Illinois Gov. JB Pritzker on Friday halted new state tax incentive agreements for data centers after lawmakers failed to take similar action during the state’s spring legislative session. The move means the state won’t help any new data centers that seek to come to Illinois and receive state support.
Pritzker’s action won’t affect existing agreements entered before July 1. And companies can separately try to seek local support.
The move puts Pritzker in the middle of a growing fight over one of Illinois’ burgeoning economic development sectors and sets up a clash between organized labor and environmental advocates, both key Democratic allies.
“Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families and local communities as the data center industry rapidly expands,” Pritzker said in a statement issued early Friday morning announcing the action.
Climate Jobs Illinois, a coalition of labor unions, called Pritzker’s decision to pause tax credits “shortsighted.” In a statement, the group alleged Pritzker’s pause won’t lower utility bills or advance clean energy goals but will allow other states to take advantage of tech investments and jobs.
Pritzker said the Illinois Department of Commerce and Economic Opportunity will stop processing new agreements under the state’s Data Center Investment Program while lawmakers, utilities, labor unions, environmental groups and industry representatives negotiate a broader framework ahead of the fall veto session.
For months, Illinois lawmakers have weighed massive economic investment tied to artificial intelligence and cloud computing against concerns about electricity demand, water consumption and rising utility costs.
Early in the legislative session, Pritzker had pushed lawmakers to put a pause on incentives, but legislators failed to adopt it in their final legislative package approved Monday.
Labor unions had pressured lawmakers not to pause incentives, and Democrats who rely on labor support fell in line.
Pritzker’s proposal calls for data centers to pay a larger share of the costs they impose on the electric grid, operate under stricter energy and water efficiency standards, disclose more information about their resource use and help finance new clean-energy generation. The governor is also pushing for community benefits agreements and more robust water permitting requirements.
Environmental groups have spent months urging lawmakers to strengthen oversight of the industry, warning that unchecked growth could strain the grid and increase costs for consumers. But some of the loudest opposition to slowing down development has come from labor unions, which see data centers as a major source of construction jobs and apprenticeship opportunities.
The divide became increasingly apparent during Illinois’ spring legislative session and helped doom efforts to pause incentives before lawmakers adjourned Monday.
Among the most vocal supporters of continued expansion has been the International Union of Operating Engineers Local 150: Executive Director Marc Poulos noted, simply, “Like any other industry, we want to build all these things.”
The battle in Illinois mirrors fights across the country as states scramble to respond to the rapid growth of data centers fueled by AI investment. Lawmakers introduced hundreds of bills this year seeking to regulate the industry, but many have run into resistance from labor groups concerned about losing construction work.
Pritzker’s move doesn’t settle the issue. His action extends the fight into the fall, setting the stage for a high-stakes veto session showdown when lawmakers return to Springfield on Nov. 17 — just two weeks after the general election.
