengthen our economy, attract new investment and put more people to work," Department of Commerce and Economic Opportunity spokeswoman Marcelyn Love said in an email.

Caterpillar spokesman Jim Dugan credited Quinn for those proposals.

"All in all, we think there have been some positive steps, in particular the last several weeks we've seen some ideas brought forward from the governor," Dugan said. "We recognize that it's going to take time to get better."

A double-digit unemployment rate, Illinois' budget deficit and an income tax increase designed to help cut that spending gap helped create an economic storm for the state last year.

States such as Indiana and New Jersey openly encouraged Illinois companies to leave. Though those campaigns appeared to have very limited effect, drawing relatively few jobs, major companies such as Sears Holdings Corp. and CBOE Inc. threatened to leave if they didn't win state tax breaks. Illinois eventually provided those perks.

Caterpillar at one point insinuated it, too, could leave if it wanted to. The company led complaints about the tax increase while pushing for changes in worker's compensation laws, some of which eventually happened.

"We think the tone and what's being talked about now has improved," Dugan said. The company hopes members of the General Assembly will follow Quinn's lead, the Caterpillar spokesman said.

Quinn, speaking Wednesday to the Illinois Retail Merchants Association in Springfield, pushed for businesses to help him pass his plans to cut pensions and Medicaid.

"I urge you to advocate for solutions on pensions and Medicaid like never before and make sure your voice is heard these next few weeks by the members of the General Assembly," Quinn said.

Unions say the pension would penalize workers for failures that aren't their own. Similarly, social service advocates say cuts in Medicaid will hurt people who most need assistance.

Wisconsin, another state that saw its leadership take shots at Illinois last year, was ranked No. 20 on Chief Executive magazine's survey. The state moved into the eight-year-old survey's top 20 for the first time.

Wisconsin's Republican governor, Scott Walker, has pushed to limit the influence of unions in his state, becoming a star among Republicans and business leaders even as he faces a recall election.

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Follow David Mercer on Twitter: http://twitter.com/DavidMercerAP.


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