The Cliff Ahead
Toledo Blade - August 5, 2011
The Toledo Blade
Gov. John Kasich and the Republican-led General Assembly have put a for- sale sign on state assets, from the Ohio Turnpike to university dormitories, to raise cash to balance the budget. As they slashed state aid to schools, local governments, and social services, they expanded tax breaks for businesses and wealthy individuals. It is not clear how any of this will benefit average Ohioans.
The new budget includes the sale of six prisons and the leasing of state liquor-sales profits and the 241-mile toll road. The transportation budget authorizes public-private partnerships that would allow private businesses to build, repair, and operate roads and bridges, then lease them back to the state or charge tolls.
The Ohio Department of Transportation now can turn rest areas over to private businesses indefinitely. Such deals previously were limited to two years.
Cities can lease their parking meters. School districts can privatize bus service. Public colleges and universities can sell dining halls and dormitories and lease them back, or have a nonpublic vendor build and operate campus housing.
State and local governments that sell off assets will receive a short-term influx of cash, but at the cost of future revenues. Leasing the state’s liquor monopoly to JobsOhio, the new, mostly private economic development agency, will add $500 million to the current budget but subtract more than $200 million a year in liquor profits from the state balance sheet for the next 25 years. How that money will be replaced is undetermined.
It also is unclear what effect these sales will have on services. Will for-profit prisons skimp on rehabilitation? Will for-profit turnpike operators raise tolls, neglect maintenance, and drive more vehicles to secondary roads? Parking meter rates soared — and maintenance plummeted –in Chicago after it leased its meters to a private company in 2009.
Privatization likely will mean fewer jobs, reducing state income-tax receipts and straining services from unemployment compensation to food banks. The jobs that remain are more likely to command lower wages and include fewer benefits. Who will pick up the tab for lost health-care coverage?
Private businesses and wealthy Ohioans benefit in other ways from the Kasich budget. According to Policy Matters Ohio, a nonpartisan policy research organization, the budget includes $400 million a year in new tax breaks, mostly for well-off special interests.
The repeal of the Ohio estate tax will cost the state about $55 million and cash-starved local governments about $231 million a year, based on 2010 receipts. Who benefits? The heirs to the richest 8 percent of Ohio estates.
A new investment tax credit for small businesses doesn’t require them to add even one new job. Another loophole gives sales, income, and commercial activity tax breaks to private companies that take over public assets such as the turnpike, Other breaks reward employers for not eliminating jobs or are tailored to aid specific companies.
Candidate Kasich attacked former Gov. Ted Strickland for not creating jobs and for using one-time money to kick the state’s budget problems down the road. Governor Kasich balanced his budget by using one-time money from the sale of public assets and by kicking the revenue shortfall down the food chain and onto the backs of local governments. Instead of creating jobs, the budget ensures job losses, at least in the public sector.
After his victory last November, Mr. Kasich said Ohioans could get on his bus or be run over by it. At the same time, he asked to be warned if it appeared he was about to run over a cliff.
It appears that the best seats on the bus are reserved for wealthy interests. And the cliff ahead, if the governor can see the signs, is the lack of job creation.