Is Ted in the Red? OBM Report Says Buckeyes Should Brace for Bumpy Ride
ONB COLUMBUS: In a published report today citing growing disparities between state revenues and expenditures, Ohio Governor Ted Strickland, the new captain of the ship of state that has drifted off course over 16 years of Republican rule and can’t seem to fix on a solid compass heading leading to smoother seas and brighter skies, has ordered his office of budget and management to slow the engines and stand ready to man the bilge pumps if economic waters roil more than they are now.
JOY TO OHIO? HOLIDAY REPORT A LUMP OF COAL IN STATE STOCKING
Tacking away from the tried and true accusation Republicans have consistently skewered Democrats with over the years, namely, they raise taxes, we cut them, Strickland, a Democrat, disarmed that venerable ballistic missile in early December when he said that, even if the economy worsens, he won't propose raising taxes.
"In my judgment, if the economy falters, the last thing we should consider would be a tax increase. I think the economy is fragile and a tax increase would be detrimental at a time of economic uncertainty." [Gov. Strickland, Dayton Daily News]
In a monthly report from his budget director, Strickland, a Democrat, learned from his Council of Economic Advisers that the anemic 1.6 percent growth in GDP will pose the "greatest economic challenge for Ohio since early in the recovery from the last recession." Citing higher energy prices, tighter credit conditions and a recent softening in labor markets, Buckeyes should brace for lowered growth over the next seven months.
Officials from Ohio’s department of taxation, commenting on the balance between revenue collections – down by about $117.2 million from projections – and expenditures – over estimates by $188.3 million – said that while one month doesn’t make a trend, the November performance figures were cause for concern. Previous month’s reports showed budget income and expenditure projections were on target and holding steady.
"It certainly made us suck in our breath when we looked at the performance at the end of the month.
I think we're beginning to see a time when we have got to be extraordinarily careful to ensure that we have the resources we need within the state to meet the needs of Ohioans and to ensure that we are meeting the promises of the Strickland administration. [J. Pari Sabety, director of the Office of Budget and Management, Columbus Dispatch]
A BUMPY RIDE FOR BUCKEYES EXPECTED
With Ohio’s economy lagging other states and the nation, the fact that it is one of only three states that still has fewer jobs today than it did nearly seven years ago when the last recession was declared over is indeed ominous. The monthly report anticipates consumers will rein in purchases in the coming months, which translates into less sales tax revenue. It asks the rhetorical question of when or whether the "pronounced contraction in residential building activity will undercut growth in other areas of the economy."
The answer to that question, at least for Tiffin, Ohio, home to an American Standard production plant, is that a world leader in the production of vitreous china products like sinks and commodes for home use announced it is will shutter its plant there within the next two months. The decision that will eliminate 165 hourly production jobs and 35 salary jobs is the result of external factors, including the collapse of the new home construction market, excess housing inventory, the decline in consumer spending for home remodeling, negative sales trends at major customers and problems in the financial markets, according to published reports.
Continuing Ohio’s hard-luck trend of loosing jobs, budget officials employment in the state decreased by 6,800 jobs in October. Adding more grim news, it said September job-loss changes were revised downward from -2,400 to -5,200, which contributed to the 13,300 job lost year-to-date.
OHIO ECONOMIC PERFORMANCE HIGHLIGHTS
• In Ohio, jobless claims for the past two months have been higher than the same months in 2006.
• Consumer confidence declined by 27% since the July peak for the Conference Board index and by 19% for the Michigan index.
• Manufacturing production fell 0.4% to 2.1% above the year earlier level. Outside of motor vehicles, manufacturing production decreased 0.3%.
• The PMI index remained just on the positive side of neutral during the month, following four months of declines.
• Midwest housing starts fell 5.0% in October, largely due to a sharp decline in multi-family starts.
• Ohio home prices decreased 0.8% in the third quarter after a 0.1% decrease in the second quarter
MISERY LOVES COMPANY
But Ohio is not alone in worrying about how to shore up its finances in the face of a growing national housing slump that has hit it hard, a rising tide of personal bankruptcies, the continued loss of jobs – 11,500 between October 2006 and this October – the looming Grinch in the credit crunch and higher costs for food and fuel that will further batter its residents going forward.
In a published report by Stateline.org about a "glum assessment" on state finances from the National Conference of State Legislatures, Ohio’s problems, troubling as they may be, have also infected about two dozen other states, 18 of which say they are “concerned” about their revenue outlook.
Ohio officials pointed to decreases in personal and corporate franchise taxes to explain why Strickland is tightening his budget belt by postponing making good on a campaign promise to increase Medicaid funding to again cover dental services for about 700,000 Ohioans and upping reimbursement costs to hospitals and other health providers.
For Ohio and other states, funding their share of Medicaid, the federal-state health insurance program for the poor and disabled, is significant. In 2007, that amounts to about 22 percent, followed by K-12 education at 21 percent, higher education at 10.4 percent, transportation at 8.1 percent, corrections at 3.4 percent, public assistance at 1.8 percent and all other expenditures at 33.4 percent.
Other states are also skittish about their financial picture and the budget shortfalls that could come sooner than later. The housing slump and slowing sales tax collections are being offset, in part, by some states that are raising cigarette and tobacco taxes. But the era of cutting taxes may be over. States last year cut taxes and fees by $2.1 billion – the first time tax cuts outweighed increases nationwide since the economic boom of the late 1990s through 2001, according to a Fiscal Survey of States, as reported by Stateline.org.
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: firstname.lastname@example.org