Bond Issue: ‘Corporate Welfare’ or Jobmaker?

Columbus Dispatch - October 24, 2005
   

Three-part proposal also involves local road, water projects
Jim Siegel and Mark Niquette

Columbus Dispatch

Through Friday, The Dispatch will publish stories about the five proposed constitutional amendments facing Ohio voters on Nov. 8.

Today, the focus is on Issue 1, a $2 billion bond package that supporters say will bring hightech jobs to Ohio.

Talk to Issue 1 supporters, and they’ll quickly tell you the $2 billion proposal boils down to one word — jobs.

Ohio’s stuck-in-the-mud economy isn’t creating nearly enough of them. No longer able to rely on highpaying manufacturing jobs to boost the standard of living, state leaders say government must do more to develop hightech employment.

And though some conservatives term it corporate welfare, supporters say it’s vital that Ohioans let state government spend another $500
million for the Third Frontier program.

The program is designed to develop high-tech research, and eventually high-tech jobs, by assisting companies and fostering partnerships with universities and businesses.

“There is a gap between our outstanding, world-class research institutions and our ability to commercialize some of that research into new products in our state,” said Lt. Gov. Bruce Johnson. “With some state assistance we can pool a lot of the research that’s already happening and have it create jobs in Ohio.”

Issue 1, which increases state borrowing but does not raise taxes, is a three-part, $2 billion issue that also includes:

• $1.35 billion for local road, bridge and water projects, essentially
continuing a 10-year issue that was last approved in 1995. The issue is not set to expire until after 2006.

By itself, the issue passed by wide margins in 1987 and 1995. It is strongly supported by local government officials who have relied on the money for more than 10,000 projects.

“For us, it’s essential,” said John Mahoney, deputy director of the Ohio Municipal League. “That has been the most successful state program we’ve had as far as infrastructure investment.”

• $150 million over seven years for business-site development, such as industrial parks. Money can be used for land and building acquisition, renovations and the installation of utilities.

Much of the discussion of Issue 1 has focused on the Third Frontier portion of the proposal.

Introduced by Gov. Bob Taft in 2002, his initial plan called for spending $1.6 billion over 10 years. The bulk, $1.1 billion, is coming
from tax revenue, capital budget funds, tobacco-settlement money and a loan fund fueled by state liquor profits.

The final portion of the plan — a $500 million bond issue to be approved by voters — went down to a stunning defeat in November
2003.

The issue is back because, state leaders say, $1.1 billion is not enough.

Johnson said the demand is 10 times what the state currently is spending — and other states, such as California, are spending significantly more.

“We’re significantly over-invested in capital because of the nature of the money we’re spending,” Johnson said. “You have to fill up (the
buildings) with active people who are doing the research.”

The state has awarded $325 million since 2002.

Nearly $89 million has gone to projects at the Ohio State University, helping to fund research such as lung-cancer treatment and industrial components made from agricultural products.

“If we did not carry these innovations forward, they undoubtedly would be developed in other states or the world market,” said Robert
McGrath, vice president for research at Ohio State.

Ohio State, with help from $17 million in Third Frontier funds, partnered with Phillips Medical in Cleveland to develop a magnetic imaging system that can take pictures of the brain far more enhanced than current equipment.

The machines are being built in Cleveland, where 80 jobs have been created, McGrath said. Installing the new machinery at the Ohio State Medical Center also required the purchase of $200,000 in concrete and $800,000 in steel from Ohio companies.

“That’s the kind of spillover we’d like to have,” McGrath said. “We think we have numerous programs heading in that direction.”

But Third Frontier critics argue the state should not be increasing state borrowing for what they term “corporate welfare” with no guarantee of new jobs.

There are moral concerns as well. Some conservative groups say Issue 1 funds could be used for embryonic stem-cell research.

Rep. Tom Brinkman Jr., R-Cincinnati, argues that government just isn’t very good at investing in private companies — and that taxpayers often end up subsidizing projects that private investors won’t touch.

“Government is a sap, a sucker,” Brinkman said.

Kurt Kauffman, the state’s debt manager at the Office of Budget and Management, said credit-rating agencies don’t have a problem with the additional borrowing.

In all, Issue 1 would require the state to pay $2 billion in principal on the bonds and $1.2 billion in interest, Kauffman said.

Although voters might support Issue 1 because of the state’s declining economy, they need to do so with their eyes open, said Jon Honeck, a research analyst for Policy Matters Ohio, a nonprofit public policy group in Cleveland.

Issue 1, he said, would change the relationship between the public and private sectors by allowing government to become stockholders in private companies, reversing a longstanding constitutional prohibition.

Policy Matters said Issue 1 is an improvement over the 2003 ballot issue because there are more safeguards to require accountability of
funding and ensure all regions in the state benefit.

Success of the program, Honeck said, “will depend on the vigilance of the legislature and the appropriate state agencies in defining and tracking the public interest in economic-development policy.”

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