By DIANE ROSS

The challenge of a changing economy

GOING into the recession, Gov. James R. Thompson said in his 1980 State of the State speech, "This isn't heaven — it's Illinois." But if this isn't heaven, it isn't Illinois either. Where have all the smokestacks gone? Building a stable economy on this barren terrain will be a lot harder — and take a lot longer — than anyone first thought, according to Thompson's view. Coming into recovery, Thompson painted a bleak picture February 8 when he delivered his 1984 State of the State address to the Illinois General Assembly.

"But the plain truth is that not enough of us are making it," the governor said. "The unemployed auto workers, and others, whose jobs have disappeared forever, have not made it. And the child who sits in an Illinois classroom without receiving an education relevant to tomorrow's jobs is not making it. That is the most important challenge we face as a state, and all of us must work together to ensure, as much as human beings can, that in Illinois those who want to work and learn, can."

For a few minutes this State of the State speech worked. Thompson had resurrected the victims of an already forgotten holocaust, parading the ghosts who haunt the survivors only as unemployment statistics. And he went on to produce a cold, clinical assessment of the situation: "Illinois lost more than 400,000 nonagricultural wage and salary jobs between the third quarters of 1979 and 1983. Some of those jobs we lost to other states and foreign competition. But many are gone, never to be seen again, either here or in any other state." That was a harsh eulogy for the smokestacks, but a realistic one. To date we've regained only 50,000 of those jobs, according to the legislature's economists.

Thompson went on to serve notice to business and labor that his policy on economic development hasn't changed: Illinois is going after the new jobs in the service sector — not the old ones in manufacturing. He told of a recent meeting with a worldwide company that wants incentives from state government to renovate its plant in Illinois. Renovation would salvage the plant, but not the payroll — 25 percent of the jobs would be eliminated in the process.

"Those are 300 manufacturing jobs we will never see again," the governor said. "Nobody stole them from us. They have disappeared — vanished with all the other jobs that are no longer relevant as our economy changes its basic shape. The only way to look at it is that if the company goes we lose 1,200 jobs, not 300. And if it stays, and we attract other companies to supply it and act with it, a loss becomes a gain. That is the challenge of an economy in transition. And we must meet it — that challenge." Apparently Thompson will get arguments on his service-sector policy, at least from the Illinois Manufacturers' Association, which insists many of those jobs aren't gone, just buried under the cost of providing worker's compensation and unemployment insurance.

But the governor's eloquence failed him just as he was about to spell out his strategy for building a new economy in Illinois.

Thompson had already recited his record on economic development, ticking off the tax breaks business has received to "make Illinois more competitive." House Speaker Michael J. Madigan laughed at that later, arguing Thompson has opposed many of the tax breaks as something the state couldn't afford.

And when Thompson went on to detail his agenda for economic development it sounded just as fuzzy as it always has. Even the best of Thompson's ideas this year were merely an extension of Madigan's ideas last year. Madigan had created the Illinois Development Finance Authority (IDFA) as an umbrella agency for delivering financial services to small business. Now Thompson wants the IDFA to build an "infrastructure bond bank" for local government, pooling revenue bonding power. For the Republicans, Thompson said he would support a new toll highway along Illinois Route 53 in the western Chicago suburbs, particularly those in DuPage County, home of House Minority Leader Lee A. Daniels and Senate Minority Leader James A. "Pate" Philip.

Overall, however, the governor's agenda for economic development merely injected another dose of bereaucratic programs into the "Illinois Plan" he unveiled last year. Thompson sees the Department of Commerce and Community Affairs, like Reagan's Small Business Administration, as a vast incubator for hatching healthy small businesses — an idea the National Federation of Independent Business finds less than exciting. You could almost hear Philip groaning at the thought of all the bills he would have to introduce when Thompson summed up by saying, "These are just some of the nearly 100 suggestions

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contained in the Department of Commerce and Community Affairs' five-year strategy for economic development." Economic development, however, has been a continuing strategy. But this year, education emerged as the governor's No. 1 priority for the legislature's spring session (partly to help build the economy). In the wake of the national debate on the excellence in education, Thompson made it perfectly clear that he'll use the same strategy on education that proved so successful with mass transit last year: no hike in the state subsidies without reform. "The two must go hand in hand. There can be no payment of the dollar for the promise of reform," he said, serving notice to the state's 1,011 elementary and secondary districts, 39 community college districts, 10 public universities and their turf-fighting teachers unions. Thompson left the details for March 7, when he promised to unveil a three-year master plan for education in conjunction with his fiscal 1985 budget for the state. Madigan, however, was already hard at work on a similar plan for the Democrat-controlled General Assembly. In January he'd announced plans to convene a statewide conference on education at the Statehouse in March.

As for the rest of Thompson's election-year agenda, it was singularly uninspired: focusing on crime, touching on coal, hardly mentioning the human services — except for warning the General Assembly that it must do something this year to control the cost of health care. The only part of the speech that produced any bipartisan applause came when Thompson said he would sell another $15 million in general obligation bonds in fiscal 1985 to finance more research on taking the sulfur out of Illinois coal. "With that commitment," Thompson had said, "Illinois would spend more in state dollars ... to remove the sulfur from coal than in the whole federal government. . . . [W]e could end at once the debate about acid rain . . . because we wouldn't have it any more."

Back at the beginning, Thompson had told the General Assembly, " 'Getting down to business' ought to be the motto of Illinois this year. ..." He might as well have yawned and said, "Getting back to business as usual." The only passion in this speech came when he recalled his January 25 decision not to call for an extension of the temporary increase in the state income tax: "But the sacrifice in increased income taxes made by our people can come to an end. We owe it to them to let the temporary income tax increase expire as planned on June 30. . . . We will keep faith with the people of Illinois. We will put their money back in their pockets. This temporary tax will be temporary."

Thompson, however, was careful not to rule out another tax hike in the future: "We have more to do to further ensure that we have a stable and well-balanced economy that can weather the storms of recession — for we have seen three of those recessions in less than a decade. . . . But we cannot be lulled into thinking that an economic recovery will . . . solve all our problems." Madigan said later that Thompson was only waiting until after the November elections to try to raise taxes again.

To increase revenue, Thompson spoke of a further crackdown on tax cheaters. He called for a new Stop Tax Evasion Program (STEP) to collect $35 million in back taxes in fiscal 1985, following similar efforts that he said yielded $56 million in fiscal 1983 and 1984. "With the enactment of those tough revenue laws," he said, "we will be in a position to consider, as some have suggested, whether a tax amnesty program would work in Illinois. But a tax amnesty program works only when even tougher alternatives than paying your taxes are already in place." Thompson also said he would reactivate his 1978 Governor's Cost Control Task Force, which he said has saved $400 million a year, to "scour the government for savings."

As usual, the governor devoted the first half of his speech to The Thompson Record. To Thompson, the recession and the temporary hike in taxes served to enshrine that record within a single year. All the achievements of his first six years in office tend to recede in comparison with those of his seventh: "And it may well be that when our income tax surcharge expires June 30, it will be the first temporary tax to be removed in all the Midwest." With the expiration, Thompson's fiscal theme has become "putting money back in the people's pocket." Up to now it has always been tax relief. Even in this speech he couldn't resist boasting of $1 billion in cumulative tax relief, including $300 million in fiscal 1985 due to the property tax deduction on the income tax and the elimination of the sales tax on food and medicine that were part of the tax package in fiscal 1984.

The state faced its worst problems in 1983, Thompson said, but government came up with its best solutions. Apart from the temporary hike in taxes, he was clearly proudest of mass transit, prisons and roads. "We met those problems head on," he said, calling the legislature's 1983 session "the most productive in my seven years in office."

In the final analysis, however, Thompson, who has seldom shown less enthusiasm in a major speech, failed to rouse the General Assembly audience on his basic theme of accepting the challenge of a changing economy. His view of the "state" of the state government appeared generally that of a holding pattern. The future? Perhaps that begins after the November election.

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