Tag Archives: Buckeye Institute

New Report Debunks Myths Surrounding Public-Private Transportation Partnerships

By Kevin Holtsberry

In an era of declining transportation funding, public-private partnerships have the potential to offer greater flexibility and increased infrastructure investment. Given their potential, and the importance of the issue to our state’s future, this tool should be evaluated based on facts and data not myths and emotional reactions. To that end we here at the Buckeye Institute partnered with the Reason Foundation to release a new report: Ten Myths and Facts on Transportation Public-Private Partnerships.

This report, the first of a series, seeks to clear away the fear and misconceptions surrounding public-private partnerships (sometimes know as PPPs or P3s) so that policy makers and the public can have an informed debate about how best to address Ohio’s critical transportation and infrastructure needs and how this tool might fit within the state’s larger strategy.

Too often confusion and misinformation has dominated debates surrounding “privatization” and P3s; whether it is the turnpike or parking garages or other government assets. I believe this report will help demystify the issue based on real experience and data.

Here are a few examples from the report:

Myth: PPPs involve the “sale” of roads to private interests.

Fact: PPPs do not involve the sale of any facilities by governments to private sector interests.

Myth: Private toll road operators can charge unlimited tolls in PPP deals.

Fact: Future toll rates are a policy decision and are determined by state officials upfront before a concession agreement is signed.

Myth: Government loses control of public assets in PPP deals.

Fact: Government never loses control and can actually gain more control of outcomes in well-crafted PPP arrangements.

Myth: PPPs involve selling our roads to foreign companies.

Fact: Foreign investment in our nation’s infrastructure represents the reverse of outsourcing. It’s could more properly be viewed as “insourcing” where significant amounts of foreign investment are spent here in the state.

Myth: Government ends up holding the bag if a PPP project goes bankrupt.

Fact: In the event of a corporate bankruptcy on the part of a private sector investor-operator, the asset would revert to the project lenders who, with permission from the state, would select a new operator.

Effective and efficient government should always be our goal, but with transportation funding shrinking and demand growing, it is critical we evaluate all our options. P3s should be considered as part of Ohio’s broader strategy as they have the potential to offer greater flexibility and increased leverage of public assets.

An informed debate will lead to better decisions and more options for Ohio. There is too much at stake to settle for anything less.

Kevin Holtsberry is president of the Buckeye Institute for Public Policy Solutions.

Gov. Kaisch’s State Budget: The Ugly, the Bad, and the Good

In my opinion, Gov. Kaisch is not the handsomest dude on the planet. I suspect his wife may have a different opinion.

What the governor lacks in appearance he makes up in statesmanship. His speech to the legislators on the budget was downright inspirational. Not only that but he even dared to praise the members of the opposing party for their work and accomplishments on a number of issues.

It almost made me cry.

I did say–almost!

Seriously, the budget itself is a mixed bag of missed opportunities (the bad) and a number of advancements for Ohioans and their economy (the good). Of course, it all depends on who you talk to, or, in this case, whose report you read.

According to the report by Matt Mayer, President of the Buckeye Institute, the governor’s budget missed some important opportunities. The bad news is the general revenue fund will be $1.26 billion greater for 2012 than in 2011 and $1.73 billion for 2013. That is a biennium increase of 12 percent. This is the second highest increase since 1990.

So how can the Governor increase spending with an $8 billion deficit? According to Mayer, the governor’s budget shows total revenues exceeding the deficit by $8 billion, which causes Mayer a lot of concern. It shows Gov. Kaisch has chosen to continue the same old policies of the past that eventually resulted in the present fiscal crisis.

Equally disturbing is the governor’s cuts to local governments. Instead of innovating new strategy to fund both state and local governance, the governor chose the slash-and-burn approach. This easy money strategy doesn’t reduce the size of state government and thus return local tax dollars back to local governments who must continue or fund new programs. Gov. Kaisch simply cuts funding to local governments to increase spending and balance the budget.

The $5 million budget deficit proposed by Xenia city and school officials may be nothing more than advanced notice of the state budget cuts. On the other hand, the budget deficit could be the typical 10% inflation budget estimates for contingency purposes; all institutions increase budget estimates for unforeseen costs. Budgets are based on previous year revenues, expenditures, known issues that will increase costs, plus 10% for unknown costs usually in addition to a contingency fund for emergencies.

Be that as it may, Mayer wishes Gov. Kaisch would have made the difficult choice of cut government employee compensation a little as well as cut the executive and legislative branch budgets. If he had cut the death tax, the bill making away through both houses, he would have as much money to spend, and many others will wish he had less money to throw at his program agendas.

Mayer did find some good in the Gov. Kaisch’s budget. The governor made noteworthy strides in such areas as prison reform, healthcare cost containment, and education funding. He included alternative sentencing approaches to non-violent offender that along with reforms nursing home service costs to Medicare will save taxpayers millions of dollars.

Some think his nursing home reforms are ugly and bad too.

Gov. Kaisch chalked up a few more good points with a number of his educational reforms. For example, his “support for Teach for America and doubling of EdChoice scholarships are vital lifelines to the most vulnerable and will inject more competition into our broken K-12 system.” Scraping the previous governor’s unfunded, evidenceless, one-size-fits-all Evidence Based School-Improvement Model will end the veiled attempt to increase dues-paying membership for unions. At the college level, the governor calls for professors to use fewer assistants for classroom instruction and a three-year degree. (Here, it is assumed that also means high schools will be required to ensure college-bound student meet the once first year prerequisites whether through coursework in high schools, college campuses, or virtual schools. That in itself would not only save a lot of money but would also be a systemic great achievement.)

Many of us may like Governor’s enthusiasm and business acumen, but analysts like Mayer give us reason to doubt his ability to help Ohio innovate its way to a better future and greater prosperity. If he cannot find innovative ways to fund government, can we expect he will achieve his inspiring goals for Ohio? Unless his goals are primary for big corporate concerns, maybe not.

To read Matt Mayer’s report on Governor Kaisch’s budget, visit the Buckeye Institute website: http://www.buckeyeinstitute.org/reports.

Conversion Levy: Permanent Tax Hikes That Remove School District Accountability

Mary McCleary, Policy Analyst

With the start of the new school year, many school districts around Ohio, including Margaretta Local School District, have realized that their finances are in trouble. Thus, these districts (several of which experienced failed levies in the spring primary) are going back on the ballot this November to ask for more money despite the economic hardships already facing many property owners.

To address Ohio’s school funding crisis, Governor Ted Strickland and the General Assembly introduced a new way for school districts to raise money through the establishment of the conversion levy in the 2009 Ohio Budget. Margaretta Local School District is the first district in Ohio to make an attempt at passing this new kind of levy.

If passed, the conversion levy would convert existing school operating levies to a 20-mill floor. Without getting too caught up in terminology, converting to a 20-mill floor essentially removes the protection homeowners have under House Bill 920.

Because of HB 920, property owners only pay taxes on roughly 15 percent of property value increases. For example, if your home is worth $100,000 and increases in value by 10 percent to $110,000, you only pay taxes on $1,500 of the increased value instead of the full $10,000. Conversely, if your home depreciates by 10 percent, your taxes are only reduced by 15 percent of the depreciation.

Thus, HB 920 brings a degree of stability to property taxes: homeowners are not hit with large tax increases when property appreciates, and school districts do not suffer large revenue losses when homes depreciate as they have over the last several years. By design, HB 920 keeps Ohio’s property taxes relatively low.

If the Margaretta conversion levy were to pass, district homeowners would be taxed on 100 percent of property value increases instead of just 15 percent. Given Ohio’s economic condition and the fact the state has the seventh highest state and local tax burden, many homeowners cannot afford higher taxes.

?Another problem with the Margaretta conversion levy is that it is a permanent levy and will consequently cause property taxes to rise indefinitely if passed. Every three years when the county auditor’s office reassesses property values, homeowner taxes could increase significantly. Since the tax hike would not go into effect until after the next reassessment cycle, Margaretta Local School District is selling the levy to voters as type of revenue neutral renewal levy. This approach is, at best, grossly misleading and, at worst, intentionally dishonest.

In addition to skyrocketing taxes, the conversion levy removes the best tool parents have to keep their school districts accountable. When school districts fail to restrain costs, they must ask for more money. The voters then have a chance to examine spending and decide whether or not a funding increase is warranted. If a conversion levy passes, the school district would have little incentive to spend money efficiently and effectively, as revenue would rise every three years beyond the true needs of the school district, and homeowners would have no means to keep the school district accountable for spending choices, as the school district would avoid new levies.

Between 1998 and 2009, per pupil expenditures in Margaretta Schools rose by 75 percent from $5,807 to $10,172 far outpacing inflation, which was only 29 percent. Similarly, the average teacher pay increased 20.1 percent from $45,710 in 2003 to $54,913 in 2010, while inflation was only 18.6 percent. In 2009, the average physical education teacher in the district earned $48 per hour with an annual salary of $64,948. If the average physical education teacher worked the entire year (2,080 hours, instead of the contractual 1,350 hours), he would have earned over $100,000 in 2009.

Although the residents of Margaretta Schools narrowly passed a levy in August, they are notorious for rejecting school levies. When voters reject levies, they fundamentally exercise their right to hold the school district accountable. With a permanent conversion levy in place, voters would lose the ability to reject these property tax hikes.

All Ohioans must be wary of conversion levies. With one vote, taxpayers could unknowingly approve large tax increases for years to come and could lose their most valuable tool in keeping school districts accountable.

For more information, read the Buckeye Institute’s report The Need for Levy Reform in Ohio – Conversion Levy: One Vote, Permanent Tax Increases at www.buckeyeinstitute.org/reports.

Ohioans ready for Big Fixes

On July 28, the Buckeye Institute released a statewide poll of 1,800 registered voters that shows Ohioans are at odds with their government leaders on the major issues of the day, especially regarding government compensation, regulations, and Ohio’s pro-union policies. Magellan Data and Mapping Strategies of Broomfield, Colorado, conducted the poll on July 19, 2010, via an autodial survey of registered voters from across Ohio. Because of the large sample, the survey has a margin of error of 2.31%.

Here are some top-line numbers:

·    50% think government leaders should first reduce government worker
     compensation to eliminate the $8 billion budget state deficit;

·    Only 16% think taxes should be increased to eliminate the Ohio deficit;

·    52% think Ohio’s state and local taxes are too high;

·    56% think Ohio’s regulatory environment makes it harder for businesses to
     create jobs and grow;

·    85% think workers should be free to choose whether to join a labor union to get      jobs;

·    67% think we should stick with coal or add nuclear and natural gas energy.

Source: Buckeye Institute Reports, August 9, 2010.

Ten Ways to Fix the State Budget Fiasco

By Daniel Downs

When the State benefits, public vice is okay. To get what they want, government leaders are ardent supporters vice that many studies show harms communities, wrecks families, and often destroys lives. For the easy money, Gov. Strickland and Ohio legislators have approved what Ohio voters rejected-slot machine gambling, according to the Columbus Dispatch.

Let’s hope voters remember this when they run for reelection.

The good news is Ohio lawmakers who voted against it intend to take the issue to the Supreme Court. Again, it’s a matter of politicians violating the Constitution, even though Gov. Strickland found found a convenient loophole to jump through.

That also means their is still hope that good creative solutions to solving the $3.2 billion budget deficit will be enacted. Marc Kilmer of the Buckeye Institute proposes ten ways to reform the state budget, which would also enable lawmakers to balance the budget. The following are his ten proposals.

1.    Eliminate the Department of Development – a corporate welfare agency. It hasn’t helped Ohio’s economy and few would miss it if it were eliminated completely. Savings: $157 million over two years.

2.    Move away from Medicaid institutional care. Unlike most other states, Ohio relies on expensive institutional care like nursing homes for its Medicaid recipients. Most recipients prefer cheaper alternatives like in-home care over nursing homes. Savings: $400 million per year.

3.    Reform Medicaid Florida-Style. Medicaid offers low-quality, high-cost care and it takes up a large portion of the budget. Reforms enacted in Florida provide Ohio lawmakers an excellent roadmap for tackling this difficult issue. Savings: $1.5 billion per year.

4.    Education funding should follow the student. If the state implemented a plan where the dollars followed students to whatever school they choose, it would lead to a better education for students as well as savings to the taxpayers. Savings: $500 million per year.

5.    Eliminate the increases from Fiscal Year 2009’s level — Legislators gave some agencies an increase from last year. If these agencies’ funding was held at the same level as Fiscal Year 2009, it would save $343.6 million.

6.    Increase state employee health insurance premiums. On average, state employees pay 15% of the premiums for health insurance. Their private sector colleagues pay roughly 20%. State employees should pay the same. Savings: $57 million over 2 years.

7.    Eliminate non-vital agencies. The Ohio Arts Council, the Cultural Facilities Commission, the Commission on Minority Health, e-Tech Ohio, the Commission on Hispanic/Latino Affairs, and the Ohioana Library Association may serve certain special interest groups well, but in this budget crisis the services they provide are hardly vital. Savings: $111 million over 2 years.

8.    Make users of government services shoulder the cost. The state park system’s millions of visitors each year can pay increased user fees. Savings: $70 million.

9.    Don’t expand government health insurance to the middle class. In 2007 the governor and legislators of both parties expanded a government health insurance program to middle class children. The increase has yet to be implemented and should be permanently abandoned. Savings: $119 million over two years.

10.    Eliminate some Medicaid services. If the state would stop paying for Medicaid recipients’ usage of chiropractors, hospice, and a few other services, the state could save $712 million over two years.

When the above saving are added it, the total amounts to $3.97 billion. Hey! that is more than the $3.2 billion. That violating the voters right to say to slot machine gambling isn’t necessary Gov. Strickland. It does means politicians wold have to show fiscal discipline and responsibility.

I still like the executive branch reorganization legislation that would save Ohio taxpayers around $2 billion this budget cycle.

Maybe it’s time Gov. Strickland and other liberal politicians obey the Constitutional and the people’s will. Better yet, why not resign and let someone more creative and responsible get the job done for the people.