Fears of Recession Prompt Ohio Governor to Offer Worker Buyouts

OhioNews Bureau

ONB COLUMBUS: Wind and snow are cooling off Ohio, as is the specter of an oncoming recession, that could further chill the state’s already ailing economy.

With light snow flakes falling as if they were blown off the canvass of a Norman Rockwell painting, the message Ohio Governor Ted Strickland offered today as a strategy to bolster the budget from the hungry jaws of economic recession probably didn’t warm the cockles of the hearts of state employees, many of whom could be offered early retirement buyouts to get them off the payroll.

In a report by The Akron Beacon Journal (ABJ), Strickland said he’s asked agencies to look into offering employees early retirement incentives to save money in light of a potential recession and continued state budget problems.

Strickland informed the state agencies he has control over – the 23 agencies included in the Governor’s Cabinet – on January 7th that they need to “begin looking at ways to trim their work force by offering to purchase additional years of service for long-term classified, primarily union, employees, allowing them to retire early.”

The agencies would need to demonstrate savings before extending the voluntary buyouts, although in some cases the offers would be mandatory because of state law and union agreements, the ABJ reported.

Strickland’s director of budget and management, J. Pari Sabety, said “it appears the administration is contemplating closing some state institutions or laying off relatively large numbers in state departments.”

Even though no timeline has been made public and no dollar amount of savings has been reached, the decision to make a decision is all that’s been done. Strickland’s chief communication’s bodyguard said the governor he is ready to “make the tough choice that may have to be made over time” when the times comes.

That time may not be far off. In fact, some say it has already arrived for Ohio and other Midwest states like Michigan, the scene of today’s primary contest there. States other than Ohio are also bracing for slowing revenue and looking to tighten their budgets.

Other experts say its only a matter of time for an official recession to be declared, but that in the meantime, reduced spending, home foreclosures, lapsed credit card payments, a sinking dollar, expanding trade deficits and a general consumers’ malaise point to a dour outlook going forward for Ohio’s and the nation’s economy.

When Federal Reserve Chairman Ben Bernanke makes gloomy forecasts like this one that says “the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,” you know its going to be a bumpy ride going forward.

Under the proposal, state agencies would need to develop plans for mandatory and voluntary buyouts. OBM would review each agency's proposal, and notify the Public Employees Retirement System (PERS) of approved plans.
The OBM would receive reports starting six months after the early retirements begin that would outline details of a department's payroll before and after the downsizing.

A mandatory buyout would have to be offered if the state either closes an institution or, within a six-month period, lays off 50 employees or 10 percent of the personnel in any ''employing unit,'' which means a department, agency, state college, board, commission, bureau, council, office or administrative body.

Under the voluntary plan, an agency would need to document a timeline to meet projected savings and outline the savings either through eliminating a position or hiring someone new at a reduced salary to replace a retiree.

The voluntary plan calls for an agency to offer an early buyout to at least 5 percent of the eligible employees within the agency, and the agency would be restricted in purchasing early retirement credits.

Purchased credits, in which the state buys service time for an employee to increase his or her years on the job for purposes of calculating monthly benefits, would be limited to three years or no more than 20 percent of an employee's total state service.

The offer to take the buyout would have to be on the table for one year.

Mandatory early retirement incentives would not exceed two years of purchased service, and the offer would be open from the time of the announcement until the actual date of the layoff or closing. [ABJ]

Unclassified employees, the ones that are hired at the pleasure of an officeholder, can also be fired nearly at will. Ohio is a right to work state where employers generally have the upper hand on employees who are not associated with a union or bargaining unit.

Strickland has made it clear that unclassified employees -- directors, assistant directors, deputy directors and any other administration appointees – won’t walk out the door with a basket of cash. Such payments, according to Sabety would be “an unnecessary and inappropriate use” of taxpayer dollars.

The ABJ contacted a spokesman for the Ohio Civil Service Employees Association, which represents about 36,000 state and local government employees. A union spokesman said Strickland’s dream is “easier said than done” and that the problem with his members is they don’t have enough of them.

ECONOMIC ICEBERGS AHEAD

Even though Ohio is landlocked, with only Lake Erie on its north shore, the prospect of economic icebergs lying ahead are good.

”Sabety warns Strickland that Ohio's employment is flat, personal income can support only moderate growth in consumer spending and the leading national economic indicators are more negative now than at any time since the 2001 recession.

In November, Ohio employment increased by 7,800 jobs after declines the previous two months. But the total was still down 8,300 from November 2006.

Figures for the Midwest are disturbing too, where manufacturing production increased 0.5 percent in November while new orders fell to the lowest level since the 2001 recession. Housing starts in the Midwest fell 6.8 percent in November, down 20.4 percent from a year earlier.

Across the country, state tax receipts hit a four-year low and state income tax receipts dropped to a three-year low. There also is a downturn in economic activity in the wake of a surge in oil prices and a tightening of lending terms.” [ABJ]

Policy Matters Ohio, a non-partisan economic research group, issued its “Job Watch” report for December, which had a subtitle of “Ohio Employment Down 50,000 since Recession.”

”Six years after the official end of the last recession, the state hasn’t recovered the number of jobs it had when the downturn ended. There are 50,000 fewer jobs in Ohio than in November 2001, according to seasonally adjusted payroll numbers for nonfarm wage and salary jobs released Dec. 21 by the Ohio Department of Job and Family Services (ODJFS).” [PMO, Dec. Job Watch]

The PMO report also made mincemeat out of the mantra that Ohio would see a surge in jobs if only it reduced taxes on individuals and business.

”More than two years after an overhaul of state taxes was signed into law with the intent of creating jobs, employment in Ohio has grown by just 12,200 jobs, or 0.2 percent. During the same period, the nation added more than 4.8 million jobs, for a growth rate of 3.6 percent. U.S. manufacturing employment has fallen since June 2005 by 264,000 jobs. However, Ohio has lost more than 34,000 manufacturing jobs in the same period, more than two times the relative loss experienced by the nation as a whole.” [PMO, Dec. Job Watch]

John Michael Spinelli is a former Ohio Statehouse government and political reporter and business columnist. He now serves as the OhioNews Bureau Chief for ePluribus Media Journal. Find ONB archives here.

If readers have a news tip or story idea about Ohio politics or government, contact the OhioNews Bureau at: ohionews@epluribusmedia.org

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