By Greg R. Lawson

Thank you Co-Chairs Schuring and Coley and members of the Ohio Grace Commission for the opportunity to discuss streamlining our state government and saving taxpayer dollars. My name is Greg R. Lawson. I am the Statehouse Liaison and policy analyst at The Buckeye Institute for Public Policy Solutions, a free market think tank that believes low taxes and limited government regulations will lead to a more prosperous Ohio.

Governor Kasich and the General Assembly deserve credit for finding ways to slow government spending. Much of the current budget provides for flat funding or just a slight increase in appropriations for many state agencies. This is a positive step. Unfortunately, this means that further savings will require even tougher and more creative policy choices. But to sustain Ohio’s fiscal recovery, to spur economic growth, and to be more prepared for the next economic downturn, such choices must be made.

The Buckeye Institute suggests exploring spending reductions and creative solutions in the following policy areas:

• Corporate welfare
• Regulatory boards and commissions
• Local Government Fund distributions
• Public private partnerships
• K-12 education and Medicaid

During last year’s budget process, The Buckeye Institute published a new version of our “Piglet Book”[1] proposing cuts to government programs that would generate nearly $2.6 billion in taxpayer savings over two years. Roughly $570 million of those potential savings could be gained by simply allowing the state-only General Revenue Fund portions of the Ohio Department of Education to grow by 3% — well below recent trends in the consumer price index.

Additional savings can be found by reducing corporate welfare spending in areas where philanthropy and private enterprise are better suited to meet market needs. We have suggested, for example, eliminating horseracing development funds paid for by taxes on gamblers and casino revenues. This program distributes millions of dollars to racehorse breeders and racetrack owners, but the government should not be propping up the racing industry, much less redistributing profits from one gambling venue to another. Ending this corporate welfare initiative could save Ohio taxpayers over $20 million. Similarly, we have suggested eliminating the TourismOhio program — a marketing program for Ohio’s tourist industry that is funded by the sales tax. Programs like this can be privatized and paid for by the businesses they benefit. For other redistributive programs better suited to the private sector, I encourage the Commission to review the most recent version of our Piglet Book.

Beyond cutting corporate welfare programs, The Buckeye Institute recommends consolidating and eliminating a variety of regulatory boards and commissions. The General Assembly’s Sunset Review Committee is already looking for specific regulatory bodies ready to be phased- out, but after the U.S. Supreme Court’s decision in North Carolina Board of Dental Examiners v. Federal Trade Commission, a systematic overhaul of Ohio’s entire licensing system will likely be needed soon. In 2015, the Supreme Court held that when a controlling number of the decision-makers on a state licensing board are active participants in the occupation that the board regulates, such a board can invoke state-action immunity only if it is subject to the state’s active supervision. After this ruling, many of Ohio’s licensing entities may now violate anti-trust law, and reforms could and should be forthcoming.

Such reforms, of course, should be part of a broader conversation about occupational licensing and how Ohio policymakers can make it easier for people to enter the workforce. Indeed, as the Commission is aware, the General Assembly is close to eliminating the “salon manager’s license” — the only license of its kind, requiring licensed cosmetologists to be separately licensed by the state in order to manage a salon. The Buckeye Institute’s recent report on occupational licensure, Forbidden to Succeed: How Licensure Laws Hold Ohioans Back,[2] provides more on this important issue.

More savings can be found by continuing to reduce the Local Government Fund or “LGF.” Currently, the LGF will distribute slightly under $400 million to localities throughout the state each fiscal year.[3] Much of this redistribution can be eliminated, with the remaining LGF reserved only for townships that do not have access to municipal income taxation or county piggyback sales taxes.

Governor Kasich and the General Assembly have received a great deal of criticism for reducing the LGF in previous budgets. Much of this criticism is unwarranted. As The Buckeye Institute has explained in a variety of publications, many of Ohio’s local governments are faring much better financially than the steady drumbeat of negative headlines would have us believe.[4] The LGF comprises a relatively small portion of the total distributed from Columbus to localities. Thus, cuts to the LGF distribution do not threaten the fiscal health of most of Ohio’s local governments. On the contrary, most local communities have seen overall local revenues on the rise. The Buckeye Institute reported in 2014 that Ohio’s municipalities and counties were not starving for funds, but were actually in better fiscal shape than many had predicted. Most local governments, in fact, continued to collect more tax dollars as general revenues rose. Many of these jurisdictions also had fairly large unassigned general revenue funds that afford them significant budget flexibility. Though there may be some exceptions out there, the exceptions should not dictate the rule.

Working more closely with the private sector can also open new avenues of taxpayer savings. Ohio should continue to explore ways to better leverage the skills of the private sector through public private partnerships or “PPPs.” The Ohio Department of Transportation, for example, is already authorized to use PPPs in order to expedite numerous construction projects in Ohio.[5]

Governor Kasich’s recent State of the State address called for a leasing arrangement similar to PPPs for the parking garages at Ohio State. And, as The Buckeye Institute and the Reason Foundation have explained, concession agreements with private companies to manage state parks could save Ohio money and improve the park experience.[6]

A PPP for state park operations would transfer the responsibility of maintaining a state park to a private operator who can then raise revenue through entrance and other fees. The state would maintain ownership of all state parks and could remove a private operator for poor performance or failing to fulfill the terms of the concession agreement. Despite recent investments to reduce the backlog of state park maintenance needs and upgrades, much more remains to be done. PPPs could help reduce the backlog, lower maintenance costs, and create a more satisfying experience for visitors.

Other states already use PPP agreements for their state parks. In 2012, budget pressures prompted California to become the first state in the modern era to enter into PPPs for operating five state parks threatened with closure. These PPPs were structured as “whole-park” concession agreements under which the state retains ownership and control over the parks while paying a private operator nothing to run them.[7] Such a model is also commonly used for managing over half of the U.S. Forest Service’s developed recreation areas.[8] These include campgrounds and day-use areas nationwide under whole-park concession agreements. Colorado, California, Oregon and Washington each have over 100 Forest Service recreation areas and campgrounds operated by private concessionaires. Most other western states such as Arizona, New Mexico, and Nevada have dozens of areas under private operation as well.[9]

Finally, to further ease government growth, the General Assembly must reign in spending on the two largest components of the state budget — Medicaid and K-12 education. State policymakers have already begun to act on Medicaid with a series of provisions, including the Healthy Ohio Program waiver that will soon be sent to the U.S. Department of Health and Human Services for approval. The waiver’s approval remains in question, but if approved the Healthy Ohio Program will save Ohio taxpayers over a billion dollars. More savings are needed, of course, and we encourage lawmakers to continue to explore how “charity care” can help Ohioans receive quality health care.[10] As for education, policymakers should re-evaluate school funding and the benefits derived from above-inflation rate funding increases.

We offer these policy suggestions as examples of cost reductions and creative solutions for the Commission to consider and explore. As the General Assembly looks for additional fiscal space to make Ohio even more attractive for job-creators, The Buckeye Institute will continue to advocate free market initiatives aimed at the long-term vibrancy and economic well-being of this great state.

I would be happy to answer any questions that the Commission might have.

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Piglet Book® is a registered trademark of Citizens Against Government Waste and is used with their permission.

1. Greg R. Lawson and Tom Lampman, “2015 Ohio Piglet Book,” The Buckeye Institute for Public Policy Solutions, June 1, 2015, https://www.buckeyeinstitute.org/library/docLib/2015-06-01-2015-Ohio-Piglet-Book.pdf

2. Tom Lampman, “Forbidden to Succeed: How Licensure Laws Hold Ohioans Back,” The Buckeye Institute for Public Policy Solutions, November 18, 2015, http://buckeyeinstitute.org/uploads/files/Forbidden_to_Succeed.pdf

3. Office of Budget and Management, “Budget in Detail- HB 64, 131st General Assembly As Enacted,” July 1, 2015, http://obm.ohio.gov/Budget/operating/doc/fy-16-17/enacted/budgetindetail-hb64-en.pdf

4. Greg R. Lawson, “Revenue Sharing Reform: On the Road to Ohio’s Recovery,” The Buckeye Institute for Public Policy Solutions, September 4, 2014, http://buckeyeinstitute.org/uploads/files/BUCKEYE-revenue-sharing-reform- main-article-ALL-COLOR.pdf

5. See Revised Code §§5501.70-5501.83.

6. Leonard Gilroy, Harris Kenny, and Julian Morris, “Parks 2.0: Operating State Parks Through Public-Private Partnerships,” The Buckeye Institute for Public Policy Solutions and The Reason Foundation, December, 2013, http://buckeyeinstitute.org/uploads/files/Parks%202_0%20(w%20Reason).pdf

7. Ibid.

8. Ibid.

9. Ibid.

10. Tom Lampman, “Expanding Access to Healthcare in Ohio,” The Buckeye Institute for Public Policy Solutions, November 30, 2015, http://buckeyeinstitute.org/uploads/files/Expanding_Access_to_Healthcare_in_Ohio(1).pdf