BuckeyeBlog

The Weekly Standard has a great article about how government employee unions are contributing to state budget problems. It points out the generous compensation government workers receive, courtesy of your tax dollars:

For every $1-an-hour pay increase, noted Dennis Cauchon in USA Today, public employees have gotten $1.17 in new benefits. Private workers have gotten just .58 cents in benefits for every $1 raise. This gap worries left-liberal labor economist Barry Bluestone. The price of state and local public services increased by 41 percent nationally between 2000 and 2008. Private services only increased by 27 percent. The benefit growth has continued unabated into the Great Recession, and Bluestone says the gap will inevitably produce a backlash.

The rising compensation of state government workers in Ohio has contributed significantly to the current state budget problems, as I wrote about here.

Even as Columbus city officials moan and groan about budget crises and their need to increase the city’s income tax, the Columbus Department of Recreation and Parks has decided to take on a whole new project. An article in today’s Columbus Dispatch states that the city may be forced to close its parks department if Issue 1’s tax increase does not pass on August 4. However, the Department of Recreation and Parks has decided to build an entirely new two-acre park and make improvements to another. The department claims that the projects will draw from “charitable grants and special funds” rather than the city’s operating budget.

Right. But parks require maintenance, equipment, personnel and other overhead costs after that. Where will the department, supposedly at risk of getting shut down, obtain these funds? It doesn’t really matter. After all, spending money unsustainably seems to be Columbus’ modus operandi these days. And more than likely, it will use those budgetary shortfalls to advocate another tax increase in a few years.

The vote on Issue 1’s tax hike is fast approaching, and the city continues its rhetoric and threats about shutting down major government services. But the City of Columbus really does not help its case when, instead of streamlining its spending, decides to pile it on. Columbus taxpayers should be asking hard questions. Why build new parks, when we can’t even afford the exorbitant services and spending the city involves itself in? If city officials cannot recognize misplaced priorities when everyone else can, do they deserve a tax increase?

The headline in the Columbus Dispatch trumpets Governor Strickland’s talking points that more people will gain health coverage because of a variety of new regulations in the state budget. A more accurate headline would have indicated that these changes will actually raise health insurance rates in Ohio, leading to more Ohioans going without insurance.

By imposing government price caps on how much insurance can charge those who have pre-existing conditions, legislators and the governor have mandated that everyone pay more for insurance. People with pre-existing conditions are guaranteed to cost insurance companies a lot of money, almost certainly more money that these individuals pay in premiums. Insurance companies must pay for that coverage by raising the rates for everyone else.

The Dispatch story goes on to discuss how rates for health insurance premiums are increasing dramatically. The regulations being celebrated in this article are a huge part of why premiums are going up. It’s unfortunate that the reporter didn’t make this elementary connection.

As the article also points out, many of the uninsured are young adults. Let’s consider why a young adult wouldn’t want to buy insurance. For one, young adults are a pretty healthy group. They don’t go to doctors or use health care as much as older people. So they have less need for insurance than others. Two, with insurance rates going up, it costs a lot to pay for that insurance. So healthy people don’t want to pay a lot for something they have little chance of using? Makes sense to me (and it did when I was a twenty-year-old and I decided I wasn’t going to purchase health insurance. As a result, I went without for two years). The only way to tempt these people into paying for insurance is to keep its cost down. Too bad the governor and General Assembly didn’t do that.

According to Gongwer News Service, a bipartisan group of legislators has rejected Governor Strickland’s idea to help balance the budget by reducing the amount the state pays into the public employee retirement system:

A Strickland administration proposal to help balance the budget by reducing retirement contributions for state workers has been shelved, leading lawmakers said Wednesday.
 
Rep. Todd Book (D-Portsmouth) and Sen. Keith Faber (R-Celina) both said Gov. Ted Strickland’s plan to cut employer contributions from 14% to 8% over the biennium has been rejected by lawmakers.

The governor is right on this issue and the Republicans and Democrats in the General Assembly are wrong. The state is facing a huge deficit and this is a sensible idea to help curb it. In fact, it may be time for the state to begin looking at how generous its pension system is for retirees. Reform could end up saving the state’s taxpayers a significant amount of money in future years.

Jon Entine had a great article in Reason magazine earlier this year about the looming government pension fund crisis.

Looks like Governor Strickland is supporting Medicaid cuts and re-thinking his Medicaid expansion because the state isn’t receiving enough tax revenue.  Two years ago, when policymakers in the General Assembly almost unanimously (there was only one dissenting vote) expanded Medicaid at the request of the governor, I wrote this:

Expanding Medicaid can lead to large increases in Medicaid spending when states can least afford it –during recessions. Ohio saw this earlier this decade when Medicaid spending increased dramatically during the recent recession. Spending grew at 11 percent annually during 2001 and 2004, squeezing other budget priorities at a time when the state was seeing reduced revenue. Expanding Medicaid now will only repeat this cycle during the next recession.

Oh, so now Governor Strickland gets it, huh? I guess I was just two years too early.

I’m not a prophet, folks, I’m just someone who actually remembers the events of 2001 through 2004. State policymakers who are grappling with the state’s current deficit chose to ignore the lessons of the recession earlier this decade and expanded spending in a variety of areas, not just Medicaid. Now they are reaping the consequences of their bad decisions. I’ll wager (based on past experience) that soon Ohio’s taxpayers will be reaping the consequences of these bad decisions when these same policymakers raise taxes.

It must be nice to have allies in the General Assembly. As the Ohio Contractors Association found out, getting a provision tucked into the budget bill which will reduce comptition for state construction jobs (and, in turn, drive up the cost of those jobs) was pretty easy:

House Democrats slipped a provision into the state budget last month banning some uses of a new style of competitive bidding over the Internet that has netted big savings in Portage County.

Inserted at the request of the Ohio Contractors Association, the provision added during the early hours of April 28 bans Internet reverse auctions for supplies and services related to construction projects.

Vernon Sykes, an Akron Democrat, was behind this language. As Portage County’s experience with these auctions shows, they can produce substantial savings:

Jeff Lonzrick, an engineering manager for Portage County’s water resources department, said the online bidding on the water project was done April 20 by a half-dozen companies prequalified to do the work. It resulted in a low bid of $188,500, while the engineer’s estimated cost had been $253,000, he said. The project was a routine replacement of 1,126 feet of a 16-inch water main in Aurora.

The contractors claim that these auctions don’t produce this kind of savings regularly. Fine. As Portage County Commissioner Chuck Keiper says, then their supporters should have this debate in the full House and not stick the ban in a budget bill.

Making businesses compete for government contracts is good. The more transparent the competition, the better. Trying to reduce this transparency at the behest of a politically-connected interest group is a shameful. Perhaps that’s why Rep. Sykes tried to slip this into the budget bill unnoticed. Kudos to the Plain Dealer’s Aaron Marshall for exposing this anti-taxpayer move on the part of Rep. Skyes and the Ohio Contractors Association.

A mandate that insurance companies must cover services for autistic children was part of the budget passed by the Ohio House. What do autistic services have to do with the state budget? I’m not sure and it seems the Sen. John Carey isn’t sure, either. He wants to remove the mandate so that it can get a more thorough review. That sounds reasonable — the mandate will raise the cost of insurance and shouldn’t be snuck through as part of the state’s budget.

Sen. Carey and other legislators may also want to consider the fact that there is a lack of evidence that many services for autistic children actually produce results:

Medications, new styles of teaching, classical psychological conditioning, physical manipulation, vitamins, diets, special eyeglasses—many kinds of treatments have been proposed and tried, but few have been tested in a rigorous way. Fewer still—some behavioral conditioning methods, a few anti-psychotic medications—have demonstrated some degree of efficacy. Some autistic patients exhibit very difficult patterns of behavior, ranging from simple stubbornness to compulsiveness to screaming to destructiveness to explosive violence. The behavioral changes produced by the few effective treatments make life in social settings (including the home) possible, but we have no idea whether they have any effect on the underlying cause (or causes) of autism or whether they even make severely affected patients feel better. The people who work with autistic clients often come to depend on their own sensitivity and empathy to judge whether a treatment has had a positive or negative impact.

So the House passed legislation that everyone agrees will raise health insurance rates (and likely lead to some people dropping insurance coverage) to pay for services that likely won’t do much good.  That’s pretty poor public policy if you ask me.

While other industries that suck from the teat of Ohio government are experiencing hard times obtaining funding, nursing homes are having their usual success in getting more of your tax money shoveled their way. Already profiting handsomely from Ohio’s Medicaid system, if House Speaker Budish has his way nursing homes will be profiting even more from their political connections. The nursing home situation in Ohio is a good example of why government-run health care won’t be the cost-effective, patient-friendly nirvana that some liberals envision.

Health care analysts generally agree that it is less expensive for taxpayers and better for many Medicaid recipients if long-term care is provided mainly in homes or community settings (the cost of home or community care is one-third of the cost of nursing home care in Ohio). However, as you may imagine, nursing home operators have a different view. It doesn’t matter to them if their services are expensive or if people don’t want to use them. If there were a free market in long-term care, business owners could not disregard consumers in this way and thrive. But when politicians are running the show, it’s pretty easy to convince them to spend your tax money for expensive care that people don’t want.

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From the Columbus Dispatch:

Rep. Ross McGregor, R-Springfield, asked Transportation Department chief Jolene Molitoris whether the state should spend money on rail service at a time when an I-90 bridge in Cleveland is too dilapidated to carry trucks.

Speaking in a finance committee hearing on the state transportation budget, McGregor called trains “quite a romantic notion” but perhaps not the most practical thing in a recession.

Molitoris, a former federal railroad administrator, disagreed.

“I would call it a good business decision,” she said. “The whole romantic notion is really not one I would apply to this at all.”

Molitoris acknowledged that the passenger rail line would lose money and require a public subsidy. That’s true of all passenger rail systems around the world, she said.

So let me get this straight: a state bureaucrat thinks that a “good business decision” means you operate your business at a loss and require taxpayer subsidies to remain viable? No wonder the state is in such a fiscal mess. Of course, I shouldn’t be too hard on Ms. Molitoris. With all the farmers, auto executives, and other “businessmen” (in less politically-correct times we’d call them welfare recipients) who only maintain viable businesses through government subsidies, I guess it’s easy to see where Ms. Molitoris got her ideas on sound business practice.

I mentioned a Reason Foundation study in a post last week that illustrates the folly of government investment in passenger rail.

Governor Ted Strickland has proposed funding for a passenger rail between Cincinnati, Columbus, and Cleveland. As the Toledo Blade reports, lawmakers are skeptical of it. They certainly should be. While politicians usually love rail projects and claim they have a variety of benefits, they are usually extremely expensive and extremely underused.

As the Reason Foundation wrote back in 2005:

Intercity passenger rail clearly will not have any significant impact on long-distance travel since “rail travel is not time-competitive with air travel.” The only possible congestion relief would be on shorter-distance travel in certain densely populated areas of the country, and even then the impact is likely to be minuscule. According to a GAO report, “[I]n 1995, we reported that each passenger train along the busy Los Angeles-San Diego corridor kept about 129 cars off the highway (about 2,240 cars each day)—a small number relative to the total volume.”

And while the following quote pertains to Amtrak, if you replace “Amtrak” with “Governor Strickland’s rail proposal,” it is just as accurate:

…intercity passenger rail travel declined substantially after World War II and has remained relatively constant since the creation of Amtrak. The development of the Interstate Highway System beginning in 1956 significantly reduced the cost of automobile travel, which also contributed to the growth of suburbs and increased reliance on the automobile for transportation. Technological innovations such as improvements in fuel economy reduced the relative price of automobile travel even further. Air travel also became cheaper, and the reduction in travel time it offered (though you might not know it from the security lines at airports these days) made it a more convenient option for long-distance travel. So, generally speaking, automobiles have become more attractive than rail for short-distance travel and airplanes have become more attractive for long-distance travel. Where does this leave Amtrak? The answer is “nowhere.”

With the state facing a huge deficit, killing this proposal seems like an easy way of saving some money.