December 28, 2008

Ted Strickland’s ‘Turnaround Ohio’ Plan Revealed: Beg Uncle Sam to Solve Ohio’s Problems (Update: Crazy CAT Accounting)

Filed under: Economy,Taxes & Government — Tom @ 8:49 am

In February 2007, Ted Strickland told Ohioans that their hearing was bad.

Hearing-impaired Ohioans thought that they heard Strickland tell Buckeye State voters during the 2006 gubernatorial campaign that he was going to work on his “Turnaround Ohio” plan as soon as he became governor.

But three months after the election, he did a big Emily Litella “never mind”, and put off what he had said was the most important component of “Turnaround Ohio” — education. He said that dealing with that could wait until the state’s next biennial budget, i.e., 2-1/2 years. Within hours (roughly two) of this and another site’s comparison of Ted’s put-off to his campaign rhetoric, the Strickland campaign web site disappeared. Fortunately, it was mostly preserved by yours truly (the linked page is one of very many) for fair use and accountability purposes.

Yesterday morning, almost two years later, we learned that Ted has now given up on turning around Ohio on his own, and has instead decided that it’s Uncle Sam’s job:

….. In Ohio, which has shed 100,000 jobs in the past year, Gov. Ted Strickland (D) and his budget team spend a lot of time delivering bad news to constituents and plotting ways to wring money from the federal government. He announced $640 million in cuts for the budget year ending June 30, for a total of $1.9 billion since the economic crisis began.

“We’re not crying wolf. This is real,” Strickland said in an interview in his statehouse office, pointing to charts that project the most serious erosion of state income in 40 years and a two-year budget deficit of $7.3 billion. Revenue shortfalls in the upcoming two-year budget could amount to about 25 percent of the state’s discretionary spending.

Strickland recently picked up the telephone and called Rahm Emanuel, the incoming White House chief of staff. When he heard the recorded voice of his former congressional colleague, he left a message: “Rahm, it’s Ted. You’ve never failed me and I need $5 billion.”

Assuming the bolded quote is accurate, it’s quite revealing. You see, it’s TED who needs to “wring money from the federal government” to the tune of $5 billion to “turn around Ohio” as HE sees fit. This is much more about Ted Strickland’s electoral viability that it is about fixing the state’s budget or its economy.

Let’s see how Ted and fellow governors want to use their booty:

(Strickland) is angling for a (nationwide) $250 billion increase in federal payments for food stamps and Medicaid, the government health program for impoverished Americans and, increasingly, the working poor. Second, he favors a $250 billion national investment in infrastructure projects. Ohio has a list of “shovel-ready” projects, including roads, water and sewer improvements and “green economy” investments.

Third, in search of a palatable pitch to a Congress and nation numbed by the parade of rescue packages, Strickland is teaming with a handful of other Democratic governors to seek a $250 billion infusion for education.

As I have noted several times previously several times (the latest is here), Food Stamp funding is presumptively adequate until advocates tell us what is specifically wrong with the benefit formulas instead of constantly sponsoring inane and intellectually dishonest “Food Stamp Challenges.” That’s because benefits before adjustments relating to income and assets are in sync with the USDA’s Thrifty Meal Plan cost estimates. Benefits were increased by 8.5% just this past year so they would stay in sync.

The Medicaid payment increases wouldn’t be “necessary,” or as “necessary,” if Ted and his team had implemented cost-saving recommendations made in 2006 that could have saved $150 million annually.

If Ted wants infrastructure money, he should sell the Ohio Turnpike. Ask Mitch Daniels how selling the Indiana Toll Road has worked out. Answer: Very well, thank you — “The money from the lease will pay for a 10-year road-building program that requires no new taxes or borrowing. Construction has begun on projects originally planned two decades ago.”

Education? This is merely cost-shifting, has nothing to do with “stimulus,” and raises the specter of even more federal control over education — unless anyone really believes that extra federal money for education won’t come with strings attached.

Note that the three items Ted and fellow Democratic governors are calling for add up to $750 billion, which is only $100 billion short of the $850 billion Barack Obama wants to spend in total. By the time they’re done spending us into oblivion in Washington, don’t be surprised if the grand total is more like $2 trillion. The total of all bailouts already executed or in the works is already a multiple of that. I for one don’t find any of them stimulating.

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UPDATE: If the state actually wants businesses to grow here, the Legislature is going to have to kill the CAT (the Commercial Activities Tax, which is really a gross receipts tax that businesses must pay even if they are not earning a profit) before it turns into a complete menace.

Even based on what little the state is willing to tell us without forcing us to dig deeper than should be necessary, it’s not that far from it. This is from Page 12 of the Ohio Office of Budget and Management’s December 10 Monthly Financial Report for state finances through November (a PDF found here):

In FY 2009, receipts from the commercial activity tax (CAT) are distributed to non-GRF funds to reimburse school districts and local governments as the tangible personal property tax is phased out.  Reversing the trend for the year to date, CAT receipts during the month of November totaled $273.0 million, an amount that was $17.0 million short of the estimate of $290.0 million estimates (6.0%).  As a result of the shortfall in November, the year to date performance of the tax was reduced to $16.1 million above estimates.

By the way, CAT’s receipts and disbursements are NOT included in the state’s actual financial reports. Instead, the report just shows a big fat $0 every month (picture is from Page 14 of the November report):

OBMnoCatDollars1108

Additionally, I could not find what year-to-date CAT collections have been in the report. So I’ll have to get to that later after looking through all five months of the fiscal year thus far. This should NOT be necessary.

This looks like an “off-budget” trick designed to make the state’s budget look over $3 billion a year smaller than it really is ($273 mil times 12, if November’s collections are typical). I don’t see how this deficient reporting and lack of transparency are defensible. It should end now.

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3 Comments

  1. Tom, maybe the question should be on why Ted didn’t do what he promised. Why would Ted be more interested in shovel ready projects instead of loading the same amount into the school systems years ago? I suggest a more cynical calculation. Ted didn’t need the public support right after the election, he already got what he wanted, he got elected. The public being A.D.D. wouldn’t remember any increase in the school budget in 2006 in 2010. Now two years later he needs public support, what better way to raise consciousness for the run up to re-election than to show the public he can get something for nothing and to boot get campaign contributions from all the employees who stand to benefit from a public works program? It’s pure calculated self interest, it has nothing to do with good governance or the public welfare. This is just plain crass electioneering.

    The public is just gullible enough to fall for it yet again. You know, seeing these people get away with this crap gives me no hope for the future of the Republic. What is it going to take for the public to see failure is not success? Hmmm, sounds like the makings of an article.

    Comment by dscott — December 28, 2008 @ 12:13 pm

  2. Sounds like you guys have every thing under control….

    Sincerely,
    Michigan

    Comment by Gordon Gekko — December 28, 2008 @ 6:16 pm

  3. Ohioans got exactly who they were warned about and voted for anyway – a singularly unaccomplished back bencher with no evidence of executive or leadership ability, let alone original thought — and the economic result that was predicted. Gov. Mulligan has fulfilled his promise to “turn around Ohio;” we were getting better, and now we are running headlong on our way to MI/NJ status on a rudderless, captainless ship of state — just what 60% of Ohioans voted for. Now, Ohio (and the nation) just did the same thing with Obama so there is no evidence that anyone has learned anything — least of all Ohioans.

    Comment by Joe C. — December 29, 2008 @ 12:40 pm

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