Monday, December 1, 2008

The Economy

It’s the economy, stupid. Two items caught my attention both related to the economy although the items were filed under different headings.

First, there is a summit of college and business leaders today at the University of Cincinnati the brain drain “discovered” by Governor Stickland during a recent visit to Taft High School. Nine out of ten students indicated they would be pursuing academic careers outside of Ohio because that is where the jobs are. I put quotation marks around discovered because this situation should not have been news to the governor. Ohio has one of the worst tax schemes anywhere for business. Business owners get to pay state, county, city and/or township taxes. In addition, businesses pay a variety of licenses. All of this is paid on top of the normal expenditures for employee benefits, insurance, pension funds, etc. There are only so many ways to trim costs and before long the only option left becomes to relocate your business. The Mead Corporation was a homegrown company in Dayton, Ohio but eventually relocated their corporate headquarters. The decision did not have anything to do with an inability to find qualified workers, rather the costs associated with keeping their corporate headquarters here in Ohio (where the Mead family is from) became just too expensive.

Governor Strickland is focused on creating jobs through revamping Ohio’s high educational system. He envisions luring companies to Ohio by having a highly trained workforce in place. A test of his theory has already hit the local area in the form of the DHL closure in Wilmington. Seven thousand jobs have been cut creating a huge pool of employed workers. Many of these workers have technical skills and college degrees, if the governor’s theory is correct then another company should be willing to relocate here and hire the DHL employees. However, I doubt this is likely to occur without revamping Ohio taxes to create incentives for a major employer to relocate to the Wilmington area. The meeting at UC today may provide some great ideas but without also creating economic incentive for business, these will remain just great ideas.

The second issue was on Cincinnati Blogs concerning impending budget cuts in Hamilton County. Typically public sector agencies cut budgets by postponing expenditures on equipment or facilities. Training is cancelled or postponed. Another strategy involves some combination of furloughs, early retirements, hiring freezes, or eliminating positions. These measures are short-term at best, as the requirements for these expenditures didn’t change. Assuming the agency has done due diligence in creating these positions, reducing the workforce may help balance the books but it increases the workload of the employees left on the payroll. Incidence of sick leave, absenteeism or resignations will increase.
Eventually they will become frustrated and eventually may look for work elsewhere. The end result of these budgetary actions is an overall diminished effectiveness of the agency to perform its mission. In Hamilton County, we see the sheriff’s office painting a grim picture of rampant crime as patrols are eliminated and criminals will have to be released due to over-crowding in the jails. I have no way of knowing what analysis the sheriff has conducted to arrive at his decisions. I do wonder if these decisions were made in coordination with the city of Cincinnati to see which agencies could pick up the slack for other agencies? For instance, some of the patrols provided by the sheriff’s office were in the Other the Rhine area which is (I believe) in District 1 of the Cincinnati Police, could these patrols not be conducted by the police? Law enforcement agencies usually have mutual aid compacts in place, could these be modified to augment the reductions by the sheriff elsewhere in Hamilton County? Of course that assumes these patrols are required in the first place, if they are then a compromise of some kind needs to be reached. If they aren’t required, then they can be eliminated and funding used to conduct other critical functions.

Hamilton County is facing a budget crisis in part because of the economy but also because of the loss of tax revenues. I submit that Ohio has some of the highest taxes of any of the states, yet our tax revenues are plummeting. Higher taxes create disincentives to spending which in turn reduces tax revenues. We’ve all heard about business relocating their operations overseas. Wages are often pointed out as the reason which inevitably leads to finger pointing between labor and management. What gets overlooked is the need for workers to be able to earn a certain level in order to pay their taxes. Employers have to not only meet the need for a fair and competitive wages, they too have to pay taxes on their facilities and profits. Combined the situation creates a major disincentive to operate business locally and leads to employers leaving Ohio. Our college and tech school graduates have no choice but to follow those jobs out of the state.

Creating jobs in Ohio leads not only to a better quality of life for our residents, it will lead to safer communities as our public sector agencies (fire, EMS, law enforcement, public works) will have the funding they need to operate.

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