The suggestion by the owner of two major futures exchanges in Chicago that it could move jobs out of Illinois because of the state's business tax casts another spotlight on the unpopular increase Democratic Gov. Pat Quinn said was necessary to help rescue the state's finances.
CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, said this week it is studying a possible relocation. The announcement comes just a couple months after manufacturing giant Caterpillar Inc. in central Illinois said it had been courted by other states. Caterpillar has since said it is staying put.
CME Group Chairman Terrence Duffy told the Chicago Sun-Times that they have to do what's best for shareholders.
"If that means opportunities are greater elsewhere, then we're going to look at those opportunities," Duffy told the newspaper after the company's annual shareholder meeting Wednesday.
Duffy did not immediately return a call Thursday from The Associated Press. Along with the two Chicago exchanges, CME owns the New York Mercantile Exchange. Duffy told the Sun-Times that the CME could retain some operations in Illinois if it relocated but didn't provide specifics.
Dealing with a massive budget deficit, Illinois raised its corporate tax rate in January from 4.8 percent to 7 percent and the personal income tax rate from 3 percent to 5 percent. That enticed other states, including New Jersey, Indiana and Wisconsin, to try to poach Illinois businesses.
Quinn on Thursday promised an "ongoing conversation" with Duffy, whom he described as a friend. The Democratic governor has offered other businesses incentives to stay in Illinois, and that's a discussion he said he's willing to have with CME.
"I really believe that the best place for these markets is right here in Illinois, in Chicago," Quinn said.
Last year, Illinois agreed to give $272.7 million in tax breaks and other incentives to 67 companies that were courted by other states to move their jobs elsewhere, according to state records. This year the promised incentives, including an unprecedented $100 million package for Motorola Mobility, are likely to surpass last year's total.
Quinn didn't elaborate on any possible incentives for the CME. Still, the governor defended the business tax increase, saying the state needed money to fund schools and other priorities.
"I don't think anybody likes paying taxes, but that's the price of having a democracy," he said.
Chicago Mayor Rahm Emanuel said he had talked to Duffy and was "confident" the exchanges would stay in Chicago. He did not elaborate.
Analysts said Thursday it was unlikely that CME would move all of its operations from Illinois.
"I would say it would be difficult in the near term for them to move significant parts of their operations, said Ed Ditmire, an analyst at Macquarie Research in New York. But, he said, in the long term they could consider relocating when they are looking at set up new projects or investments.
Larry Tabb, founder and CEO of the Tabb Group, a financial markets research firm in New York, said all companies these days need to look at their expenses and taxes are a big one. But moving would be "pretty challenging" for CME because they have an expansive infrastructure in Chicago.
"I can't imagine they're going to move the whole business but certainly parts of their operation could certainly move to a lower tax state," he said. "Technology has made business way more portable than they have ever been before."
Illinois Chamber of Commerce chief Doug Whitley said it's not good enough for Illinois government to try to craft incentive packages for businesses after the state raised their taxes.
"Politicians need to pay attention to what employers are thinking. There are economic consequences to political decisions that they sometimes ignore," Whitley said.