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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2011 > May > 24
Tuesday, May 24, 2011
Editorial: Revenue growth is especially meaningful stat
The news that tax revenues are up for local and state governments provides a particularly clear measure of the general direction of things. The unemployment rate has some meaning when looked at over the long term. But it is a hinky kind of stat, looking good sometimes because people are getting out of the job market in frustration, or bad because they are entering it because they think the economy’s up.
The measurement that competes hardest for attention with the unemployment rate is job growth. Again, the long-term trend offers real insight. But the stat doesn’t have information about pay, among other flaws.
But when income tax revenues go up — when nobody is raising taxes — that’s an indication that more money is being made as the result of some combination of new jobs and more hours. It’s a hard stat to spin, at least if the trend is lasting and widespread.
So the news is important that six Miami Valley communities saw double-digit increases in their tax revenue in the first third of this year, compared to the same months last year. (The six are Troy, Huber Heights, Tipp City, Vandalia, Miamisburg and Xenia.)
Eleven of the 15 biggest municipalities had a better 2010 than 2009, and 13 have had surges in 2011, generally much stronger than last year’s.
Similar improvements are apparent at the state level. In April, Gov. John Kasich got a report that state tax receipts had been better than expected for eight consecutive months. In March alone, the figure was 13 percent higher than expected.
Meanwhile, of course, when an economy improves, that typically reduces some government expenses, such as for Medicaid.
Nothing that happens to the economy is going to eliminate the need for serious state budget cuts; but just how serious is open to question. As the Senate takes up a budget passed by the House, it needs to get up-to-date on the revenue figures and see if some of the cuts being planned can be themselves cut.
After all, the Kasich administration has generally defended its cuts as necessary, not as options to be undertaken just on general conservative principle.
The upturn in tax revenues suggests that economic development policy is not what drives the state economy. The new Kasich approach isn’t in effect.
A better national economy is doing a lot. And Ohio is, by some measures, running ahead of the national economy. Its unemployment rate has dipped below the national average after years in which the state has been one of the hardest hit in the nation.
Ohio’s stats appear to reflect the fact that the state’s single biggest problem (and certainly the Dayton area’s) — the decline of the American auto industry — is in the past. The Dayton-area plant of auto parts maker Tenneco is actually growing.
And with help from some mess-ups at Toyota and an earthquake, General Motors has reclaimed its spot as the seller of the most cars in the world.
The recovery is spotty, perhaps fragile and certainly modest compared to the harm done by the recession. But it’s clearly affecting a lot of people, and, finally, a lot of governments.
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Guest column: Plans to peddle state’s assets seriously flawed
This commentary was written by Zach Schiller, research director for Policy Matters Ohio, a liberal-leaning think tank.
Amid slashed school funding, Medicaid changes, drilling in state parks, reductions to libraries and local governments, and cutbacks ranging from child care subsidies to adult basic literacy, it’s easy to overlook one of the most far-reaching proposals in the budget approved by the Ohio House this month.
Language in the budget bill would authorize the privatization of six state prisons and Ohio’s liquor distribution business. It would also give the administration authority to lease the Ohio Turnpike for up to 75 years.
Imagine the world in 1936 — before the interstate highway system — and one can see how hard it would be to predict all of the things that might affect such a contract between now and 2086.
Ohio’s experience regarding private prisons should make the General Assembly think twice before ratifying such proposals.
Since Ohio first contracted with private companies to operate two prisons in 2000, state law has required that any private operator produce savings of at least 5 percent compared to what it would cost the state to run the same facility.
According to previous calculations done by the state, the savings have exceeded that threshold by as much as a factor of three.
However, a recent examination of those calculations performed for Policy Matters Ohio (available at policymattersohio.org) shows them not only to be riddled with errors, oversights and omissions of significant data, but also potentially tainted by controversial accounting assumptions that many experts consider deeply flawed.
Once past errors in the state calculations are corrected and revisions made, the private-prison savings computed by the state over the years appear to shrink dramatically.
During the 2006-07 biennium, the state might have even paid more to operate the prisons than if it had operated them itself; more recently, savings appear to have been less than the mandated 5 percent.
In past calculations, the Department of Rehabilitation and Correction has used bloated estimates for what the staffing would be at a state institution, and ignored costs such as inmate pay and reimbursements for inmate hospitalizations.
Though the department’s office of prisons oversees operations whether they are public or private, ODRC has counted all of those costs when computing what a public facility would cost, but not when counting costs for Lake Erie Correctional Institution, the privately operated prison in Conneaut that is the easiest to compare to public facilities.
The ODRC has said it will produce a new methodology for comparing private and public prison costs. However, no such new methodology had been completed as of March 14, the day before Gov. John Kasich announced his privatization plan.
This raises serious questions about the proposal to sell five prisons based on the same 5-percent savings. Leaving aside other issues — and they are many — it means that the administration didn’t know whether the state had saved the money it had claimed.
The proposed privatization of the liquor-distribution operation also raises questions. This fiscal year, that operation is expected to generate $136 million for the state General Revenue Fund, above and beyond the amount it contributes in taxes, paying off economic-development bonds, and supporting the Department of Public Safety’s Liquor Enforcement Unit, an alcoholism-treatment program and other programs.
While the transfer agreement may provide for annuity payments to the state beginning in FY 2014, the deal provides a one-time gain — said to be $500 million — but leaves the state short on a long-term replacement for these funds. This will help balance next year’s budget, but leaves a hole in future budgets.
Meanwhile, if the administration should decide to sell the turnpike, virtually no standards or accountability are mandated in the budget bill, apart from its approval by the Controlling Board.
The contractor would be exempt from taxes. And there is no required provision for continued availability of information about the contractor’s operation.
In light of some of the privatization fiascoes that have occurred in other places, the lack of accountability is stunning.
For example, after Chicago in 2009 leased its parking meters for 75 years, rates soared and many meters malfunctioned or were mislabeled. A report by the city’s inspector general called it “a dubious financial deal” and concluded that the sale lacked meaningful public review.
These proposals lack fundamental public safeguards. The General Assembly should scrap them.
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