The Associated Press December 14, 2011, 5:53PM ET

Report: Ill. incentives come with few strings

Illinois and many other states get low marks in a report released Wednesday on ensuring that the tax breaks and other perks handed out to businesses generate good jobs.

The report from Good Jobs First, a Washington-based nonprofit group that researches economic development subsidies, gave Illinois a D for its efforts. It rated many Midwestern states with which Illinois competes regularly to attract and retain employers similarly low, putting Indiana, Michigan, Minnesota and Ohio at a D+.

It came just a day after Illinois lawmakers voted to give hundreds of millions of dollars in tax breaks to Sears Holdings Corp. and the financial companies CME Group Inc. and CBOE Holdings Inc. after they threatened to leave Illinois and take thousands of jobs with them.

Many states, the report authors wrote, say they have safeguards in place to guarantee a return on taxpayers' investment.

"When the fine print is examined, many program rules turn out to be deficient," the authors wrote. "Moreover, states are not consistent in how they apply such safeguards across their full lineup of programs."

The report criticized Illinois in particular for failing to require that companies that receive incentives intended to create jobs or keep them in the state provide employees with health benefits.

Marcelyn Love, a spokeswoman for the state Department of Commerce and Economic Opportunity, said the agency does consider wages and benefits as it weighs potential incentives for businesses. The department is the state's primary provider for tax breaks and other business subsidies.

"While there are no legal mandates requiring healthcare benefits or base salary as a qualifier for the state's economic development programs, our process does include weighing proposed wage scales and health care benefits when evaluating whether to make an offer," Love said in an emailed statement.

Good Jobs First used its work on earlier reports on corporate subsidies to help it analyze 238 incentives programs in the 50 states and the District of Columbia. Programs such as Illinois' Economic Development for a Growing Economy (EDGE) tax credits were graded on whether they require companies to meet job creation or other measurable performance standards; whether incentives include wage-level requirements; and whether companies receiving the incentives must provide health care coverage and other benefits for employees.

The report gave EDGE, Illinois' primary incentives program, solid marks for requiring that recipients create or maintain certain numbers of jobs. But the program's lack of any requirements on wages or benefits was criticized.

A January increase in Illinois' corporate and personal income tax rate this year intended to help deal with a multibillion-dollar government budget deficit led a number of other states -- Indiana and Ohio among them -- to target Illinois companies they thought might move.

Ohio worked to lure Sears out of Illinois when the company said it was considering leaving. Sears said Tuesday that it will stay in Illinois if Gov. Pat Quinn signs the tax-breaks legislation, as is expected.

Illinois' tax increase combined with the deficit also led Illinois many companies to complain about the state's business climate and push for changes. That continued Wednesday with the introduction of legislation by House Republican Leader Tom Cross to roll back the corporate tax increase.

"The simple truth about the state of Illinois is, our taxes are wrong, our litigation abuse is wrong, and we do nothing to encourage businesses to stay here," state Rep. Dwight Kay, a Republican from Glen Carbon, said at a news conference. "This is a proactive step to encourage every business, not just a select few, but every business, to stay here in Illinois."

Quinn said cutting corporate taxes without addressing the needs of individual taxpayers would be unfair.

"If you're only going to have a corporate situation, I think you're missing the people of Illinois," the governor said. "We've got to make sure everything is balanced for everyday people who are the heart and soul of our economy."

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Associated Press writers John O'Connor in Springfield, Ill., and Carla K. Johnson in Chicago contributed to this report.

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


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