Ohioans are struggling through economic slumps and recoveries with less help than in the past, according to this report. The safety net that used to ensure basic needs were met is in tatters, and needs to be updated for today’s challenges. This study is based on surveys of 150 non-profit groups that serve more than 100,000 Ohio families, and of 2,000 northeast Ohioans who have needed help affording food, clothing, day care and other essentials during the recent recession. It also analyzes public policy decisions that have affected modest-income families. (more…)

Report finds that Ohioans struggle through slumps and recoveries with less relief than in the past

Ohioans are finding it harder to thrive economically and are slipping into poverty amid the destruction of vital services that were once a pathway to the middle class, according to a new study by Policy Matters Ohio. Poverty is high through slumps and recoveries, the study shows, and both work and the safety net do less to meet basic needs than they once did in Ohio. Wages have stagnated and benefits once common, like health insurance and pensions, are increasingly scarce.

“Too many working Ohioans cannot make ends meet,” said Amy Hanauer, report author and executive director of Policy Matters. “Many jobs no longer cover the essentials for a family, and fewer options are available for those who lose jobs and need short-term help.”

The study is based on surveys of 150 non-profit groups that serve more than 100,000 Ohio families, and of 2,000 northeast Ohioans who have needed help affording food, clothing, day care and other essentials during the recession. It also analyzes public policy decisions that have affected modest-income families. Key findings include:

• Caseloads increased by an average of 60 percent between 2008 and 2011, with providers of emergency food and shelter reporting the biggest jump. Many people seeking help were turned away because staffing and other resources were inadequate to meet demand.

•  To make ends meet, families skipped health care, rent payments or meals; sold vehicles; exhausted savings; borrowed money; and even left children unattended because child care was not available or affordable when they worked.

• Organizations said the public sector should provide more funding, make health care affordable, better fund safety net programs and expand eligibility for services, among other reforms;

• The vast majority of individuals surveyed, 92 percent, were employed, but 80 percent earned $30,000 or less and had difficulty affording essentials. Three in five could not get health care, through employers or Medicaid. More than one in five said they often had to skip meals.

Many try to cover the basics through work, but wages have been stagnant even as American productivity has increased dramatically and families have sent more adults into the workplace. Provision of health and retirement coverage through the workplace has declined precipitously over the past generation.

Because work does not help all families escape poverty, state and federal services were put in place to provide security and opportunity, allowing Ohioans to stay in the workforce and afford necessities as they try to move up to better-paying jobs.  But these services are under siege and leaving far too many behind:

• The Supplemental Nutritional Assistance Program (SNAP) helps very low-income households – the vast majority of them with children — put food on the table. Despite its modest cost – an average of $1,100 per family each year — and successful track record, Congress is considering proposals to slash SNAP, as well as a related program that assists infants and pregnant women at risk of malnutrition.

• Fewer children will be eligible for day care because of federal and state cuts. Childcare can be among a family’s biggest expenses, with center-based infant care consuming more than one-third of a median single-parent income in Ohio.

• Unemployment insurance kept more than 3 million Americans out of poverty in 2009 as they searched for work, allowing them to continue spending money locally on necessities and arresting the economy’s downward spiral. This program, too, has been attacked in Congress.

• Cash assistance helps some families, but many fewer than in the past. About three in four poor Ohio children lived in a family that got no cash assistance in 2008. General assistance, the program that once provided help to desperately poor adults with no children, no longer exists.

• Social Security lifts 859,000 Ohioans out of poverty and has turned old age from the time of life when poverty was most likely to the time of life when it is least likely.

Much assistance is provided through the tax code and is skewed toward the wealthy. The home mortgage deduction costs the U.S. treasury $103.7 billion a year and provides more assistance to those purchasing expensive homes. Deductions for retirement savings cost $108.2 billion annually and do more for high-income earners who can afford to save more.  The Earned Income Tax Credit, our main poverty relief program for working families, costs just $55.1 billion a year.

“Our survey found that Ohio families are struggling despite working and our review of policy found deep retrenchments in the social contract,” Hanauer said. “If we want our communities, economy and families to thrive, we will have to ensure that either work or policy does more to bring about opportunity and security.”

Randy Tucker

Southwest Ohio residents continue to reach for their credit cards and sign off on auto loans at a brisk clip, boosting borrowing twice as fast as most economists had predicted.

Total U.S. consumer credit grew by $21.36 billion in March, according to the latest figures from the Federal Reserve. That was the biggest month-to-month jump since 2001 led by a surge in auto loans, personal loans and student loans, which combined for about $16 billion of the increase.

Credit card debt shot up, too, climbing by $5.1 billion after a $2.3 billion decline in February, according to the Fed.

As consumers increasingly leverage credit, local economists and financial experts continue to debate whether the turnaround from a lengthy period of austerity is good for the economy.

On one hand, a certain amount of consumer debt is necessary for a healthy economy since consumer spending accounts for about 70 percent of economic growth.

But overspending consumers strung out on easy credit were among those hit hardest by the financial collapse of 2008, and some experts fear consumers could be heading for the same financial cliff they fell off at the start of the recession.

“We don’t see it as much now as we did before the recession, but there are some individuals who are overextending themselves and doing just undisciplined kinds of things with credit,’’ said Melodee Shiels, director of Consumer Credit Counseling. “But the bulk of our clients are using credit just to get by and meet day-to-day expenses. Eventually, you reach your limit, and then you end up in a downward spiral because you can’t even make minimum payments.’’

In Ohio, the average credit card balance climbed to $3,648 in March, up more than $190 from year ago, according to the latest figures available from Experian, one of the three main credit bureaus.

James Brock, a Miami University economics professor, said the pick-up in consumer borrowing can be viewed one of two ways:

“Some people would argue that it’s an indication that things are not good because people have had to go deeper into debt to get by,” he said. “But the other side of the story is that maybe things are getting better and people may feel a little safer about spending more than they did before. It’s really a glass-half-empty or glass-half-full question.” Brock thinks the glass is half full. “The economy is getting better,” he said. “It’s getting better in fits and starts; sometimes it’s two steps forward and one step back. But if you look at most of the broad statistical gauges of the economy, they’re generally trending up.” Brock noted that retail sales, car sales, even home sales have all started to pick up in recent months. “I would look at (consumer credit) as another reinforcing measure of the recovery of the economy,’’ he said.

Brock is not alone. More consumers also seem to think the economic glass is half full rather than half empty.

U.S. consumer sentiment has risen to its highest level since January 2008, according to the Thomson Reuters/University of Michigan’s preliminary May reading on the overall index of consumer sentiment. The index rose to 77.8 earlier this month from 76.4 in April, beating forecasts for a small decline to 76.2.

The monthly survey found also 65 percent of consumers thought buying conditions were favorable, the highest level in more than a year.

While many households are feeling more upbeat about the economy, a significant number have simply been compelled to make purchases — regardless of their financial situation.

David Rothstein, a researcher at Policy Matters Ohio, a public policy think tank in Cleveland, said Queen is typical of people who have delayed spending on necessities.

“People have waited and waited to see if the economy would get better,’’ he said. “They’ve put off different purchases like moving or buying a car, but people can no longer wait to make those decisions.

“They don’t have the money anymore to pay up front, so they just have to borrow,’’ he said. “And we saw what that did during the mortgage crisis.’’

Ohioans are especially vulnerable to financial calamity as a result of overspending, according to the Corporation for Enterprise Development’s Assets and Opportunity scorecard.

Nearly a third of Ohio households are asset poor, or have little or no financial cushion to rely on in case of emergency. Ohio ranked 37th out of 50 states and the District of Columbia for the financial security of its residents.

Consumer debt surge highest since 2001

Steve Bennish

The U.S. can grow jobs with a clear national manufacturing policy that focuses on regional clusters of specialized companies such as those in machinery, composite materials, autos and aerospace in the Dayton metro area, a new report from the Brookings Institution said.

Ohio had 620,000 manufacturing jobs by the end of 2010 despite losing 39 percent of manufacturing jobs in a decade, said the report, “Locating American Manufacturing: Trends in the Geography of Production.”

The encouraging report detailed manufacturing growth in the Midwest that’s exceeding growth elsewhere. Nationwide, it said, manufacturing is “largely located in metropolitan areas, displays greater variety than may be recognized, and falls into six broad patterns” of clustering.

It said those industry clustering patterns include: computers and electronics, transportation equipment, chemicals, machinery, food productions and low-wage manufacturing industries.

Scott Koorndyk, executive vice president of economic development for the 14-county Dayton Development Coalition, said the report validates strategies here to build on existing clusters, such as aerospace and advanced materials, which restore the region’s historic manufacturing base.

“We are in the middle of the nation and in an area that is growing more quickly,” he said. “We are investing in early-stage technologies to build clusters in those things that we are good at.”

A coalition study said that since manufacturing is Dayton’s “driver industry,” the manufacturing losses here devastated the rest of the economy, making the Dayton metro area third in the nation for nonmanufacturing job losses in a decade.

Other Brookings’ report findings:

• A long-term shift of manufacturing to the South has ended. Between 2000 and 2010, the Midwest and the South each lost about a third of their manufacturing jobs. Between the first quarter of 2010 and the last quarter of 2011, manufacturing jobs in the Midwest grew by 5 percent, while manufacturing job growth in the South was 2 percent. Manufacturing in the Dayton metro area grew 4.5 percent.

• Metro areas, particularly large metros and central metro counties, are the nation’s manufacturing centers. Metros had nearly 80 percent of all manufacturing jobs in 2010, and 95 percent of very high-tech manufacturing jobs.

• Manufacturing pay varies widely, from almost $145,000 in average annual earnings in San Jose, Calif., to $35,000 in McAllen, Texas. Wages vary for education levels of workers, differences in products and processes, and worker bargaining power. In the Dayton area, the average manufacturing wage is $53,645, compared with $42,891 for all jobs.

The report is the latest in a string of think-tank reports criticizing policy drift that erodes the nation’s industrial power, fuels a $600 billion annual trade deficit, and hinders job growth.

The Brookings recommendations also line up with President Barack Obama’s $1 billion proposal to establish 15 federal manufacturing research centers in the U.S. An Ohio consortium, including the University of Dayton Research Institute, is pursuing a pilot center for additive manufacturing, also known as 3D printing.

Estimates say the $1.7 trillion manufacturing economy employs 11 million Americans directly and another 7 million in related business. It has an economic multiplier effect superior to any other industry.

Howard Wial, an author of the Brookings report, said neglect by U.S. federal leadership on balancing trade, promoting industrial development, vocational training and a broad swath of related issues has harmed the economy for a long period.

“We really welcomed off-shoring and didn’t do anything to discourage it,” he said. “On the domestic side, we didn’t pay attention to our manufacturing base and improving quality of products, or helping small and medium-size manufacturers improve productivity and innovation.”

But on the positive side, manufacturing is still a growth machine. The Institute for Supply Management says U.S. manufacturing has been expanding for 33 consecutive months.

Tim Krueger of Policy Matters Ohio in Cleveland, a co-author, said local and state economic development efforts and public funding should focus on local industry clusters, not select firms, or courting new industry. “What makes us more competitive is to use money toward a cluster of firms, organized on their own, and helping them find ways to work with research networks, invest in technology and workforce skills,” Krueger said.

In northeastern Ohio, for example, a coalition of 80 civic leaders developed a regional plan that includes Cleveland, Akron and Youngstown, for manufacturers.

A national policy should support innovative “high-road” manufacturing (aggressive innovation and productivity and high wages) in U.S. metros, Wial said.

A recent poll shows a slight majority of Ohioans support a right-to-work law in the state. Ohio also routinely uses tax credits and other subsidies to attract companies to the state.  But Susan Helper, economics professor at Case Western Reserve University and co-author, said, “We can make investments … , or we can watch things crumble.”

Scott Patsko

A collection of people who shape education law in Ohio, and those most affected by it — school administrators — gathered for a roundtable discussion at North Royalton High School May 7.

Under the umbrella of “The Future of Public Education in Ohio,” a seven-member panel discussed topics ranging from school funding to new district ratings to needed changes in Ohio’s education system.

“My hope is that we take this back to our own districts,” said Dan Langshaw, North Royalton school board member. Langshaw along with Terry Groden, North Olmsted school board and Reno Contipelli, Cuyahoga Heights school board organized the event.

The trio of school board members held a similar roundtable in 2011.

This time, members of the panel were: Anthony Podojil, executive director for The Alliance for High Quality Education; Piet Van Lier, communications director from Policy Matters Ohio; Michelle Francis, deputy director of legislative services from Ohio School Boards Association; Barbara Shaner, associate executive director for Ohio Association of School Administrators; Tom Ash, director of governmental development from Buckeye Association of School Administrators; Rep. Nan Baker, R-16, member of the House Education Committee; and Rep. Mike Dovilla, vice-chair of the House Education Committee.

Posed with the question of whether or not the tax burden on homeowners will ever lessen, both Dovilla and Baker urged school districts to do more.

“Some of this comes down to making tough decisions at the district level that we have to make at the state level,” Dovilla said. “To rely on the debt of residents in the district to fund an operating budget is just not right.”

“It’s not always about money. It may be more about doing better with what we have,” Baker added.

Shaner pointed out that, while Ohio is often thought of as a state with a high tax burden, it’s in the middle of the pack when local taxes are not factored in.

“What’s happened in Ohio has not made us stronger,” said Van Lier. “It won’t get better until we address the funding issues in the state.”

House Bill 136, a controversial bill, aimed to provide funds for students to attend schools outside their home district was also part of the discussion. Opponents feel the bill would steer public school students toward private schools.

While the panel collectively felt the bill, which is currently on hold, needs work, Ash felt public schools weren’t getting enough credit.

“We feel public schools will compete with anybody, if given the chance to compete,” he said.

Many school administrators are concerned about expected changes how schools are rated, and the confusion that may cause. A rating of “Excellent” or “Continuous Improvement” for a school district would switch to a letter grade between A and F.

“We do need time to explain this,” said Shaner. “There will be questions like, ‘What does it mean?’ and ‘Why are the grades changing?’ ”

When asked what changes the panel would like to see with Ohio’s education system, Dovilla focused on job training.

“The jobs we are training kids for today will not be the jobs in 10 to 15 years,” said Dovilla.

Podojil questioned the importance placed on state assessment tests students take in the spring.

“We’re getting away from the body of work it takes to evaluate a student,” said Podojil. “At some point I’d like to see a dialogue switch to the bigger picture.”

Van Lier feels cooperation will be a key to moving forward.

“All these districts are fighting for their little piece of bread,” he said. “We have to try and treat these issues as one. We have to work together.”

State, local education minds gather in North Royalton for roundtable

Burton Speakman

The Mahoning Valley remains the part of Ohio most dependent on manufacturing, according to a national report.

The report is by the Brookings Institution, which surveyed 100 metropolitan areas in the nation. Brookings is a nonprofit public-policy organization based in Washington, D.C.

In the Valley, manufacturing jobs represent 12.6 percent of all jobs, which ranks eighth nationally. The Valley is more dependent on manufacturing jobs than any other part of the state, although Akron and Cleveland are close, ranking 13th and 14th, respectively.

The area has 28,416 workers in manufacturing jobs. The Mahoning Valley had lost 46.2 percent of manufacturing jobs compared with 2000, according to the Brookings report.

The region made a comeback in the past two years with manufacturing jobs increasing by 11.7 percent between the first quarter of 2010 and the fourth quarter of 2011. The increase ranked third nationally, according to the report.

At one time, dependence on manufacturing was even greater, said Tony Paglia, vice president of government affairs for the Youngstown/Warren Regional Chamber.

“I think we have an infrastructure in place for manufacturing,” Paglia said. “We have diversified within manufacturing.”

At one point, nearly all manufacturing businesses within the Valley were related to steel or metals, Paglia said.

The Mahoning Valley Manufacturing Coalition believes the high percentage of manufacturing jobs is good.

Spending for manufacturing has a greater multiplier effect than any other industry, which means more money into the area’s economy, said Jessica Borza, coalition executive director.

“Things were down for so long that the companies that survived have come back stronger. They’ve learned to diversify within their products and customers,” she said.

Coalition members, in a survey, estimated their companies would grow 33 percent in the next two to three years, Borza said. Those estimates do not include any anticipated growth from manufacturing for oil and gas companies.

The Valley needs to take advantage of what it can in terms of manufacturing jobs, Paglia said.

“We also need to have a strategy for continuing to diversify,” he said. “There are always cycles in the economy, and we need to prepare.”

Nationwide, the Brookings report shows that American manufacturing has shed its Rust Belt image and become more diversified and advanced. The report finds that U.S. manufacturing is located largely in metropolitan areas, and the long-term shift of manufacturing to the South came to a halt in the past decade.

What is needed now, the report concludes, is a national policy that plays to regional strengths and supports development of innovative “high-road” manufacturing in U.S. metropolitan areas.

“We can pave the high road, or we can block it,” said Susan Helper, an economics professor at Case Western Reserve University and co-author of the Brookings study. “We can make investments in training, in research and development, in infrastructure, or we can watch things crumble. We can take advantage of the synergies that are happening on the ground, or we can squander the energy that’s building.”

In Northeast Ohio, a coalition of 80 civic leaders, including some from Youngstown, developed a regional plan that has a strategy for helping manufacturers adopt new manufacturing methods, develop new products and reach new markets.

“A lot of economic development has been geared toward changing a region’s blend of industries or creating something like ‘the next Silicon Valley,’” said Tim Krueger, a research assistant with Policy Matters Ohio and a study co-author. “Yet the data show nearly every metropolitan area already has an important set of core competencies. New economic thinking should be geared toward recognizing these strengths and building on them in creative ways.”

Report: Valley depends on manufacturing

Dear Chairman Widener:

During testimony before the Finance Committee yesterday, you questioned some of the numbers that we presented. We stand by these numbers, and provide the following information to show how we arrived at them.

The two figures you specifically mentioned: the $1.8 billion reduction in funding for K-12 education and the $1 billion for local services, were published before in our budget brief of August 1, 2011.[1]   We present the published information here. As we often do, in writing this report we relied on data on from documents published on the website of the Ohio Legislative Service Commission.

Table 1, below, is taken from that brief and illustrates the source of our conclusion that the funding to K-12 schools in the current budget is $1.8 billion less than in the prior biennial budget.

We compared the level of spending from biennium to biennium: total funding in the biennial budget for FY 2010-11 compared to total funding in the biennial budget for FY 2012-13. As Table 1 shows, we include in our calculations funds outside of the General Revenue Fund (GRF) because state legislators can make decisions about use of funds in some other fund categories, such as the revenue distribution categories, and because legislators have the ability to replace funding lost from sources they do not control – such as the federal stimulus spending – by restoring lost tax revenues and appropriating them for specific purposes. For example, revenues could be raised by closing loopholes and taxing oil and gas to restore funding for primary and secondary education and local governments.

The loss to community services is attributable to the reductions in three areas: the Local Government Fund, reimbursement of tangible personal property tax, and reimbursement of the kilowatt-hour tax. The change in funding in these three line items is illustrated in Table 2, below.

Table 2.  Cuts to Local Government Property Tax Fund – Utility, Local Government Fund, and Local Government Property Tax Replacement – Business, FY 2010-11 compared to FY 2012-13.

Source:  Policy Matters Ohio, based on Ohio Legislative Service Commission ‘Budget in Detail (as enacted)’

for the 129^th General Assembly.

We looked at the change in funding in these lines on a biennial basis: FY 2010-11 compared to FY 2012-13. We looked at these funds, which are outside of the GRF, because legislators have authority over use of those funds. Figure 1, below, illustrates the loss of funding. These are flexible funds: the state does not tell local governments how to use those funds. Some communities use it to repair street lighting, others use it to supplement human services, and so forth.

In our testimony, we also reference a half-billion-dollar reduction in funding for higher education. This is a figure we have included in prior writings, including the August 1, 2011, budget brief. This  reduction in funding for classroom teaching (State Share of Instruction) resulted from the expiration of federal stimulus money that filled gaps in the state budget during the recession and enabled tuition to rise more slowly than in the current biennium. This is not GRF funding, but policymakers could have chosen to raise revenues to replace these funds. As with K-12 and local services, we based our analysis on data provided by the Ohio Legislative Service Commission.

As residents of Ohio, we appreciate the opportunity to add our testimony to the range of opinions we hope lawmakers consider. We thank you for the opportunity to respond to your comments on the accuracy of these specific numbers. We also stand by additional comments and numbers in our testimony, which is available at www.policymattersohio.org/mbr-testimony-may2012.

Best Regards,

Wendy Patton

Senior Project Director

Cc: Senate Finance Committee: Shannon Jones (Vice Chair), Tom Sawyer (Ranking Minority Member), Kevin Bacon, Bill Coley, Keith Faber, Jim Hughes, Peggy Lehner, Scott Oelslager, Tom Patton, Michael J. Skindell, Shirley A. Smith, Charleta B. Tavares.

Hannah Halbert

Delivered before the Commerce, Labor and Technology Committee of the Ohio House of Representatives on May 9, 2012. 

Good afternoon, Chairman Young, Ranking Member Yuko and members of the committee. Thank you for the opportunity to testify today about HB 484: SharedWork Ohio. I am Hannah Halbert, policy liaison and workforce researcher at Policy Matters Ohio, a nonprofit, nonpartisan research institute with offices in Cleveland and Columbus. Policy Matters Ohio supports the passage of SharedWork Ohio.

Shared work, or Short-Time Compensation, is a proven layoff aversion tool. These programs increase the flexibility of the unemployment compensation system. Instead of allowing unemployment compensation only to be paid to workers who are laid off, the program allows unemployment compensation to also be paid to workers who face a reduction in hours. In short, the program allows employers to shorten the workweek of a larger number of employees instead of laying off a smaller number entirely. This can benefit Ohio workers and the companies that employ them in several ways.

Employees can maintain much of their income, stay employed and retain their benefits. They are able to continue to meet their financial obligations and to contribute to their local economies. Employees can retain their health insurance and keep accruing retirement benefits. In addition, the emotional hardship associated with layoffs, and the stress of looking for a new job in a tough labor market is averted.

Employers can retain skilled employees, avoid expensive retraining and rehiring, boost employee morale and be more easily able to gear up when demand recovers. Employers responding to a January 2012 survey of participants in Washington state’s shared work program were very much in favor of the program; 99 percent said they would recommend the program to other businesses, 68 percent said the program had helped their business survive the recession, and an additional 20 percent said that the program probably helped their business survive.

In addition to the state of Washington, 21 states and the District of Columbia operate work-sharing programs and New Jersey passed short-time compensation legislation in January of this year.^[1] During the 2007 recession, participation mushroomed in the states with existing shared work programs. In 2009, more than 288,000 individuals participated in one of the fifteen shared work programs that reported in-state beneficiaries to the U.S. Department of Labor. This was a considerable increase from 2006 reports, which showed slightly more than 39,000 participants. Participation declined significantly in 2010, but remained higher than in any year except 2009, according to the Congressional Research Service.

“The Mid-Biennium Review neither looks back in review of the sweeping changes in public services caused by the current state budget nor forward in preparation for the loss of hundreds of millions in federal funds as a result of the Budget Control Act of 2011. Instead, more services are cut; tax breaks continue to go unscrutinized; unfunded or underfunded mandates are imposed; and more privatization is authorized.” (more…)

This report explores how revenue from a fracking tax could bolster vital public services if it is not used to finance income tax cuts that would mostly benefit wealthy Ohioans, as Gov. John Kasich has proposed. The Ohio General Assembly should consider an adequate tax on oil and gas extraction to help restore local jobs, schools and services and assist communities impacted by drilling. (more…)