Our 4-year-old daughter is a clever little lady who recently determined her beautiful hair was too long. So she snuck downstairs at 5 a.m., raided the art supplies for scissors and went to work. I was more amused by the new hairstyle than my wife.
Illinois also made the proverbial 5 a.m. scissors run. Responding to rising electricity bills, Gov. JB Pritzker paused new data center tax incentives effective July 1. During a generational infrastructure boom, when other states are courting the same projects, this pause risks becoming a forfeiture.
The incentive provided a sales tax exemption for data centers that invested at least $250 million, created 20 jobs and met clean-energy commitments. In Illinois’ latest “Data Center Investment Program” report, the state estimated $983 million in tax benefits for 27 approved data center applications. The same report said the industry generated $1.85 billion in state and local tax revenue in 2023 alone. We appear to be getting the better end of that bargain.
If unsatisfied, Illinois can demand more from the program. But freezing it outright creates investment uncertainty.
The timing couldn’t be worse. JPMorgan estimates artificial intelligence capital expenditure will reach $5.5 trillion through 2030, with the data center buildout rising from $280 billion in 2026 to $590 billion annually by 2028. Companies are choosing sites and signing deals now.
Technology firms have choices beyond Illinois. According to the National Conference of State Legislatures, 38 states offer data center incentives. Recent announcements are enormous: $40 billion from Google in Texas, $20 billion from Amazon in Pennsylvania, and over $25 billion from Amazon and Meta in Indiana. While other states are competing, even as they refine rules around power and cost allocation, Illinois is stepping back.
That is unfortunate. Data centers are a strategic fit for Illinois. We have the power resources and skilled labor to attract investment — not to mention the nation’s largest nuclear fleet. This is a state that wants to promote itself as a home for hard tech — making much fanfare, for instance, about the South Side’s Illinois Quantum and Microelectronics Park. Fantastic! Except that hard tech needs hard infrastructure.
Considering Illinois’ anemic growth record, leaning out from our competitive strengths is puzzling. Since Pritzker took office in 2019, Illinois’ real gross domestic product has grown just 8.2% through 2025, ranking 46th among states. Meanwhile, the U.S. grew 17.7%. That difference translates to missing jobs, investment and tax revenue. In this light, pausing a policy that leverages our existing assets seems particularly self-defeating.
To be sure, the governor’s concerns are understandable. Data centers consume enormous amounts of electricity. PJM Interconnection, the grid operator for ComEd’s northern Illinois service area, now projects summer peak demand to grow 3.9% annually over the next decade, more than double last year’s 1.6% forecast. Revisions to data center load growth drove PJM’s adjustment.
Nevertheless, Illinois did not get blindsided. We courted this industry through a conditional incentive program enacted in 2019. At the same time, we tightened our own power supply. The 2021 Climate and Equitable Jobs Act, targeting net-zero emissions by 2045, puts Illinois on track to retire roughly 11 gigawatts of conventional power generation by 2030 — about a quarter of total capacity — while replacing much of it with variable wind and solar.
The state is also pushing electrification and aiming for 1 million electric vehicles by 2030, up from around 174,000 today. Where is that power supposed to come from? Incentivizing new demand while curtailing supply was always a recipe for higher electricity prices.
Notably, higher bills are not unique to Illinois. From 2023, when AI took off, to this March, Illinois residential electricity prices rose 20.1%, my analysis of state electricity prices found. High, but reasonable relative to the 16% national average. And on a par with neighboring Indiana’s 19.5% increase.
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The newer data center model is not simply to plug in and leave ratepayers with the bill. In Illinois, Meta signed a 20-year agreement to buy power from the Clinton nuclear plant, helping keep it running. In Missouri, Amazon agreed to pay the full cost of powering its new campus. Google pledged to fund its own power in its $1.5 billion Alabama expansion. Big tech companies increasingly know they have to bring their own power.
That is the bargain Illinois should want. If data centers need power or transmission, make them finance it. For water use, require public reporting. As an aside, most water fears reflect outdated cooling assumptions, as modern projects recycle water in closed-loop systems. In any event, better to revise the program around those terms instead of freezing it.
Data center investment represents a historic economic opportunity Illinois should be pressing to capture. Beyond jobs, it promises to bring new power infrastructure that could, over time, help stabilize the grid and ease ratepayer bills. Not to mention tax revenue.
In some locations, the fiscal upside is already sizable. Meta’s DeKalb site had a $31.1 million 2025 property tax bill, mostly benefiting the local school district. In Loudoun County, Virginia, data centers occupy 4% of commercial parcels but generate 38% of general fund revenue, helping cut property tax rates by 30% in a decade.
Illinois needs growth, and given its resources and workforce, data centers are a natural fit. Investment of this scale doesn’t come around often — nor does it wait. Pausing now risks cutting Illinois out of an investment cycle it’s built to win.
My daughter’s hair will grow back. A generational investment opportunity may not.
Stuart Loren is a managing director at Fort Sheridan Advisors, where he manages client investment portfolios and is responsible for market and economic analysis. Formerly, Loren was a corporate lawyer in Boston. He lives in Chicago with his family.
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