Sunday, June 27, 2004

Bob Taft's big job hunt

Six months with the Governor, Part II: Ohio

By Ray Cooklis
Enquirer staff

In his January State of the State address, Ohio Gov. Bob Taft outlined a clear, three-point agenda for the state in 2004: "Jobs, jobs, jobs."

Each initiative Taft mentioned in his speech was colored by that one central concern: increasing employment opportunities for Ohioans, who have been hit hard by the recent recession.

Part of this is a political calculation. In this presidential election year, Republicans are vulnerable to charges of job loss, even though the economic downturn that caused those losses started well before President Bush took office.

Taft now likes to point out that the state has gained 30,000 jobs since the beginning of the year, and the unemployment rate has dipped from 6 percent to 5.6 percent.

But the public at large has yet to perceive a real turnaround, so Taft's task this year has been to push hard for programs geared toward tangible job growth.

On one of those, fundamental tax reform - an area in which he was rebuffed last year - Taft has challenged lawmakers to "roll up our sleeves and get it done this year." There's similar urgency on education funding, tort reform, economic development and Medicaid reform.

Now the year's half over. How has Taft done in moving his agenda forward?

Ohio, like any state, is partly at the mercy of the national economy and federal policy. For example, the federal gasoline-tax "ethanol penalty," which costs the state at least $150 million a year for being one of the nation's major users of the cleaner-burning fuel, has yet to be fixed by Congress.

But there's plenty state government can do, so it's puzzling it has been such a quiet year at the Statehouse so far - at least, compared to the previous three years, which saw a multibillion-dollar deficit crisis and several emergency belt-tightening budget "fixes."

Taft and the legislature have played "little ball" with bills that help segments of the state but may not have a major impact on the economy: asbestos litigation reform, a state pension reform, a worker's compensation liability fix.

The big items are pending. Commissions are working on public education funding and the reform of Medicaid. The legislature is discussing tax reform options. A comprehensive tort reform bill, S.B. 80, has yet to pass, as have campaign finance reform proposals.

Part of what's going on is this: Taft is a lame-duck governor midway through his final term, with at least three statewide officeholders hungrily jockeying to succeed him, and a number of legislators looking to increase their clout in the next General Assembly. There are a lot of election-year agendas out there, and it's not surprising Taft has trouble getting much done.

"We have meetings and talk about trying to work together," Taft said, "but they don't have to listen to me necessarily." That's not the kind of admission you like to hear a governor make. He has the chance - and the responsibility - to make a real mark this year, but so far the results are incomplete. Here is a look at several key areas:

Economic development

The centerpiece of Taft's second-term agenda has been the $1.1 billion Third Frontier Project, a smorgasbord of programs to grow "knowledge economy" industries and new, high-tech jobs. Some critics have said the Third Frontier is too little, too late, and doesn't help other vital areas of Ohio's economy, such as agriculture.

But it is having an impact. This year, several Cincinnati firms are among those that have received new Third Frontier funds, with Children's Hospital and the University of Cincinnati getting more than $27 million for the Center for Computational Medicine. For our community, this is translating into hundreds of good-paying jobs.

State officials found an extra $108 million for the program this year, and the startup this fall of a super-high-speed computer network linking Ohio universities, high-tech firms and other institutions could jump-start the flow of investment and top-notch talent into the state.

Education funding

In the wake of DeRolph public school-funding court case, the state has put billions extra into funding for schools, and is doing new school construction to the tune of more than $1 million a day. But funding equity remains a major concern, with Ohio getting low marks in that department. Lawmakers are working on better formulas and sources for funding, but there's no magic bullet.

Meanwhile, the level of state support for public universities is declining, and students feel it with double-digit tuition increases. Ohio has been concentrating on two-year colleges, which can provide quick job-readiness for people of varied economic backgrounds. Taft says the strategy has been to keep tuition at these schools as low as possible. Many graduates of two-year colleges, he notes, are earning more than graduates of four-year colleges.

Tax policy

Taft wants a comprehensive reform of Ohio's tax system. A plan he advanced last year, to make the tax structure reflect the service-based 21st century economy, was all but scuttled by lawmakers. He's pushing it again, saying his goal is to make the system more broad-based, neutral, fair and stable.

So far, he's finding the process as difficult as his colleague in Kentucky, Gov. Ernie Fletcher, has found it. Last week, Kentucky's House Democrats sent Fletcher an alternative tax modernization plan that removed Fletcher's increases on cigarette and alcohol taxes, which made some of the broadening and reductions possible.

To shore up and increase the state's 850,000 manufacturing jobs, Ohio's traditional strength, Taft's solution is to slowly ease taxes, as on equipment and inventory, that make Ohio one of the most business-unfriendly states in the nation.

State budget deficit

Ohio has performed the role of escape artist for the past three years, narrowly avoiding budget disaster after budget disaster. Already this year, Taft has cut an additional $150 million in operating expenses, for a total of $1.4 billion over the last three years. The state has 3,500 fewer employees and six fewer institutions than in 2001.

The economic upturn and a recent increase in state income tax receipts have given state leaders some relief, although Taft says that whatever the economy does, "We face a budget challenge next year." That's an understatement. It could be a train wreck. The quick-fix "temporary" one-cent sales tax increase they imposed last year, breaking pledges to put tax hikes up to a public vote, is scheduled to expire in June 2005. That is chief among the more than $1 billion in one-time revenues the state will lose, unless lawmakers decide to extend - or even make permanent - the sales tax surcharge, which Taft admits is under consideration.

But Ohio can't make real, long-term headway unless it can control the yearly cost of Medicaid, which has doubled to $10 billion over the past five years. Medicaid now consumes a third of the state budget, and could grow to half of the budget within a few years.

Such growth is unsustainable. Yet a Taft proposal to reform Medicaid was booted by lawmakers last year. Unlike other states, the formula to reimburse nursing homes under Medicaid is set by statute, not negotiated by the governor. In the next budget, that cost will increase 17 percent unless something is done.

Clearly, the remainder of this year's legislative session will be critical if Ohio is to adopt key reforms in time to help the economy.

Complicating the challenge of getting state lawmakers focused on Taft's 2004 agenda are the attention and resources that the fall election campaign will draw. Bob Taft has a big job ahead of him.

Legislative record

Among the legislation passed by the Ohio General Assembly and signed by Gov. Bob Taft so far this year:

• House Bill 427 - Job stimulus package, including a provision to extend the Enterprise Zone business incentive program

• Senate Bill 133 - Corrects financial and operating abuses at two of Ohio's five public pension systems, and implement preventive measures at all five

• House Bill 223 - Places burden of proof on employees in workers' compensation cases where alcohol or drug abuse may have been involved in a workplace injury

• Sub. House Bill 342 - Changes rules for filing personal injury lawsuits claiming exposure to silica dust

• Sub. House Bill 292 - Changes rules for filing personal injury lawsuits claiming exposure to asbestos, and limits liability

About Taft

Born: Cincinnati, Jan. 8, 1942.

Education: Bachelor's in government, Yale, 1963; master's in government, Princeton, 1967; law degree, University of Cincinnati Law School, 1976.

Family: Married to Hope Rothert Taft since 1967; daughter, Anna.

Experience: Peace Corps volunteer, Tanzania, 1963-65; assistant director, Illinois Bureau of the Budget, 1969-73; Ohio House of Representatives, 1976-81; Hamilton County commissioner, 1981-91; Ohio secretary of state, 1991-99; Ohio governor, 1999 to present.


Ray Cooklis is the Enquirer's assistant editorial page editor; email rcooklis@enquirer.com phone (513) 768-8525.

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