mark partridge swank chair in rural-urban policy dept. of agricultural, environmental, and...
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Mark PartridgeSwank Chair in Rural-Urban Policy
Dept. of Agricultural, Environmental, and Development Economics
[email protected]://aede.osu.edu/programs/Swank/
Helping Ohio Compete: Bringing the 21st Century to
OH’s Local Govts
Helping Ohio Compete: Bringing the 21st Century to
OH’s Local Govts
Presented at:
OFBF Rural Advisory Team Plain City, Ohio – March 3, 2011
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OverviewOverview 1. Current Economic Conditions 2. Ohio is not competitive in the
global economy nor is it competitive with other states
3. Emerging approaches to local gov’t and making Ohio competitive.
OFBF Rural Advisory Team2
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Ohio growth patterns.Ohio growth patterns. Ohio’s economy lags the nation. Long-term issue that will
persist for years and years if nothing is done! If Ohio returned to the national average in per-capita income: over $16,000 more income for a family of 4.
We need to produce 75,000 jobs a year, while right now we have been trending at a loss of 60,000 jobs a year since 2000.
Private sector investment does not occur with current expectations. Vicious cycle that limits wealth
creation.
OFBF Rural Advisory Team3
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OFBF Rural Advisory Team4
Economic ConditionsEconomic Conditions Popular stories for OH’s lagging
performance are insufficient. E.g., manufacturing’s importance to explaining persistent problems is overstated since 1990.
What are the trends?
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Data—focus on job growth.Data—focus on job growth. Journalists love to report the
unemployment rate but it can be quite misleading or even useless. Witness the recent MAJOR drop in U.S. UR.
North Dakota is held up today as strong economy 3.7% UR (2.6% in 2001). Yet, ND’s long-term performance in terms of pop. is the worst in the country.
Ultimately what drives OH’s or ND’s prosperity is job growth.OFBF Rural Advisory Team 5
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1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
200980
90
100
110
120
130
140
150
160
170
180
190
200
U.S.
Ohio
Michigan
Illinois
Indiana
Wis-consin
Source: Bureau of Labor Statistics.
1970-2009 Nonfarm Employment Growth, US and Great Lake States: Benchmarked to 1970=100
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Jan-
06
Apr-0
6
Jul-0
6
Oct
-06
Jan-
07
Apr-0
7
Jul-0
7
Oct
-07
Jan-
08
Apr-0
8
Jul-0
8
Oct
-08
Jan-
09
Apr-0
9
Jul-0
9
Oct
-09
Jan-
10
Apr-1
0
Jul-1
086
88
90
92
94
96
98
100
102
104Nonfarm Employment January 2006-August 2010
Benchmarked to January 2006 U.S.
Ohio
Michigan
Illinois
Indiana
Wis-consin
Source: Bureau of Labor Statistics.
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Jan-
06
Apr-0
6
Jul-0
6
Oct
-06
Jan-
07
Apr-0
7
Jul-0
7
Oct
-07
Jan-
08
Apr-0
8
Jul-0
8
Oct
-08
Jan-
09
Apr-0
9
Jul-0
9
Oct
-09
Jan-
10
Apr-1
0
Jul-1
060
65
70
75
80
85
90
95
100
105
U.S.
Ohio
Michigan
Illinois
Indiana
Wis-consin
Source: Bureau of Labor Statistics.
Change in Manufacturing Employment benchmarked to Jan. 2006═100
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Where are we as the economy recovers?Where are we as the economy recovers? Rural Ohio is faring better than
metropolitan Ohio. Among the 3 C’s, Cleveland is the
‘growth engine’ and Columbus has been the “engine that couldn’t”.
Smaller Ohio Metropolitan areas are showing some signs of life.
9OFBF Rural Advisory Team
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-12.00
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
OH - all countiesmetro OHnon metro OH
Annual Percent Change in Nonfarm Employment, January 2006-August 2010
Source: Bureau of Labor Statistics.Nonmetropolitan is determined by taking Ohio total minus employment in Ohio’s metropolitan areas.
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-12.00
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
OH - all countiesCincinnatiClevelandColumbus
Source: Bureau of Labor Statistics. Employment for metropolitan areas.
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OFBF Rural Advisory Team12
Why does Ohio Lag? Why does Ohio Lag? Ohio lags Great Lakes Region—i.e.,
not manufacturing; not climate; not location. Trade is at most a minor cause—timing is not right Trade deficits began in early 1980s NAFTA began in 1994 China became a force after 2000 The recent export surge has greatly
benefited agriculture (NY Times, “Export Boom Helps Farms, Not Factories”)
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Why does Ohio Lag? Why does Ohio Lag? In global economy, small
changes in costs/profits sends entrepreneurs, skilled workers, and investment to the most profitable locations
Moral: Ohio needs to focus on what it can control and not blame outsiders for our problems.
What about taxes, education, gov’t? OFBF Rural Advisory Team
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What can be done in Ohio?What can be done in Ohio?
OFBF Rural Advisory Team14
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OFBF Rural Advisory Team15
What can be done in Ohio?What can be done in Ohio? Constraint—no money, tight
budgets. 2008 OH state AND local tax burden is 7th highest in the U.S. (Nat. Tax Found.)
Individual firm tax incentives are not effective (Kraybill and Gabe, 2002; Partridge et al., 2011) and help increase taxes on everyone else including agriculture. Better policy is not ‘pick winners’ but to
give everyone lower taxes to reduce the burden.
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What can be done in Ohio?What can be done in Ohio? Our leaders need to be smart and not
just copy everyone or follow the latest fads.
Regionalism and effective governance—roughly 200 local gov’ts in Columbus. Dayton/Montgomery County is a leader.
OH has thousands of local gov’ts with high taxes. Newspapers report that 85% of expenditures is local gov’ts.
OFBF Rural Advisory Team 16
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What can be done?What can be done? Good governance promotes
wealth creation and reduces risk premium for business.
Not boring, but important for our state’s health Better governance to compete in 21st Century through lower costs.
Better planning. Cooperate not compete for econ develop.
OFBF Rural Advisory Team17
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How to think about local gov’tHow to think about local gov’t
Larger or smaller regions? The plus of small regions is they are close to the people with similar HH tastes. Gov’t is shaped to the desires of the people.
The plus of larger regions is when there are spillovers—links across economies, land use, or transport
The other plus is “economies of scale” In 1800, small regions made sense, no
spillovers and few economies of scale. In the 21st Century, small regions are
costly and hurts OH’s competitivenessOFBF Rural Advisory Team
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OFBF Rural Advisory Team19
What can be done?—cont. What can be done?—cont. Ohio has significant amounts of
government: Gov’t borders and duties were defined
100+ years ago for a different economy & transport.
Many in Indiana argue that it has too much local gov’t and proposed to eliminate 1,000+ units. Source: Wall Street Journal, Sept. 5, 2007, p. A1 and Indiana Commission on Government Reform, (2007).
“Despite the enormous economic, social, and technological changes that have occurred…, Indiana’s system of local government would still be very recognizable to Hoosiers from the Civil War era…” Indiana Commission on Gov’t Reform, p.42.
Bi-partisan. Whether you prefer low taxes or more ed funding, leads to more resources.
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OFBF Rural Advisory Team20
Within Ohio trends and regions.Within Ohio trends and regions. A key feature is proximity to the
core of one of Ohio’s largest 5 cities or its many urban areas. Commuting patterns show this pattern.
Growth does not respect county borders Separating rural & urban Ohio is
pointless. The spillovers imply the need for
regional approaches.
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OFBF Rural Advisory Team21
Primary Commuter Flow
Commuting w/in large urban area
High commuting to large urban area
Low communiting to urban areaExtremely low commuting - Rural
Commuting w/in smaller urban area
High commuting to smaller urban area
Rural-Urban Commuting by Census Tract, 2000
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Other Advice for Ohio PolicymakersOther Advice for Ohio Policymakers Building our entrepreneurial
talent and business retention. Economists view: Governments can’t pick winners
Economists believe ‘communities’ should build an environment where: Eventual ‘Winners’ pick your community.
Ohio Gov’ts try to do too much for
Economic Development!OFBF Rural Advisory Team 22
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SummarySummary Ohio’s leaders face many
challenges Need to consider addressing the cost of local gov’t to help make OH competitive in the global economy.
Small-box gov’ts make less sense when there is better communication, transport, economic spillovers, and cost savings to providing services at a larger scale.
OFBF Rural Advisory Team23
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Advice for Ohio’s PolicymakersAdvice for Ohio’s Policymakers
Governor Kasich has a strong sense that efficient government goes a long way to economic success? Has he learned from past conservative leaders who did not succeed? The data says ‘state’ taxes are low, but ‘local’ taxes and revenues are high.
[Not that more liberal Democrats succeeded either.]
OFBF Rural Advisory Team 24
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OFBF Rural Advisory Team25
Thank youThank you
Presentation will be posted at The Ohio State University; AED Economics; Swank Program:
http://aede.osu.edu/programs/Swank/
(under presentations)
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0 0.00002 0.00004 0.00006 0.00008 0.0001 0.00012 0.00014 0.00016 0.00018
-12
-10
-8
-6
-4
-2
0
2
PA
IL
IN
MI
OH
WI
MN
FL
AZ
CO
f(x) = 1956.71745192743 x − 4.7817757323724R² = 0.00140020435498323
New Per-Capita Million Dollar Facilities: 2005-2007
%Jo
b G
row
th 2
00
8-1
0
2008-2010 Employment Growth—Ohio is a leader in Million $ Facilities
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TABLE 1:STATES WITH PROJECTED FY2012 GAPS
FY12 Projected ShortfallShortfall as Percent of FY11
BudgetArizona $974 million 11.5%California* $25.4 billion 29.3%Colorado $988 million 13.8%Connecticut $3.7 billion 20.8%District of Columbia DK naFlorida $3.6 billion 14.9%Georgia $1.7 billion 10.3%Hawaii $410 million 8.2%Idaho $300 million 12.6%Illinois $15.0 billion 44.9%Indiana $270 million 2.0%Iowa $294 million 5.6%Kansas $492 million 8.8%Kentucky* $780 million 9.1%Louisiana $1.7 billion 22.0%Maine $436 million 16.1%Maryland $1.6 billion 12.2%Massachusetts $1.8 billion 5.7%Michigan $1.8 billion 8.6%Minnesota $3.9 billion 24.5%Mississippi $634 million 14.1%Missouri $1.1 billion 14.4%Montana $80 million 4.3%Nebraska $314 million 9.2%Nevada $1.5 billion 45.2%New Hampshire DK naNew Jersey $10.5 billion 37.4%New Mexico $410 million 7.6%New York $9.0 billion 16.9%North Carolina $3.8 billion 20.0%Ohio $3.0 billion 11.0%Oklahoma $600 million 11.3%Oregon* $1.8 billion 25.0%Pennsylvania $4.5 billion 17.8%Rhode Island $290 million 9.9%South Carolina $877 million 17.4%South Dakota $127 million 10.9%Tennessee DK NaTexas $13.4 billion 31.5%Utah $437 million 9.2%Vermont $150 million 13.9%Virginia* $2.3 billion 14.8%Washington $2.9 billion 18.5%West Virginia $155 million 4.1%Wisconsin $1.8 billion 12.8%States Total $124.7 billion 20.0%Note: Kentucky and Virginia have two-year budgets. They closed their FY2012 shortfalls when they enacted their budgets for the FY2011-FY2012 biennium. California’s shortfall includes an $8.2 billion shortfall carried forward from FY2011. Oregon’s shortfall is one half of the state’s total projected shortfall for the 2011-2013 biennium.
FY12 Budget Shortfalls as a share of FY11 Budgets
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STATES WITH PROJECTED FY2012 GAPS
FY12 Projected ShortfallShortfall as Percent of FY11
BudgetNebraska $314 million 9.2%Nevada $1.5 billion 45.2%New Hampshire DK naNew Jersey $10.5 billion 37.4%New Mexico $410 million 7.6%New York $9.0 billion 16.9%North Carolina $3.8 billion 20.0%Ohio $3.0 billion 11.0%Oklahoma $600 million 11.3%Oregon* $1.8 billion 25.0%Pennsylvania $4.5 billion 17.8%Rhode Island $290 million 9.9%South Carolina $877 million 17.4%South Dakota $127 million 10.9%Tennessee DK NaTexas $13.4 billion 31.5%Utah $437 million 9.2%Vermont $150 million 13.9%Virginia* $2.3 billion 14.8%Washington $2.9 billion 18.5%West Virginia $155 million 4.1%Wisconsin $1.8 billion 12.8%States Total $124.7 billion 20.0%Note: Kentucky and Virginia have two-year budgets. They closed their FY2012 shortfalls when they enacted their budgets for the FY2011-FY2012 biennium. California’s shortfall includes an $8.2 billion shortfall carried forward from FY2011. Oregon’s shortfall is one half of the state’s total projected shortfall for the 2011-2013 biennium. Source: Center on Budget and Policy Priorities, see notes to slide
FY12 Budget Shortfalls as a share of FY11 Budgets--cont
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Mid-Year Shortfall Amount
Shortfall as Percent of FY11
BudgetArizona $531 million 6.3%California* See Note Colorado $257 million 3.6%Connecticut $45 million 0.3%Kansas $60 million 1.1%Louisiana* $108 million 1.4%New Mexico $159 million 2.9%New York $315 million 0.6%Oregon $378 million 5.4%Texas $4.3 billion 10.1%Washington $1.1 billion 7.1%District of Columbia $175 million 2.8%Total $7.4 billion 4.2%
Note: California did not fully address the shortfall that it faced prior to adopting its FY2011 budget (listed in table 1). An $8.2 billion shortfall remains open for FY2011. Louisiana ended FY2010 with a shortfall that must be closed in FY2011.
States With FY2011 Mid Year Gaps
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OFBF Rural Advisory Team31
Reference MapReference Map