Buckeye Institute Talks “Green Energy” Freeze on State of Ohio

Our Greg R. Lawson was on the past episode of the State of Ohio with host Karen Kasler and guest Dale Butland from Innovation Ohio discussing multiple issues.   Discussions on tax policy air this Friday, but last week, Lawson and Butland discussed Senate Bill 310 and the freeze on Ohio’s renewable energy portfolio.  Exchange begins around the 21 minute mark.

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New Study: Cleveland and Columbus Teacher Absences Top Most Urban Areas

If eighty percent of success is showing up, public school teachers in Cleveland and Columbus are not making the grade.  Embedded in a report released by the National Council of Teacher Quality (NCTQ) is a startling statistic: Cleveland and Columbus have two of the highest average number of teacher absences in the nation.

With an average of 15.6 missed days a year, teachers in the Cleveland Metropolitan School District more than doubled the average of 6.1 days found in Indianapolis.  The Columbus City School District did not fare much better, with an average of 14.8 days per year.  There was a total average of 11 days missed among the districts supplying information for the report, 40 of the 50 largest districts in the nation.

To put these numbers in perspective, the absence rate for all full time wage and salary workers is 2.9 percent. Furthermore, an Ohio student can be classified as a chronic truant after missing 15 school days.  A classification of chronic truancy can result in a suspended driver’s license for the student and a criminal charge for his or her parent or guardian.

The high average number of teacher absences underscores problems Cleveland and Columbus have with “chronically absent” teachers.  A “chronically absent” teacher is defined by the report as a teacher with 18 or more absences.  Six districts studied by the report had a “chronically absent” teacher rate of 25 percent of more.  In Cleveland and Columbus, the second and third worst districts on this metric, 33.81 percent and 32.03 percent of teachers, respectively, missed 18 or more days of school.  Only Buffalo, New York, at a whopping 36.82 percent, performed worse.  By contrast, Cincinnati’s “chronically absent” rate was only 14.12 percent, less than half of its Ohio peers.

High rates of absence can affect both student achievement and school funds.  As the report observes,

“When teachers are absent 10 days, the decrease in student achievement is equivalent to the difference between having a brand new teacher and one with two or three years more experience.”

Furthermore,

“The 40 districts included in this analysis spent approximately $424 million combined on substitutes in 2012-2013, not factoring in the time and resources spent recruiting, training, and securing substitutes.”

These findings are consistent with an earlier report issued by the left-leaning Center for American Progress, which estimated the cost of teacher absence to be “a minimum of $4 billion annually.”  The Center for American Progress report also found this issue to be much more prevalent in public schools, where teachers were absent “more than 10 times per year at a rate more than 15 percent higher than in charter schools.”

The NCTQ report is careful not to draw overly broad conclusions, but two findings should trouble defenders of the public education status quo in Ohio.  First, the rate of poverty did not have a statistically significant effect on teacher absence.  Second, the current district incentive programs to ensure teacher attendance do not appear to be particularly effective and need to be re-examined.

There is no reason to attack the public school teachers in Cleveland and Columbus for their excessive absenteeism, but there is reason to raise fundamental questions about how public education is viewed in Ohio.  The endless demands for taxpayer dollars for school funding are often presented as vital investments in the future of the state.  In fact, over the past two years, both Cleveland and Columbus have asked voters to add even more money to already high-spending districts through the approval of gargantuan property tax levies.  Taxpayers must ask whether their investment will be used appropriately and wisely.  Will the additional funds help to achieve the desired results?  Or is there a deeper more systemic problem that requires reform?  Is it time to evaluate whether Cleveland and Columbus teachers can actually succeed in educating the cities’ children without showing up.

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Will “War on Coal” Devastate Ohio?

Given the recent news regarding the new U.S. EPA rules on reducing carbon emissions 30 percent from 2005 levels nationally, it only makes sense to examine the likely impact on Ohio given that around 70 percent of its energy is produced by coal, the rules’ major target.

Unfortunately, as this Cincinnati Enquirer story indicates, Ohio will be one of the most impacted in the nation.  Coming at a time when Ohio’s economy is just recovering from a disastrous economic decade between 2000 and 2010 (losing 617,000 private second jobs, second only to Michigan), a massive energy tax hike right now will be devastating.

“Meanwhile, Ohio lawmakers say they’re seeking to give the state as much control as possible over how it implements the new federal rule. A bipartisan bill would require Ohio’s EPA director to create emissions standards for coal and natural gas power plants — rules that could prevent the state from closing older coal-powered plants. Lawmakers worry a rush in changes to power generation in Ohio could increase electricity costs and eliminate jobs.

The bill is scheduled for a committee vote as early as Tuesday in the Ohio House.

Ohio’s coal-fired plants will almost certainly be hit hardest by the administration’s proposal.

EPA officials said Ohio’s plants produced 1,850 pounds of carbon pollution per megawatt hour of electricity in 2012. The EPA wants that brought down to 1,338 pounds by 2030.”

The Institute for 21st Century Energy estimates an average annual hit of $7.4 billion between 2014-2030 in the region of the country Ohio is located and an annual average loss of nearly 32 thousand jobs.

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Local Governments Recovering Despite Supposedly Brutal Cuts

The cost of local government is a critical issue for Ohio’s future economic growth.  As The Buckeye Institute described in our 2011 Joining Forces report, Ohio has the seventh highest number of municipalities (938) and townships (1,308) in the nation and there is a cost to having so much government in Ohio.  In 2010-2011, according to the Ohio Department of Taxation, the tax burden of local government in the state ranked Ohio as 12th highest as a percentage of personal income.  These kinds of costs, combined with a still unreformed labor environment, make Ohio a less attractive place to do business and help to explain why other states have grown more robustly over the last several decades.

It is important to keep that in mind as many local governmental bodies lament the cuts made by Governor Kasich and the General Assembly to the Local Government Fund as well as the elimination of the estate tax. If the recent bus tour by Democratic gubernatorial nominee Ed FitzGerald is any indication, a number of local elected officials clearly assume they have a revenue problem and vociferously blame Columbus.  All too many officials appear unwilling to consider that what they actually have is a spending problem.  These same officials also conveniently fail to mention that the localities are recovering from the Great Recession thanks to a growing, albeit slower than desired, Ohio economy.

The Buckeye Institute is working on a report that will show that many counties, municipalities, and townships have seen their general revenues grow since the beginning of the decade despite decisions made in Columbus that have led to so much angst.  Many of them are actually sitting on significant unencumbered end of year balances.  Those balances can act, if needed, as “rainy day funds.”  In numerous cases those balances actually exceed, as a percentage of their revenues, the state’s own Rainy Day Fund that stands at 5 percent of the previous year’s general revenue.

This is a very different, and far more nuanced, story from the doom and gloom offered up on a daily basis to the news media regarding slashed services and “lack of investments” in the future.

Below are several illustrative examples with data supplied by the governments themselves to the Auditor of State.  More will be available in our forthcoming full report.

While there are some communities where this picture is different, the challenge for local government officials is to realize the need to change and grow the entire Ohio economy.  They need to confront the reality that Ohio’s economy has been a laggard nationally for over half a century and that many of the problems they face are not the result of changes coming from Columbus in the last few years, but the result of decades of poor state policy.

While the South and West were rapidly expanding their populations, Ohio hasn’t.  One needn’t look further than the fact that Ohio’s Congressional delegation has shrunk by a third since the 1960s, from 24 to 16.  This has costs that reverberate through all levels of Ohio’s governments.

Dramatic reforms in Ohio including Right to Work, further state, and especially local tax reform are essential to jolt the state out of its economically dreary status quo.

Raising taxes so local governments can go back to the way things always have been is not a long-term answer to Ohio’s challenges- indeed, it further worsens conditions that have made Ohio less competitive.  A better solution is to facilitate shared services, reform taxes at all levels of government and engage in collective bargaining reform.

 

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Private Sector Job Growth Continues, Unemployment Rate Drops Below National Average, Labor Force Continues Slide- Ohio by the Numbers, April 2014

The April 2014 Ohio By the Numbers report continues to paint a mixed picture for Ohio’s economy.  On the positive side, Ohio’s private sector gained jobs and the unemployment rate sharply declined.  Ohio added 8,000 private sector jobs (and 4,600 government jobs) and the unemployment rate declined from 6.1 percent in March to 5.7 percent in April.  However, the unemployment rate decline, despite settling at over half a percent below the national average of 6.3 percent, is partially the result of another month of significant decline in Ohio’s Labor Force — a decline of 14,000 people.  As The Buckeye Institute’s Labor Force report indicates, Ohio’s Labor Force has lost more than 24,000 people in the last two months and is down nearly 17,000 people since January.

Overall, Ohio’s Labor Force Participation rate has slipped from 63.7 percent in April 2013 to 63.1 percent this April.  This reduction was caused by a 27,000 April-to-April loss of people participating in the Labor Force, despite the working age population growing by 43,000 people over the same time period.

Ohio continues to see private sector job gains, but a continuing test to Ohio’s recovery is the state’s shrinking Labor Force.

For a full Labor Force update, click here.

Overall highlights from the report:

  • Ohio gained 8,000 private sector and 4,600 government jobs in April;
  • Ohio ranked 26th nationally in private sector job growth since January 2010, growing at a 7.6 percent rate;
  • Ohio currently ranks 47th nationally for private sector job growth since January of 1990, growing at 10 percent (top-ranked Nevada grew 98 percent over the same time span).

Within individual industry sectors, Professional and Business Services, Education and Health Services, and Leisure and Hospitality continue to employ more people today than in either 1990 or 2000.  Meanwhile, Mining and Logging, Construction, Manufacturing, and Information sectors have fewer jobs today than in 1990 or 2000.

Between 1990 and January 2012, Worker Freedom states’ private sector jobs grew at a 38 percent rate vs. only 14 percent for Forced Union states (11.8 million vs. 8 million).  Since Indiana became a Worker Freedom state in February 2012, Worker Freedom states’ private sector jobs grew at a rate of 5.2 percent vs. 3.9 percent for Forced Union states.

For the full report, please click here.

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Buckeye Institute Urges General Assembly to Let the Market Decide on “Green Energy”

The Ohio House of Representatives was poised to pass Senate Bill 310 this week—a piece of legislation that would implement a two-year freeze on the state’s energy efficiency and renewable energy portfolio standards.  The bill would also create a special committee to continue examining the impact of the renewable energy portfolio on Ohio consumers, eliminate a probably unconstitutional in-state mandate for the purchasing of renewable energy, and a variety of other things.  The bill, however, was delayed until at least next week.

The current standards were passed during Governor Ted Strickland’s term of office in 2008 and took no account of the major change in Ohio’s energy landscape heralded by the shale revolution.  The mandates include specific set asides for solar energy and have prompted the large expansion of wind energy in Ohio despite the fact that the state is simply not located in an area to take meaningful advantage of that resource.

Our Statehouse Liaison, Greg R. Lawson, testified as an interested party yesterday before the Ohio House Public Utilities Committee during a hearing on Senate Bill 310.  In his testimony, Lawson concluded:

 ”…the entire premise of government mandates on energy is misguided. Given the current realities of the energy market, these mandates become even more absurd. In time, the market will adapt—it always does. If our natural gas were to disappear tomorrow, other supplies would emerge to fill the void. In the future, some of the supplies will probably come from sources that seem like science fiction today. Yet, the competition amongst these various resources will ultimately be what drives costs down and assures the reliability of our energy infrastructure. Mandates merely prop up non-competitive energy sources and supplies, and do not serve the recovering economy or Ohio energy consumers well.”

Lawson was also interviewed by WBNS 10TV on the whether Ohio should roll back the mandates.

When government picks winners and losers, the public and innovation loses.  Ohio should not be in the business of mandates, whether in the field of health care, or in the energy market.

 

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Compare Apples to Apples When it Comes to Property Levies

With the dust now settled from May Elections, it is worth pausing to review how property tax levies work in Ohio.

All too often, well meaning people are confused by the dizzying array of different property tax levies that can placed on the ballot.  What is a “new levy” vs. a “renewal levy” vs. a “replacement levy?”  They are also frequently unaware that there is a world of difference between the effective tax rates they are paying on an existing levy and the official “voted” amount they would be paying under a new levy.  It is critical for taxpayers to understand the differences between “effective” and “voted” millage so that they are making appropriate comparisons between apples and apples.

When public officials want to raise more money they have several options for the type of levy to propose.  When a previous levy is set to expire, officials will often propose a “replacement” levy.  These replacement levies are for nominally the same amount as the expiring levy.  Due to the nominal rate, typically called the “voted millage”, being the same or similar to the amount previously approved, voters less frequently oppose these levies.  What they may not realize is that, in Ohio, this is an apples-to-oranges comparison.  In fact, the so-called “replacement” levy will likely cost taxpayers more.

As property values rise and house values are re-assessed every three years, the actual millage rate, called “effective millage,” homeowners are taxed at decreases so that the dollar amount of taxes for the levy stays the same.  When a replacement levy is approved, this process of lowering the effective millage resets.  Consequently, if property values have risen so does the tax bill.  A “renewal” levy, on the other hand, merely extends the previous levy in question for a set number of years, meaning your tax bill would remain constant because the effective millage is not reset.

For a simple illustration, see the chart below that shows the impact:

This shows a hypothetical district’s situation over a six-year period with a five-year, five-mill general levy approved in year one and then renewed again in year 5 as opposed to a replacement levy initiated in year 5.  For simplicity, the analysis also assumes a jurisdiction consisting of 10,000 homogeneous taxable homes, each valued at $100,000 when appraised in year one and increasing by 5 percent each year, with each homeowner receiving a 12.5 percent reduction from having an owner-occupied residential property.  Please note that the recent budget changes eliminating the 12.5 percent “rollback” impacts “new levies” and replacement levies, thus the increase in the actual taxes paid for a replacement is now even higher than it had been prior to current biennial budget.

In years one through five the tax bill for the levy stays constant despite the 5 percent year-on-year increase in values. The effective millage is 0.44% in year one (coming from the 12.5% reduction), and decreases each year. Year 6 shows the bottom-line difference between a renewal and replacement levy. If in year 6 voters approved a renewal levy, the bill stays the same as effective millage rates continue to decline (shown italicized).  However, if voters approve a replacement levy in year 6 (shown emboldened), these millage rates reset and are based on the new property values, significantly increasing their tax burden.

As this makes obvious, it is extremely important when debating levy issues to be aware of this potential discrepancy.  It is also important to compare effective millage rate with the any new proposed levy rate as opposed to comparing only the voted millage rates.  Otherwise, it is easy for people to be confused as to the full costs of the proposed levies they see on the ballot.

For more in-depth information regarding Ohio taxation issues, click here.

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