Success and Failure at Public Worker Compensation Reform- Ohio vs Wisconsin 

This Wall Street Journal piece on falling Wisconsin property tax bills shows what can happen when real reform in government sector compensation is addressed, particularly collective bargaining.  From the article,

“On Monday Mr. Walker’s office released new data that show the property tax bill for the median home fell by 0.4% in 2011, as reported by Wisconsin’s municipalities. Property taxes, which are the state’s largest revenue source and mainly fund K-12 schools, have risen every year since 1998—by 43% overall. The state budget office estimates that the typical homeowner’s bill would be some $700 higher without Mr. Walker’s collective-bargaining overhaul and budget cuts.”

Meanwhile, Ohio local governments continue to struggle in the wake of the failure of Senate Bill 5 last year.  We have blogged about this many times since last November but it bears mentioning again that local governments are faced with two unenviable choices now if they have any hope to achieve structural stability in local government budgets: 1) hike local taxes or 2) lay off employees.

Of course, there are some in the General Assembly that would prefer to whistle past the graveyard and ignore the structural problems in order for a quick fix one time fix:

“Backed by leaders of police and firefighters unions, House Democrats unveiled a plan yesterday to restore about $400 million in cuts to schools and local governments through surplus tax revenue, the state’s rainy-day fund and Gov. John Kasich’s plan to increase severance taxes on shale drillers.

Under the plan, which Democrats say they will offer as an amendment to Kasich’s broad mid-biennium review, all surplus tax revenue, currently at $265 million, plus $120 million from the rainy-day fund and $15 million in initial “fracking” tax revenue would go into a new Kids and Communities First fund.”

The problem with that proposal is that it offers a temporary reprieve based in large measure on better than expected tax revenues that may not happen again and on rainy day funds that once depleted would have to built back up to ever be useful again.

In addition, the plan seeks to simply spend revenue from new oil and gas exploration with no effort to move towards a competitive tax system or offer relief to small businesses as Governor Kasich has proposed, albeit with controversy.

Ultimately, this all goes back to a failure to deal with collective bargaining; the long running problem of public sector workers whose total compensation packages, wages and benefits, have grown unsustainable.  Without reform, Ohio is forced into having to make poor decisions that will keep the state from being economically viable.

Wisconsin, despite the controversy there, has shown reform can work and keep taxpayers from being on the perennial hook.  Ohio is running the very real risk of illustrating the opposite: a failure to reform means higher taxes, radical layoffs, or temporary solutions that kick the can down the road for at best a couple of years.

Greg R. Lawson

About Greg R. Lawson

Greg R. Lawson is the Statehouse Liaison and Policy Analyst with the Buckeye Institute
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