$7 Billion in Annual Tax Breaks Will Continue Without Review
New Tax Break Rushed Through, Worth Up to $100 Million Per Biennium

The Conference Committee working on Ohio’s biennial state budget stripped language
included in the Senate’s version from the bill that would have created a new committee to review all tax exemptions, credits and deductions. These tax expenditures annually amount to more than $7 billion a year, according to the Ohio Department of Taxation. …

Full Report

Educating our children is among the most important ways that we improve people’s lives,
prepare tomorrow’s workforce, and make our state appealing to employers. Rather than investing in education to build a stronger Ohio, however, the legislature has put the state’s future at risk by reducing funding for public education by more than $2 billion compared to the current biennium.

Budget Brief

The budget bill under negotiation in the conference committee of the Ohio legislature will 
impose devastating cuts on schools, local governments and health and human services.   
These cuts will hurt our economy and result in fewer jobs in the public and private sectors. 
Yet elected leaders who tout the virtue of spending cuts are spending on the other side of 
the ledger: in the tax code. …

Full Report

Patrick Bresette of the national think tank Demos gave a talk entitled “Trust in Government: Whose Problem is It?” on June 22 at the City Club.  Bresette addressed the nature of civic trust, the damaging consequences of our cynical political culture, and the responsibility we all share to restore government to its proper and appreciated role. 

by Zach Schiller

Ohio used to be known for making and building things. Now state government seems to be more interested in selling them.

The state House and Senate have passed versions of the budget that contemplate massive privatization of public assets. They could range from the Ohio Turnpike and Ohio Lottery to public schools and college dormitories. We need to ask some questions:

Are we giving away state and local assets, which taxpayers have spent a lot of money to build, for less than they are worth?

The Senate budget would require school districts to make unused buildings available for $1 to charter-school buyers that rank in the top half of academic performers. The measure does not require the charter school to have enough money to maintain the building, which the public system still would own. This looks like an asset giveaway.

Similarly, the proposed 25-year lease of the state’s liquor distribution business to JobsOhio, the new nonprofit group that will run state government’s economic development efforts, appears underpriced.

The $1.2 billion to be paid for the business would provide $500 million to balance the upcoming two-year budget. But after that, the state no longer would collect more than $100 million a year from the business that has been going to support public services, creating another budget hole.

Will privatizing actually cost less?

The proposed sale of five state prisons is based on supposed savings that would be achieved by private operation. But the state has not shown it has a reliable way to compute such savings from two existing prisons run by a private company.

A recent study for Policy Matters Ohio finds the state’s calculations to be not only riddled with errors, oversights, and omissions of significant data, but also potentially tainted by controversial accounting assumptions that many experts consider deeply flawed.

The state Department of Rehabilitation and Correction has released a new set of numbers that also, not surprisingly, tout dramatic savings. But these new calculations raise as many questions as they answer.

Will privatization limit our ability to make decisions and deliver good services?

A turnpike lease could last as much as 75 years, far longer than the existing interstate highway system, and take out of public control a key piece of transportation infrastructure. If rising turnpike tolls cause drivers to use other roads instead, maintenance costs for these roads will increase.

The Senate budget says the turnpike contract may include certain terms approved by the state budget director, including financial and other data reporting requirements. “May” is not the same as “shall.”

Too often, privatization deals include clauses that require taxpayers to compensate the buyer if steps are taken that might reduce the private owner’s return. For instance, Virginia must pay the private contractor for one of its highways if carpooling grows beyond a certain amount.

Chicago can’t reduce its number of parking meters without compensating the company that is leasing them for 75 years. Such clauses restrict government’s ability to make decisions about how to provide the best public services.

Who will benefit from these deals, and will that adversely affect making of good policy?

The provision in the Senate budget for lottery privatization was submitted by a gaming company lobbyist, and was nearly identical to legislation the company drafted. Private-prison owners want more prisoners, while the public wants to keep people out of prison as long as public safety is preserved.

The House and Senate wisely rejected a budget proposal by Gov. John Kasich that would have given his administration the authority to contract out any state service for as long as 75 years. Under some privatization proposals, the General Assembly directly would authorize a sale or lease. In other cases, the shift to private operation would require the legislature’s review or other action.

But nearly all of these prospective deals raise the question: Will Ohio taxpayers be able to find out how well services are being delivered, and to keep tabs on the private monopolies that will provide these services?

Ohio is rushing to privatize without good answers to such important questions.

Zach Schiller is research director of Policy Matters Ohio, a not-for-profit research organization in Cleveland that examines the effect of economic issues on working families.

Why the rush to sell off Ohio’s assets?

Emerging from the Ohio Senate and now before conference committee, the 
proposed budget for the next two years imposes harsh cuts. The 2005 tax slashing 
removed more than $4 billion in state revenues over the course of this budget.  To 
preserve these tax cuts, which largely went to corporations and the wealthiest 
Ohioans, the governor and legislature have slashed services, seized revenue from 
local government, and sold off public assets for one‐time gains. These cuts will result 
in job loss in both the public and private sector and will weaken Ohio’s ability to 
take on future economic challenges. …

Full Report

Ohio tax breaks may be reviewed, but stronger action is needed

The Ohio Senate has taken a long-needed step in approving the creation of a committee to review state tax breaks on a regular basis and examine new tax-break proposals before bills are passed containing them. The conference committee on the budget should approve this measure as a basic element of good government. Additional action is also needed. …

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On June 13, Wendy Patton gave this statement on the Ohio Works Progress Administration at a press conference with Representatives Mike Foley and Nicki Antonio.

As joblessness lingers in the wake of the Recession, it is time for a strategy that rebuilds
Ohio’s and America’s economy from the bottom up.

The economic policies aimed at employment for the past 30 years have typically
positioned job creation as a secondary or tertiary benefit that trickles down from a primary mission of boosting wealth. That has not worked here.

Full Presentation

Dayton Daily News

For weeks now, the news out of Columbus has been about the budget — how big the cuts are going to be, who is going to be hit.

With a June 30 deadline to pass the next two-year spending plan almost here, and the House and Senate both having taken their turn at changing the governor’s proposal, the issue is heading to a small committee made up of House and Senate members. That’s where the real decisions will be made.

Though tax revenues have picked up, the hacking still will be severe, especially for schools, local governments and social services.

One idea that could mitigate the situation at least down the road is a requirement to take a look at all the state’s tax breaks. That good suggestion is in the Senate plan, but it needs more force.

The tax department has identified 128 “tax expenditures” — credits, deductions, exemptions or other breaks — representing $7 billion in value. By law, these expenditures have to be enumerated every two years for lawmakers, but there’s no requirement that the legislators then have to vote to continue them or even debate their merits.

Once a break is on the books, it’s likely to be there forever.

The breaks are given to businesses and individuals alike. They include, for example, the individual deductions residents get on their state income tax form and a sales tax exemption for prescription drugs.

Meanwhile, manufacturers don’t have to pay sales tax on machinery, equipment, supplies and fuel.

Also keep in mind that this tally doesn’t include the money the state kicks in to reduce the hit homeowners would otherwise take in property taxes. That subsidy program costs almost a whopping $1.7 billion last year.

No one is proposing to solve the state’s financial problems by eliminating all tax breaks. Some of them foster good things. Giving businesses a tax break for buying new equipment encourages companies to invest — and create jobs. Helping reduce the sting of property taxes — which are hard on people on fixed incomes — is good for schools.

But should manufacturers never have to pay taxes on equipment?

Should the state subsidize property tax payments for people who draw big salaries and own expensive homes?

The push to review the state’s tax breaks is coming from an unlikely trio — the conservative Buckeye Institute, the liberal Center for Community Solutions and the liberal Greater Ohio Policy Center.

They don’t agree on what should happen to the money that’s “lost” to tax breaks; but they do each say that tax breaks shouldn’t be guaranteed.

Policy Matters Ohio, another liberal research organization which was among the first to push this issue, and the state chamber of commerce also say a review is needed.

Gov. John Kasich hasn’t supported the idea, worried that eliminating any breaks would be portrayed as raising taxes.

“What one person describes as closing a tax loophole another person calls raising taxes,” his spokesman told one newspaper. “While in Congress, Gov. Kasich was well-known for taking on inappropriate corporate welfare, and that commitment continues. I think you’d be hard-pressed to find too many Ohioans right now who think their taxes are too low, however.”

Here’s the thing, though. Getting Ohio through this financial crisis has to be a shared burden. Just cutting spending — without asking if the state is giving away money it shouldn’t — is not smart.

What’s so awful about having sunsets for tax breaks?

What’s wrong with having targets for reducing the breaks, which is another way of evaluating which breaks result in the most good?

Making sure that Ohio is collecting what it has coming isn’t selling out. It’s showing fairness to the people who aren’t getting discounts on their tax bills.

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