Mark Partridge Swank Chair in Rural-Urban Policy Dept. of Agricultural, Environmental, and Development Economics [email protected]

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

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

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.



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?

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

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

6

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


7

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


Change in Manufacturing Employment benchmarked to Jan. 2006═100

8

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

-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.

10

-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.

11


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”)

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

13

What can be done in Ohio?What can be done in Ohio?



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.

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

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.


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

18


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.


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.


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

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

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.


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


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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PA

IL

IN

MI

OH

WI

MN

FL

AZ

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f(x) = 1956.71745192743 x − 4.7817757323724R² = 0.00140020435498323

New Per-Capita Million Dollar Facilities: 2005-2007

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2008-2010 Employment Growth—Ohio is a leader in Million $ Facilities

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

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

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


Reference MapReference Map

Documents

Mark Partridge Swank Chair in Rural-Urban Policy Dept. of Agricultural, Environmental, and Development Economics [email protected]