Back To The Lab...

...without a mic to grab.

Time flies when you are trying to reorient yourself to a brand new locale. We decided to take advantage of the opportunities that arise during a crisis ( low interest rates and housing prices) and made a break for the greener pastures of Medina.

The long hiatus was harder to break than I expected. Maybe being out of the Akron city limits slowed the perception of time or maybe not. Medina is a lot like Akron but without the mercenary police force and Circle K's. They also have one of them giant gazebos in the town square which takes some getting used to.

It's two and a half months and an off year election since my last transgression, uh post, but, I think now is as good a time as any to wade back into the surly waters. I hear there's a Senate and gubernatorial race around the corner.

Robart Drinks The Tea

The local chapter of the tea baggers were rockin' on the river in Cuyahoga Falls Wednesday. According to reports the place was packed with local patriots clamoring to get their freedoms back. The event featured remarkable speeches by pols including the king of sneer, Tim Grendell. He seems to be at all of these events.

Even Falls Mayor Don Robart got in on the celebratory berating of all things federal:

Robart said that former President George W. Bush's bailout ''has been a total failure'' and that President Barack Obama's stimulus bill ''has been worse.''

Uhh, yeah Don that stimulus bill thing has been so bad that your administration has opted in for millions of federal dollars. Someone should vet the mayor's speeches before he says something rash. While Don was busy riling up the crowd at the tea party his minions back at city hall were busy racking up ARRA funding.

To date the City of CF has applied for $138,527,132 in federal stimulus dollars. You can't make this crap up. Included in that amount is $50 million on behalf of the school district to build a new learning campus.

Robart has decided to water the trees of Cuyahoga Falls with the nickels and dimes of us tax paying patriots. Shhh, don't tell the gun toting loons at the rally you are actually big on spending federal dollars on roads, bridges and shopping center demolitions.

The request submissions are available at the State of Ohio's Recovery website.

Keno As Proxy

The results are in on Ohio's Keno gambit and the numbers are pretty weak. According to the State Lottery Commission the expansion of games of chance as a revenue source fell short, really short.

The venture that was used to beef up revenue to the State by an estimated $73 million performed well below expectation. The annual take for keno in Ohio, $30 million, not so hot.

Officials blame the shortfall on hard economic times. I blame it on the over-rated nature of gambling schemes to solve State revenue woes. The money raised by keno is earmarked for education funding but thankfully money is fungible. The State won't have to cut funding to education due to the shortfall.

The pressing issue now becomes the massive gamble the State budget has placed on video terminal slots and whether they will perform as advertised. The working number for the foray into gambling is expected to back fill revenue to the tune of $930 million. That's nearly a billion dollars in programs that were spared from the chopping block during the FY2010 budget process.

If the VLTs perform as poorly as keno the Gov' could be forced to cut another $500 million from the freshly approved State budget. Any subsequent cuts made will most certainly hit bone.

The Fringe Benefits

A Democrat is president and that means the fringe elements of the hard right wing are busy at establishing a foothold in the American body politic.

The debate around health care reform has certainly highlighted what's in store for the next several years. If it's not the rampant use of the Hitler comparisons it's the unitelligible dribble permeating the mob scenes at town hall meetings that defines this latest resurgence of reactionary mouth breathers.

This persistence of lunatic fringe in public discourse will have consequences. As the SLPC has reported, we've seen this kind of social movement before and it's back in vogue,

Almost a decade after largely disappearing from public view, right-wing militias, ideologically driven tax defiers and sovereign citizens are appearing in large numbers around the country. “Paper terrorism” — the use of property liens and citizens’ “courts” to harass enemies — is on the rise. And once-popular militia conspiracy theories are making the rounds again, this time accompanied by nativist theories about secret Mexican plans to “reconquer” the American Southwest.

Surely not all of the screamers at health care forums are of the militant ilk. Some of them are just uninformed or unwilling to listen to the facts of the matter. You'll have that anywhere. The problem is that the influence of the re-surging militia or Bircher movement will bleed into the everyday right wing cadre of citizenry. What was once very fringe will become more prevalent.

I'm afraid that all of the very important debates to be had in the next few years, like health care or climate change, are going to transpire in the midst of these proto-brownshirts that have descended on the public square like a modern day lynch mob. I'm sure it has nothing to do with the election of a black man as president.

Authoritarians Against Authority

The Beacon Journal is doing its best to keep Slurred-Speechgate in the news. The latest reminder is a front pager that attempts to stir up controversy about reports filed by police officers that responded to the scene of last weekend's Mayoral incident (I think a crime actually occurred there too). The question begging to be asked is whether a request was made to change the official account of what happened last weekend.

The Mayor's slurred speech is now front and center.

One of the officers had complained to the FOP boss that he was asked to white-wash the aspects of the report that mention the Plusquellic's slurred speech and nasty demeanor. There has to be more pertinent questions asked about the latest dust up between the FOP and the Mayor. That's really what this about isn't it?

Yeah Yeah, we know Plusquellic is brash and even heavy handed. The mayor's prerogative is to make it clear he's the guy running the guy running (micromanaging) the show in Akron.

As I've pointed out I think most effective mayors do have these traits. Sure it rankles the members of the public safety forces when the guy they are directed to show disdain for bosses them around. I'm sure the rank and file have been given their marching orders - the mayor is not to be trusted. An age old fight continues.

What rankles me, a taxpayer, is the blatant disregard by police officers for the just order of things in city governance. The Beacon article made sure to point out that the officer who made the claim has an honorable military record with the U.S Marines. While that is impressive and much appreciated it's not an excuse to contravene the mandate our elected leaders have to act as the chief executive of the city. Even though it may hurt your feelings.

How can I say this politely? The union president is not the elected leader of Akron, the mayor is. As an police officer you don't have to like him but, you do have to respect his position. He put in office by a vote of the people (twice in less than two years). In fact I'm almost sure that the armed forces are tasked with protecting our system which is based on the rule of law.

To go further I'd guess that one of the tenets that people who've served in the armed forces take with them is respect for the chain of command. The stubborn fact here is that the dude at the top of the food chain is the mayor and you don't have to like him to serve and protect the rest of us. The FOP leadership should consider this principle, especially if they are going to foist that Safety Tax Levy on us this fall.

Wrongsizing State Tax Revenue

The State's budget impasse may be near a conclusion but the real issues with the long term budget structure are not going away.

I've been barking about the massive failure of the tax reforms enacted in 2005 and 2007 for some time now. Those changes instituted under the guise of reform may have been politically expedient buy have contributed to the historic crash in State tax receipts.

The latest confirmation comes from an official analysis conducted by Office of Budget & Management. Careful examination reveals just how badly the reforms have buried Ohio government in a sea of red ink. Consider the findings released in this weeks GONGWER NEws Service (s/r) report for July 9th:

Agency spokesman John Kohlstrand said the annual drop is by far the largest in years for which the state has easily researched data, as he personally looked up numbers dating back more than 50 years.

"Nothing remotely like this has happened in the past half century," he said. "Certainly, it is a historic drop."

While not a surprise to officials given the dismal performance of the personal income tax and other revenue sources in the later months of FY 2009, the final year-to-date numbers were dragged deeper into the red by a month that saw Ohio's coffers take in nearly 24% less in tax collections than in June 2008.

State budget administrators have said the biggest factors in the drop are the economic anemia and the tax restructuring of 2005, which reduced income tax rates across the board by 21%, cut or eliminated certain business taxes and made other changes.

The economic impacts became clearer with the close of tax filing season, after which Gov. Ted Strickland's administration revised its already dampened financial projections and later announced the state faced a roughly $1 billion deficit for FY 2009. That hole was filled with the drainage of the Budget Stabilization Fund, which now stands at 89 cents.

Last fiscal year was the third in a row in which the state collected less tax revenue that the year before - a streak that's also considered a record. Mr. Kohlstrand said the agency could only find three other years dating back to 1957 in which such declines occurred.

The changes in fact did not ameliorate the impact of the recession as predicted by the supply side faithful and anti-tax geniuses that had insisted this would be the case. Why not? Tax cuts work in every situation.

It seems event the magic elixir of unbridled tax cuts didn't do the job of protecting the rust belt capital from the effects of the Great Recession. Maybe a more moderate and you know, sensible regime of changes would have left us a more sustainable budget structure.

This latest budget and future budgets will not be made right until someone has the courage to patch the flawed tax reforms of General Assemblies past.

From The Beach To The Moon

Vive Le Tour!

The 96th edition of the greatest of all bike races kicks off in Monte Carlo tomorrow. Free up space on your DVR and settle in for the next three weeks.

This year's TDF offers a time trial in Monaco, a relapse of the notorious team time trial, a slew of classic climbs and of course the penultimate stage finish on Mt.Ventoux. That one will be epic.

The smart money is on 2007 champ Alberto Contador who is a teammate of The Boss, Lance Armstrong. I doubt the seven time winner will be able to contend in this field but I wouldn't be surprised to see him steal a stage or time trial win. My guess is that he will be relegated to super domestique for most of the tour.

My top three in no particular order:

1. Alberto Contador - has to be the favorite even though he missed last year

2. Cadel Evans - cuddles has been quiet so far but look for him to be in the hunt.

3. Andy Schleck - I think the younger of the brothers Schelck has GC potential this year.

I would put the over under on positive doping tests at three.

Divining Truth From The Palinisms

Sarah Palin is stepping down as Governor of AlASka and the talking heads on CNN are actually trying to discern some logical rationale for the move.

CNN also played the rambling ten minute speech given from the unofficial state capital of AlASka, the Palin residence. It went in more directions than a country crossroad at times sounding like a victory speech and then a polemic on Obamanomics. She's was also quick to lash out at the media and critics in her classic paranoid fashion even mentioning past ethics investigations of her administration.

I don't know what is more curious a thing to take away from the event. Trying to divine the actual motive behind Palin's quitting is perplexing enough. Then watching cable news guys assuming there is a calculated and strategic element to the announcement is just as curious.

I'm guessing she has either been offered her own show on Faux News or she is going to be indicted on some kind of ethics charges very shortly. Maybe she sees opportunity in a potential GOP contender for president being taken out of contention by his infidelity. Keep you eye on the ball.

Giant Purple People Movers Invade Akron

Akron METRO had unleashed new purple buses on the highways traversing the Akron-Cleveland highway corridor. The local transit authority has revamped the express bus fleet with newer more colorful rides.

Not only was the nearly $3 million cost of new buses covered with ARRA dollars but the purple machines come with bike drawers and will soon be WiFi equipped. Yet another move towards public internet connectivity in Akron. An email sent by METRO announced the rollout of Molly and her purple friends:

New NCX Buses Are Here

Six new buses are being put into service on the NCX express routes. The new buses have a vastly different look to them and will be eye catching, to say the least. Eventually they will be WiFi enabled. The bike racks are in a "drawer" under the bus and the operator will be able to show you how to use it.

If you haven't seen one yet and would like to see a photo of the bus email Molly at communications@akronmetro.org

Thank you for your patience with our current fleet and we hope you enjoy the new buses. Each bus cost $497,000 and was purchased with stimulus funds.

The use of stimulus dollars is good in a couple of ways. The purchase of new buses demonstrates how the dollars are finding their way down to the local level. And with $3 million freed up METRO can think about dialing back the rate they charge for riding the North Coast Express.

That wold be the rate that was increased even after voters approved a sales tax increase. Did you think we forgot?

Shedding The Taint of TARP

An interesting dichotomy is emerging in the banking industry as of late. Large money center banks are bowing out of the Treasury capital assistance program affectionately know as TARP. At the same time smaller regional banks are more than willing to hold on to the capital and are not concerned about blemishing their reputations.

Big banks are doing their best to jettison TARP dollars and repurchase the associated warrants the government took as a condition of assistance. Large banks are making it crystal clear they don't need the money and are giving a mission accomplished reason for the change in disposition.

Ditching TARP is being used to convey a sense of strength and independence to investors and customers alike. Big banks are making every case they can to wiggle out of the grand bargain offered to them in the darkest hours of the financial crisis of 2008. For example, the form letter below is being sent out by U.S Bank to it's commercial customers to extol the virtues of being TARP free.

US Bank TARP Memo - Get more Business Documents

Meanwhile in the realm of smaller more humble banks the landscape is much different. A article appearing in the WSJ and cited all over the internet reveals that smaller regional banks have been more than happy to hold on to their TARP allocations. Apparently the smaller more sensible banks have decided to meet one of the objectives of the program - provide credit for business investment.

The behemoths on the other hand are more concerned about demonstrating they can maintain adequate capital levels without help from Treasury. Extending credit to small businesses is ancillary at best. The other perk of course is the ability to dodge executive pay caps and somehow prevent the inevitable regulatory smack down that is on the horizon.

Another Don Dynasty

There's been oodles of attention paid to the failed recall attempt of Don Plusquellic but another Mayor Don has escaped recent notoriety from critics.

The chatter amongst the Dems and political elite in Cuyahoga Falls that Mayor Don Robart was looking vulnerable to a challenge from a Democrat. Abe Zaidan had written about the waning of the Robart's power back in January. The local opposition it seems, was adamant that this was the year to unseat the Don of CF.

I too had heard from people close to the situation that 2009 would be a watershed year in the city o f CF. There was a feeling Robart had overstayed his welcome on Second Street and there was supposedly some blood in the water (meters) after several Robart initiatives had met stiff resistance from the Democratically controlled council. The days of unchallenged directives have disappeared now that they controlled city council.

With the stars aligned and plenty of ammunition to go after Robart with in the general election there would be a strong chance of a challenger filing to take on Robart this fall. What's that you say? No Democrats filed at the Summit BOE to run against Robart? The most under reported story of the week is that there will be no Democratic challenge to the long-time Falls Mayor. So much for striking while the iron is hot.

There is a remote chance someone could file as an independent after the primary. Typically you don't see that sort of thing in local elections but, you never know. Maybe the banished Kevin Coughlin will abandon his quixotic campaign for governor and re-brand as an independent.

Photo: Falls News Press

Akron Recall: An Epilogue of Sorts

With the recall business in the rear view mirror it's time for Akronites to start the healing process or at least stop laughing about the results. There are some lessons learned from this odd detour from the rational discourse of our city's future into the bizarre obsession of one man.

Firstly, the mayor is not an infallible or unassailable political tour de force. Sure the guy has great hair and a square jaw but there was never a claim that he's perfect. There have been brash statements, public fits, feuds with the police and the failed sewer lease plan. Aside from the sewer thing (which I was critical of here, here here) there was nothing that warranted a bona fide public campaign to remove the mayor. That was accepted early on.

As dumb as the recall attempt was the process did afford the citizens of Akron a unique and comprehensive review of the Plusquellic years. Once observers were able to filter out the noise created by the Mendenhall Syndrome a reaffirming picture of Plusqeullic's tenure emerged. This cleansing was so pronounced that it actually resulted in nearly 5,000 more votes being registered in support for Don in the recall election than in the general election. Perhaps the lunacy of the recall effort also motivated people to get to the polls on a Tuesday in late June.

I mentioned in my last post that we should be devoid of Warner for at least three months. He has hinted at another attempt to hoist term limits on the voting populace. He is also trying to establish a puppet regime with his wife now planning to run for city council. I wouldn't rule out other forms of instigation involving the Akron FOP or maybe a caper involving Joe Finley. At any rate it may not matter what Warner's next act is. The recall debacle has cast a considerable shadow over his reputation, whatever that was.

Two more requiems on the Mendenhall Affair that are worth checking out were posted by The Pho and Abe Zaidan. Both contributions are much more eloquent than anything that I have attempted to convey on these pages.

High Noon In Columbus

The State General Assembly is still mulling, no agonizing over how to bring Ohio's next biennial budget into balance by next week. So far massive spending cuts and an anemic attempt at raising revenue from slot machines are the only means to achieve that end.

The cuts have hit just about every area of the State's operations including libraries and social programs. Of course there has been no serious push at rolling back at least part of the income tax cuts enacted in 2005. Although the Dispatch has reported on a small band of Dems that have requested a tax increase in lieu of the deep spending cuts. It looks like no new taxes and no new books will win out.

In a new development the Governor had requested a meeting with all elected State executives at noon today. I know this because State Treasurer Kevin Boyce was supposed to speak at a state sponsored training seminar today but was not able to attend. His staffer explained that Boyce and his elected colleagues had been summoned by Strickland to come and offer up "more blood from their respective turnips", the staffer's words not mine.

This move is interesting because much of the attention has been directed at cutting programs administered by the Governor's cabinet agencies. We'll see if the individual elected officials will be willing to sacrifice more of their kingdom to the alter of spending cuts.

Akron Recall: Game Over

I'm not waiting for the polls to close to call this thing. With very little knowledge or insight my gut tells me the recall is going down in flames.

As of now the recall of Mayor Don Plusquellic went down to a thirty point defeat. Total ballots cast 11,200 against, 4,800 for and 1 undecided (Joe Finley). God I hope I'm right about this.

Anyway, I voted at 6:30AM with about ten other inhabitants of 8's N and Q. The same crew was manning the polls but they were a tad confused. I find that the elderly function much better with an infusion of fiber to start the day.

The recall defeat should buy the citizens of Akron at least a three month reprieve from the minions of Mendenhall.

Update: I was a little off. The number of total votes cast was 24,133. It looks like the piker rebellion of 2009 will go down by 40 plus points. I'm sure Warner has already concocted a worthy conspiracy to explain the trouncing.

Akron Recall: The Mendenhall Syndrome

June 23rd can't come soon enough. At this point I'm not even concerned about the results of the special election. What the arrival of that day really means for me and other citizens of Akron is the removal of Recall Warner from our lives. As Lady Anne exclaimed in Richard III , "thou dost infect my eyes!", and Mendenhall has been infecting our eyes, ears and sensibilities for the past year.

We have all been exposed to the Mendenhall Syndrome. Aside from being an insufferable whiner Warner's symptoms also include a preoccupation with conspiratorial delusions about Mayor Plusquellic. The mayor shouldn't take it so personally, there have probably been scores of other people that have been directly exposed to this virulent strain.

The most recent example of the affliction was the immediate condemnation of the roll-out of the first phase of the Connect Akron venture. To the casual observer the introduction of a public wireless network is a good thing.

Those afflicted by the syndrome see a calculated plan to buy votes by timing the announcement. Somehow Don was able to cajole the dudes stringing fiber and installing access nodes all over Akron to finish right before the recall election. The guy has impeccable timing alright. If he is that good of a manger then sign me up for four more years.

Then the 1,000 or so new jobs announced by PlusOne Communications, a new call center start-up in downtown were identified as a transparent scheme to garner votes. To the mentally lucid observer the announced job openings are a desperately needed shot in the arm for an economy that continues to suffer from unemployment.

Perhaps Warner didn't see the latest unemployment numbers. I thought he was unemployed. You'd think he would be standing in that line at the old Firestone Bank building.

Comments Are Not News

Someone please inform the folks at the Beacon that reader comments on the paper's website are not news. This is true even if the comments are from the friends of Tom and Howie. Good taste would dictate to refrain from quoting a reader comment in a news story.

Ohio's Green Shoot Deficit

Just as State lawmakers are embroiled in the impossible task of solving Ohio's budget woes more historically bad news on the jobs front is emerging. It's no surprise that the mild signs of a relenting downturn seen elsewhere are not sprouting en mass in the Buckeye State.

A review of the ODJFS employment report by George Zeller with the think tank Center for Community Solutions points out the painfuil truth:

The new May employment figure for Ohio extended Ohio's horrible lengthy sup-par job growth streak. This lengthy streak of 159 consecutive months when Ohio's job growth has been slower than the USA national average is an all-time record in the history of Ohio. The state has now gone 13 years and three months with its job growth continuously below the USA national average, including all months during those 13 years.

In May 2009, Ohio's year over year job growth rate was negative at -4.9%. The May 2009 job growth rate in the United States was sharply negative with a decline of -4.3%. The more than 13 full years of sub-par job growth in Ohio is certainly the most serious chronic problem that Ohio faces today.

Zeller holds no qualms about letting the bad news out of the bag.

So Ohio will continue to be mired in an under-employment slog for the foreseeable future. Even when the official end of the recession is discovered by economy watchers Ohio's job outlook and economic vitality will not rebound anytime soon.

The position we are in is mostly a reflection of the decimation caused by the evaporation of manufacturing jobs over the past two decades. Policy makers and GOP candidates for governor should keep this fact in mind as they prepare to make a case for leading the State out of this mess.

Cheneyism Spreads To Israel

Iran is in the midst of political uprising that has revealed a collective desire for more moderate leadership. The mass demonstrations and calling out of the clerical leaders seems to be a good thing. You can see why the country's younger and liberal (socially) populace is so important. The young Iranians could serve as crucial catalyst for capitalizing on America's use of soft power with Iran to unwind their nuclear ambitions.

Leave it to the neocon elements in the U.S. and their Israeli counterparts to find a problem with the hopeful signs in Iran. First it was Diane Pletka's column in the NYT that threw cold water on the notion that the current upheaval will lead to anything good in the end.

Then there was this piece in the WSJ (s/r) that corroborates what the neocon line should be on this matter. Any signs of moderation in Iran are bad for the bomb-bomb-Iran-crowd. Case in point:

Meir Dagan, chief of Israel's Mossad intelligence agency, told a closed Knesset ommittee hearing that Mr. Ahmadinejad's reputation as a Holocaust-denying rabble-rouser makes it easier for Israel to enlist international support against Iran's nuclear program, a committee member said. A victory for Mr. Ahmadinejad's moderate challenger, Mir Hossein Mousavi, in last week's presidential elections would have presented Israel with "a graver problem," Mr. Dagan said.

You see, we need crazy Ahmadinejad to stay in power so there is a reason to sell the hard line approach to Iran.

"Both of them pose the same threat. But it's better for Israel that you have a leader [in Iran] with a very dangerous ideology who speaks clearly so that nobody can ignore him," said Knesset deputy speaker Danny Danon, a member of Prime Minister Benjamin Netanyahu's Likud party. A more careful, soft-spoken Iranian president who promised better relations with the West "would have made it harder for us to recruit the world to our side," Mr. Danon added.

You got that? More crazy leadership equals better chance of starting yet another war in the Middle East. That's what the crazies in our neck of the world think. Good if you are an oil company or a defense contractor. Not so good if your son or daughter is the one that will be thrown into another needless military engagement.

The Fifteen Minute Budget Solution

Lawmakers in the Ohio General Assembly are just about done freaking out about the number $3.2 billion. Do you know how far 3.2 billion Tim Grendells stacked on top of each other would reach? Once the legislators have regained their footing they will have about fifteen days to reduce the projected shortfall in the FY2010 budget by that amount, seems like a daunting task. I sure hope that doesn't effect my life.

The gigantic budgetary gap caused in part by a cliff diving economy and a budget analysis apparatus instructed to keep things rosy will have to be closed within a short amount of time. The General Assembly conference committee has until the end of the month to get a balanced and realistic budget to the governor. How does a such a massive undertaking get completed on time? I am suggesting that rather than fifteen days the whole thing can be solved and wrapped in neat bow in fifteen minutes. Sounds facetious and politically improbable doesn't it?

Yes to Cuts

There will invariably have to be deeper cuts to programs and staffing. Perhaps the idea of an enforceable and State-wide earl retirement program could achieve savings within the two year horizon of the FY2010 budget. Mandatory furloughs are also in order. The State Treasurer and Attorney General have announced a steep two week furlough program all employees. Holy Mary Taylor and Jennifer Brunner are also "considering" a furlough measure for their respective offices.

Staffing takes up a large portion of administrative budgets in government entities. The need to further reduce staffing through layoffs will have to be considered. This will impact delivery of
services. The remainder of the cuts will have to be to programs. Everyone has their pet projects so agreeing on additional program will not be easy.

Jim Sigel's piece in today's Dispatch points out the difficult nature of whittling down the State budget to a discretionary core of programs ripe for cuts. Still, more reductions will have to be attained to meet the target. Those will most likely be done in a back room away from prying eyes of media and advocates.

In the end I don't see more than a few hundred million being cut from the existing lean budget proposal. This budget process will not be used as a de facto method for deconstructing State government into a model for Tea Party visionaries.

Yes to Creative Finance

Before moving on to revenue I should dedicate some space to what I call creative finance. No, that would not include investing in rare coins or drilling the shit out of the State parks. This category of budget fixes is reserved for creating new revenue sources or using financial tools to create new payment streams.

The most viable solutions in the near term are casino gambling and securitization of assets. Casino gambling has been bandied about for years and invariably gets voted down by the legions of puritans that inhabit Ohio's towns and villages. Creating the legal framework for casino gambling, one that focuses on gaming districts in a few select large urban centers could pay off. Siegel uses an estimate of $200 million over two years of ongoing revenue for this source.

We could dust off the plan to lease the Ohio turnpike. The last attempt to securitize this asset was championed by political loser and right-wing blowhard Ken Blackwell. Under the umbrella of a rational and carefully reviewed plan the State could realize a substantial revenue stream (billions) for a long-term lease agreement of the tollway.

Of course this would be a one time revenue stream and some of that money would have to be used to offset road improvements to the other highways in Ohio. The other caveat is the potential "tax increase" that Ohioans would face when the rates on the turnpike are increased by the private entity that operates the leased tollway.

Yes to Tax Increases

The last option is the most effective but least politically feasible of all budget fixes. The key members of the Senate, House and administration can meet at a local Applebees and agree to raise some tax rates. The numbers provided by Siegel make it clear that there is ample capacity to bridge the budget gap with tax rate increase alone. The tax increases could be kept in check if they are coupled with fixes from the spending cut and creative finance pots.

This move would require some very hard headed people to accept the premise that tax revenues have fallen to perilous levels in part because the tax reforms of 2005 were untenable and unrealistic. There will have to be some ratcheting up of income tax brackets in order to get the budget above water. The other change to tax rates will have to be the misunderstood CAT.

The commercial activities tax was implemented as part of the HB66 reforms as a low tax with a very broad base. The results on the CAT are still inconclusive but a slight increase to the already low rate would go a long way in increasing tax revenue. These changes may be enough to get us in balance while avoiding tinkering with the more regressive sales and property taxes.

There you have it, over $3 billion in fifteen minutes or less. Enjoy the potato skins gentlemen.

Home Rule Rehash

The lights are slowly coming on for the purveyors of local print media when it comes to last weeks SCO ruling on residency ruling. The order to uphold a state law banning residency requirements as term of employment certainly did in the idea of employees having a vested interest in the communities they protect. The real change to the local governance landscape was of course the signal that that the home rule provision in the Ohio constitution was in fact shown the door by the high court.

The majority of the immediate reporting focused on the high fives and histrionics that took place around various city halls and union halls around the state. The police and fire unions had at last exacted a bit of their own justice on the city leaders that have oppressed them for so long. Mayors and managers were apoplectic that the myopic court would render such a deleterious ruling in nonchalant fashion.

While there has been some coverage of the impact on home rule, we are still stuck on the clash of two rival interests described above. I have argued that the provision is now dead and there will be a cascade of impacts on the way localities govern themselves.

For some background on why home rule is now an endangered species I would direct you to a fine piece of reportage by Henry Gomez at the PD. Here the detail behind the court decision and the relevance of Section 34 of the state constitution is parsed. The officials that Gomez quotes reveal the ruling as a gateway drug for power hungry state assemblymen looking to meddle in the affairs of the urban centers of Ohio. First it was predatory lending, gun laws and red light cameras. Next it will be income taxes, employment policies and economic development. The next few years will indeed be indicative of how badly this thing could end up for cities.

Home Rule Goes Poof!

The home rule provision of the Ohio Constitution was laid to rest today by the Supreme Court of Ohio. Today it's residency requirements tomorrow it's income tax rates or something else. The 5-2 ruling upholding a State law barring the residency requirements was to the delight of police and fire unions and the dismay of city officials all over Ohio.

I guess this decision was inevitable. The State Supremes and the General Assembly have been hostile towards the very precept of local control of governance when it comes to large cities in the north end of the state.

Here are some points on the now defunct residency requirements and a sort of postmortem on our dear friend home rule.

Residency Lost

Police unions in particular are happy about the overturn of the requirements in Akron and Cleveland. I suspect Cleveland is going to be worse off than Akron or Lima. The Cleveland Police Department is already redeploying as a hired mercenary force at this hour. I hear that the County Land Bank is willing to buy up all the vacated homes left by police and fire guys fleeing Cleveland proper.

Many will choose to leave their respective cities and live elsewhere.
Still there are plenty of people who will stay in Akron or Cleveland
for a variety of reasons. What makes a community livable and a desirable to live in? Some would say it's all about the schools. Safety and decent neighborhoods are just as or more important. Of course the State is getting to work on fixing school funding so that will negate the school system variable soon enough.

There is still a need to get public safety employees especially police forces to be cognizant of the community vibe so to speak. The residency requirement was sort of a forced fit in trying to attain that end although it was also an assurance to city finance directors of a certain level of captive income tax revenue. It was never perfect and has bred some animosity between the rank and file and city management. This pervasive tension was probably counter productive to the achieving the better effective policing and healthy relations with the community. Akron's steps to strengthen community relations with a citizen review committee can be a positive force in offsetting the lost residency requirement.

I suspect the decision will be a morale booster for public safety forces. The eradication of a perceived hardship could renew the outlook a lot of public safety workers, I hope. There's always something to complain about in ANY line of work (present company included) but this change may translate into better dialogue and respect between both sides.

Wither Home Rule

Here is an aphorism that I just made up, "Everyone likes activist judges
when the decision falls on their side of the policy argument". This one ruling has changed the local governance landscape. The majority's dependence on Section 34, Article II in particular will leave the door open for more home rule erosion.

What is the future of home rule now that Ohio's merry band of Republican justices have struck such a harmful blow to the provision? Will this ruling impact the way cities govern themselves in other areas besides employment practices? How does a mayor or city council evaluate a policy initiative that would seemingly rely on the once safe harbor of home rule?

I think going forward there will be a chilling effect on local governance. One that could inhibit local leaders from thinking boldly when it comes to addressing challenges (think red light cameras and gun ordinances).

With the residency card pulled from the deck, cities may want to find ways to incentivize employees to live in city limits. There are no doubt numerous carrots that could be offered as a way to entice people to remain residents. As a mayor faced with eroding home rule power do you even bother having staff evaluate and assemble policies that could be wiped out by a legal opinion? Who's to say income tax or property tax abatement offered as an enticement to keep resident employees aren't on shaky legal ground now?

Dead Idea or Not?

I just finished reading The Tyranny of Dead Ideas by Matt Miller and think his book speaks to the death of the residency requirement. A dead idea is a conventional wisdom that has reached the end of it's useful life of determining policy outcomes. Perhaps when residency requirements are looked at in conjunction on with regionalism, tax sharing and other 21st trends in local governance their shelf life looks past due.

That may be the case for a policy like residency requirement that had limited application and mixed results. My fear is that home rule is next up for elimination and that would not be good.

Kasich's Heartland Wisdom

A John Kasich gubernatorial campaign will be a melange a Fox News invective, Ken Blackwell style conservatism and Buckeye Institute policy babble. The added bonus will of course be the omnipresent use of Ohio as heartland theme that Kasich has parlayed into a career on cable television.

When the campaign starts Kasich will divide his time between enforcing supply-orthodoxy (think income tax phase out) and the reclaiming Ohio for the Tea Party elements of the GOP. The latter will involve bitch slapping us with heaping helpings of heartland wisdom. Think of this as the "what's the matter with Ohio" John Kasich. Ohio's voters as seen through the eyes of the Rovian political lens.

A great example of what to expect can be seen in his interview with Steven Colbert in March of 2006. In the segment Kasich extols the virtues of Ohio and its heartland sensibility. We don't windsurf in the heartland Kasich exclaims (Colbert led out of the previous show segment with 2004 footage of John Kerry kite surfing. I don't know why that was pertinent in 2006). Ohioans being heartland dwellers have a keen sensibility to stay away from water sports and wetsuits.

That moment highlighting Kasich's penchant for stoking the flames the urban versus rural nuttery stuck with me. The stupidity of his rant against windsurfing and equating Ohio to some antebellum agrarian society is troubling.

You see, there's this large body of water that runs along the entire northern edge of Ohio. The large body of water I'm referring to is called LAKE ERIE! Perhaps the millions of people who venture to the shores and into its waters partake in activities such as windsurfing and kitesurfing and even surfing! Imagine that, not all buckeye state residents grow alfalfa for a living. I heard that most of us actaully live in the urban centers these days.

Kasich is going to be hitting the trail this summer blabbering about taking back the heartland to the detriment of the real issues voters want to hear about. Let's party like it's 1994. At this point I already have an idea how this will play out and it won't be pretty for Kasich or Ohio's image. At this point I doubt Ted Strickland is loosing any sleep over Kasich's entry into the race. Can someone please prod Mary Taylor into running for Governor?

Akron Recall: Debt Perspective

The question about Akron's indebtedness is clearly over the heads of the Mendenhall Gang. The recall savants made a mistake by wading into the unfamiliar waters of public finance during their kitchen sink approach to unseating the mayor. A constructive argument could be had on the merit of individual investments funded by City debt but, not on the nature of borrowing money alone.

The analysis by CSU professor Ned Hill that was featured in an above the fold story in Sunday's ABJ made this point for us. I’m sure Warner has already been chirping away on the comment section at Ohio.com about how biased the ABJ has been.

Information provided by Professor Hill and the subsequent reporting in the Beacon story separated the uninformed outcry about the destructive force of municipal debt from the accepted practice of using bond financing for capital improvements and development projects.

Often times people who mean well, sound the alarm over a city’s borrowing habits. This a common criticism levied at public official’s who have already gone through a thorough evaluation of a specific project or capital improvement. The debt (or borrowing though issuing bonds) is the final step to getting a project underway. Under competent leadership the evaluation of affordability, credit risk and legal limitations should already have been completed. In the case of Akron it appears these steps where part of the decision to take on additional debt.

Part of disconnect comes from the negative connotation that the term "debt" has when paired with the words increase, municipal and large amounts. The lay person may not be familiar with the positive and enabling role that utilizing the bond markets to fund capital investments has. When it comes to analyzing the use of long-term debt by cities and counties, critics tend to hang on the word debt. That's to be expected because that word has a negative implication when associated with our personal finances.

So instead of focusing on the underlying projects financed by bonds this woefully uninformed bunch attacks the idea of city taking on debt. What's that mean? The increase in municipal debt has grown since the massive tax law changes of the mid 1980's which allowed local governments to use long-term bonds to fund expansion.

Consider this fact about the creditworthy nature of municipal debt. Moody's Investor Service (the same Moody's mentioned in the article) conducted a study of the default rate of municipal issuers over the last three decades. The study concluded that municipal issuers are very unlikely to default on their bonds. In fact the comparative ten-year default rate of all investment grade issuers was only 0.1%. This is much lower than the defaults on investment grade corporate debt over the same period.

What’s my point? Well, my point is that the stigma against using debt financing to fund major investments in infrastructure and economic development is wholly unfounded. Thousands of cites, counties and other governing entities have show prudent use of debt issuance to implement a strategic vision. Merely screaming the word debt is not a useful critique of a public official’s financial stewardship and it’s definitely a reason to run someone out of office. Considering Akron’s debt ratings the City’s management has been graded very favorably.

Of course each project should be evaluated on its own costs and benefits to the citizens of Akron. Maybe we didn’t need Inventure Place or Canal Place. That is a discussion that was finished years ago. We’re still waiting for a solid fact-based refutation of the various investments made by the City under Mayor Plusquellic. The recall committee has been largely incoherent on that front.

The County Blowhard

If you want a sampling of what a tyrannical public official with little self confidence is, read this article from Tuesday's Plain Dealer.

Geesh, so much for trying to protect taxpayer dollars and foster unfettered intellectual discourse on County programs. You can imagine how hard it is to exact budget cuts from discretionary County programs when any critique invokes the wrath of hot-headed people in power.

I will post some ideas on the much touted path to County reform shortly.

Convention Busting Bumpers

Finding unconventional bumper sticker pairings is becoming a slight obsession on my part. The daily sojourn to C-town gives me a decent size pool of bumpers to sample from.

I saw this combination on the way up north, a good sized Ron Paul sticker and right below it a "Abortion: One Killed, One Wounded". Now I'm always interested in the followers of Dr. Paul. I can never tell exactly what the essence of Paulism is.

On one hand an abhorrence to central government and strict observance of the constitution is required to be in this camp. On the other hand there never seems to be a strong outcry from Paulites on torture, warrantless surveillance and other government intrusion into reproductive rights. Is Dr. Paul an opponent of birth control? Don't they consider the choice a woman may make about her body and pregnancy her own? I really don't know.

In unrelated news I'm still looking for the bumper sticker that reads, " I drive like an a-hole".

Mandel Promises To Leverage Internet

Someone please tell Josh Mandel that StarOhio is not a constellation that hangs over the Buckeye state. The fresh faced Lyndhurst Republican state rep. announced his candidacy for State Treasurer last week. He throws his hat into the ring with stellar ideas and "utilize technology" to maximize State resources and communicate with constituents.

That's a peachy idea Josh. In case you've been out of the loop, technology is already very pervasive in the financial milieu. Yes the banking sector actually uses computers and web-based appplications to transact business. The State Treasurer's Office has been using a web based portal to provide content, accept tax returns and coordinate the CPIM program for years.

I can't wait to see his full platform on running for Office. If you've been able to catch any of Jill Miller Zimon's posts on the up and coming GOP candidate you'll notice there's not much in there about overseeing the State's financial resources. Of course that doesn't say much about his chances. According to media reports young Mandel has a sizable war chest of over half a million dollars. His Democratic opponent, Kevin Boyce is also not well known and who really wants the State Treasurer to communicate to them anyway?

His one well noted foray into financial policy was a bill that would require Ohio's pension funds to divest from companies connected with the regimes in Sudan and Iran. Good for political points on the right bad for portfolio diversification. I won't knock the guy any further though. I'll give some credit for at least crossing party lines to vote for the House foreclosure bill.

Scenes From Mall B

Mall B in downtown Cleveland is slated to be torn up and replaced with a raised (not razed) mall space once the Medical Mart project gets underway . This ideally situated strip of green space is part thorougfare and part urban park that is a haven for lunchtime solace. It will be missed for many reasons including the assortment of people and activity that create a much needed break from the dreary confines of downtown cube farms,

Gone will be the walkers, landscapers and the lunchtime gatherings. No more bike messengers meeting for a quick smoke break.

I sometimes talk with a guy who combs the lunch time crowd one person at time asking for spare change. He usually gets cross looks or terse denials. I often engage him, I'll call him Joe, in brief conversations:

Me: This is my favorite time of year. The weather is enjoyable and not too hot.

Joe: I don't have problems with the weather, just individuals. Like myself.

My phone rings and Joe walks away.

The mall will be cease to serve its current role as a collection point for office workers and Joes for awhile. The hole (literally) left in its place will change the dynamic of downtown.

Roldo has a gloomier take on downtown in his most recent post.

Akron Recall: A Mayor Knows

Why did fifteen local mayors from both parties draft a letter condemning Akron's recall process? Mayors are by necessity pragmatic people.  They know that managing a city or village requires a balance of long term vision and "up in your grill" micromanagement.  At times the latter can win out to the detriment of the vision thing.

Good mayors get things done. There was a campaign a few years ago that touted this axiom.  The bus tour in support of Ohio's big cities enlisted mayors from large cities including Don Plusquellic.  

Getting things done does not being sheepish or hanging out in the back of the room at conferences. At times brash behavior and bold statements are required to back up brash and bold new ideas.  A mayor on occasion may need to put decorum and congeniality aside to defend their city.  That's what Plusquellic has been doing for the better part of two decades in making the City of Akron the driving force of his career.  Has he offended people with harsh words and braggadocio?  He sure has.

Back to the letter from the gang of fifteen mayors.  The abuse of the recall process a la Warner Mendenhall is a threat to the continuity of leadership that good mayors provide.  What is disappointing is that Don Robart who is Plusquellic's Republican analog in Cuyahoga Falls refused to sign the letter.  The refusal to me is short sighted and was done with calculated partisan intent.  

Robart is in a similar position as Plusquellic.  He's been in office for two decades, has worked tirelessly for his city and has built a healthy list of detractors it the process.  So, why aren't there calls to remove the Mayor of CF from office?  Probably because the city has a sensible recall provision the city charter and nobody wants to waste time on recall effort unlike Akron.  You think the guy would be more empathetic to the other Don's plight.

Speaking of the charter in Akron.  The letter from the mayors recommends the action of an emergency charter review as a way of blocking the recall election.  This is not a goos idea.  AS much as I loathe the recall process the current charter is the legal guideline and has to be accepted as such for now.  Let's ride out this storm for now.  Once the dust settles the recall threshold can be changed to a more sane level. 

Convention Busting Bumpers

I've had a chance to catch some of the media coverage of Obama's commencement speech at Notre Dame. The piece in the NYT was decent. It did seem to reference the common use of graphic imagery on the part of the anti-abortion protesters. The rampant hyperbole used to describe the president's supposed hatred for the unborn was a close second.

Opposition to abortion on religious grounds is not hard to understand. What I have always been troubled with is the primacy placed on this one issue above all other moral questions. Wars built on lies and unbridled greed don't rile the lifers as much these days.

Making the daily drive up to Cleveland today I noticed a car with two bumper stickers. The sticker on the left side read, "Former Fetus Opposed to Abortion". Prominently displayed on the upper right bumper was an Obama 08 sticker.

There it was, a glaring contradiction to the conventional wisdom purveyed by the insurrectionists at Notre Dame. Pro-life is more than a stance on abortion. Supporting a Democrat for president and opposing abortion do not have to be mutually exclusive beliefs. Obama didn't manage to win an election and not grab a portion of the devout Christian vote.

Now, I don't wear my bumper stickers on my sleeve but that driver was a voter I can respect.

Furloughs For Everyone

As the State is grappling with balancing the FY 2010 budget  local governments are also trying to find ways to shore up their fiscal houses.  City and county governments have already had to contend with their 2009 budget cycles and continue to bleed red ink as the recession strains revenue collections.

Staffing costs are the largest component of local government budgets.  A county such as Cuyahoga for example spends as much as sixty percent of its operating dollars to pay employees and provide them with fringe benefits.  Thus any meaningful action that can be undertaken to plug a budget deficit has to involve reducing those people related costs.

The method of last resort is laying off of employees.  Hamilton County , deep in financial distress has already laid off hundreds of people and plans canning more staff this year.  Other counties such as Summit and Cuyahoga  have implemented early retirement programs, the good natured cousin of the lay off.

The relative newcomer to the staffing cut arsenal is the furlough or unpaid leave. Previously, furloughs were a creature of the manufacturing sector.  A plant shuts down for a few weeks and the workers get a paid or unpaid vacation.  The furlough concept is gaining ground as a budget reduction mechanism in the white collar world.  A recent WSJ article highlighted the benefits of using furloughs to cut costs:

Amid the steep job losses, some managers and advisers are touting alternatives to layoffs, including furloughs, pay cuts and reduced workweeks. Some economists say these alternatives slow the recession's downward spiral by preserving jobs, albeit at lower wages.

Some counties in Ohio  are moving to employ furlough programs to check budget deficits that continue to grow unabated.  The only catch has been that O.R.C. does not permit County employees not covered by a bargaining agreement to be furloughed.  Yet another example of the outdated and inflexible means in which county government is organized in the Buckeye State.

In response to the need of counties to have the option of unpaid leave a provision is being tailored for insertion into the Senate version of the budget bill.  The County Commissioner Association of Ohio  has been working on the furlough amendment and plans to have something ready for the Senate bill this month.  Inclusion of the amendment would permit county governments to furlough employees as a cost cutting measure. Of course the deeper the fiscal mess faced by any individual county the more likely lay offs will be necessary. 

Uh, Yeah ...you're going to have to come in on Saturday to make up that furlough time.

Akron Recall Afterthoughts

City Council has certified the recall petitions collected by the Mendehall Whiners Brigade as meeting the signature threshold.  Who even cares at this point how many signatures were collected?  At this point it's all academic.   There will be a recall election on Mayor Plusquellic.

Eric Mansfield raises some intriguing questions in his post from yesterday. There is a whole slew of complicated minutiae that will need to ironed out before an actual election can be held.  I''m sure it will all be worth it in the end. 

Anyway, looking past the election mess and the potential for a new mayoral contest reveals more future relevant questions that should be addressed. 

Has council or someone else started drafting a revision the section of the city charter that deals with the recall process/  Now would be an ideal time to make some basic changes to the amount of signatures required to trigger an election.  I think the current situation speaks to why this jhs to be changed. 

I don't know how often the charter review commission can consider new language but revising the recall language should be given priority.  You see where I'm going with this?  Why not stick a revamped recall version to the charter on the same ballot as the mayoral recall?  Time permitting of course.

Finally, would it be too much to look into the possibility of getting our rabble-rousing barrister dis-barred?  What are the requirements for starting that process?   Where's the Akron Bar Association on this matter?   It seems to me that Mendenhall's flagrant abuse of the civic legal system to pursue personal vendettas rises to the standard of malfeasance. 

State Budget: Missing The Moving Target

The latest update on State tax revenue projections is grim.  Each time Pari Sabety's crew gets another round of revenue data their estimates bottom out even further.   The latest income tax numbers really stink.

Total tax receipts through March were about $200 million below revised estimates, and total income-tax collections for April alone were $322 million, or 22 percent, lower than the already-pessimistic projections...

Due to the cliff diving tax receipts a third round of budget cuts was announced in Tuesday by the administration.  With tax revenue in a tailspin Governor Strickland had no choice but to make deeper cuts to the current year budget, or what remains of it.  The latest reductions could total $900 million and will no doubt harm be felt by the already reeling local governments.   The fiscal year ends on June 30th at which time another beleaguered budget starts anew.

The question arose in my office today.  How can they continue to be off the mark by such a wide margin?  Could it be that no one in Columbus is willing to accept how detrimental an ailing economy couped with short sighted tax cuts can be to the State's revenue sources.  This episode reminds me of Nassim Taleb's book Fooled By Randomness .  The over reliance on historical data to predict where the bottom will be has not worked out to well.  This latest recessionary cycle has broken the mold.

No matter, the new budget will be anything but fresh.  In order to staunch the deficit flow Ohio will have to tap the budget reserve fund (rainy day fund) before the end of the fiscal year.  That means there will be less of those much touted one-time revenue available for the FY 2010 budget.  The Senate Republicans are already complaining.  They will have to find the billion or so dollars needed to restore equilibrium to the next budget

There is now an inescapable fact staring the General Assembly in the collective face. You hear that State senators?    Some form of tax increase coupled with additional cuts to programs will have to be factored into the latest budget bill.  I can't think of another way out of the mess. 

State Budget: Desperately Seeking Sources

Here's where we are with the revenue shell game being played within the State budget process.  The House version of the budget bill was passed last week and the Senate will take the next two months to craft a moderated and tax hike free version of the FY2010 state budget.

The issue of revenue was mitigated somewhat by replacing the administrations projections for tax revenue with the much friendlier estimates derived from the Legislative Service Commission.  Nothing has changed at the core of the budget outlook.  Ohio needs more revenue, preferably from increasing taxes.

Using some one time revenue sources and a newer parlor trick with State sponsored non-profits  being employed to dig up extra money for State agencies in the House Plan.  Willard covers the non profit plan here.  In the end tweaks and nuance can plug the budget hole for the temporarily but they will not erase a structural budget deficit.  

Sunday's Beacon editorial page joins my call to increase taxes, er, set them back to a responsible level:

The absence of stimulus cash. A structural deficit. A commitment to improving public education. Ohio needs a tax increase, one that can be crafted to enhance the state's prospects in the long run, one that reflects responsible stewardship of the state.

The latest battle cry from the reality challenged tax haters in the Ohio GOP is that the one-time revenue in the next biennial budget will lead to a tax hike.  Truth be told, it's the short sighted politically opportunistic tax reforms of 2005 that have gotten us to this low point in the revenue curve.  Think about that for a moment.

The Ohio Senate should meet us half way and address the structural deficit prevalent in the budget.  Find some more budget cuts that can reduce the level spending over the 2010-2011 budget period.  That's the easy part.  

The next step will require some of the more adult members (in both parties) of the Senate to step up and reset income tax rates to a realistic and sustainable level.  Let's face it, 2005 was a different time.  The days of ideological opposition to responsible tax rates is passing.  Let the tea baggers and Jon Kasich wage the losing battle against the income tax. 

The sooner we take these steps the sooner Ohioans can begin working on achieving the school funding reforms that are long overdue.

My Recessionary Confessional

Now that the economic data have stopped cliff diving we can all catch our breath and reflect on the current recession.   Better yet, the purveyors of NPR's Planet Money podcast have set up a phone line where we can leave a recessional confession: 

Did you help break the global economy, or even the local one? Planet Money has a new call-in line for your confessions. It's (202) 371-1775.

If anything the call-in approach provides the platform for a great thought experiment.  Most of us observing the financial system cratering under its own gruesome weight feel (rightfully so) like hapless bystanders.  Digging deep enough reveals a thread to the current crisis in just about everyones' personal life.

The cynical Fausto is willing to admit his role.  I didn't run a hedge fund nor did I leverage a PhD in mathematics into developing synthetic CDO's or credit default swaps.  No, my story is a lot like yours.

I am guilty of turning my home into an ATM by way of a home equity line.  Sure we spent the majority of the credit on "capital improvements" but there was plenty of discretion on our part. A few niceties here and there quickly added up.  I'm not proud of my role in running up the U.S. trade deficit while helping to scuttle personal savings rates.  

I'm one of the more fortunate consumers traversing the real economy.  The equity line is almost paid off and the home value was spared the fate of other declining neighborhoods, keeping the underlying mortgage in the money so to speak.  All I can do is resolve to keep the personal debt to a minimum and maintain a glide path of more prudent savings, and all that.  There is it is, not very sexy.  That's how I contributed to the mess. 

State Revenue Reprise

A belated tip of the hat is in order for Beacon Journal opinion page editor Michael Douglas. Mr. Douglas picked up my theme about the real problem with Ohio's budget outlook in his Sunday column. The one-time revenue being used to balance the next budget is a patch for the gaping hole created by the shortsighted tax reforms championed by the GOP several years ago:

Neither do Taylor and her fellow Republicans take responsibility for their ample share of the shortfall. In 2005, they engineered changes in the state tax code that reduced revenues by a projected $4.4 billion in the next biennium. They slashed individual income tax rates by 21 percent. The state's regimen for taxing businesses required much reworking. What wasn't necessary was lowering further the share of taxes paid by businesses,the percentage having fallen from 40 percent in 1975 to 26.5 percent today.

Governor Ted is left with a fiscal shit sandwich and not many options other than temporarily plugging the deficit with one time money.

I second Douglas' call for some mature members of the General Assembly to step up and begin looking for some solutions for Ohio's revenue pickle. There is a measured approach that can be employed to restore some of the tax reductions without creating undue pressure on taxpayers of Ohio.

Death By Optionality

The next phase in preventing potentially insolvent banks (C and BOA) from backsliding into the abyss appears to be another accounting trick. The Treasury plan revealed earlier this week will seek to convert government shares of preferred stock held in beleaguered institutions to common stock. Whoopee! I've read that Geithner likes to preserve optionality,to leave as many doors open as possible. In this case Summers and Geithner both are not willing to concede that some form of nationalization is requisite in the case if C and BOA. They prefer to not exercise that option.

There may be some rationalization for the planned common stock conversion but not everyone agrees what that is. Coincidentally, a mention of the plan Treasury wants to implement can be found in the latest IMF GFSR report . The use of a stock conversion plan is mentioned in the section of the executive summary that discusses bank capitalization:

Most capital injections from governments thus far have come as preferred shares and these have carried with them a high cost that may impair the banks’ ability to attract other forms of private capital. Consideration could be given to converting these shares into common stock so as to reduce this burden.

My favorite members of the loyal opposition school of economics including Paul Krugman and Simon Johnson have cast doubt on this maneuver. I see their point on the seemingly futile nature of the stock conversion. The IMF report does provide some counterbalance to the critical outlook on the Treasury plan. This is the same IMF that Johnson used to work for.

Update:I recently purchased a Kindle and find it very conducive to reading dry and lengthy policy papers. More so than if I were to try to read them online. For what that's worth, I'm not quite sure.

One Time Revenue Ain't The Problem

Mary Taylor has unveiled her latest check on the Strickland administration's budget plan.   Auditor Taylor has stepped out of the normal role of the elected position she holds to evaluate what she thinks is the true deficiency in the governor's plan.  

The resulting opinion includes another admonishment of using one time revenues to to balance the budget. It seem the State Auditor doesn't believe the State  budget should depend on any one time revenue to cover an operating deficit.  Perhaps in an effort to lend some of her officialdom to the Tea Party movement Taylor criticizes the use of Federal Stimulus dollars in the budget as well.  This is becoming a frequent theme emanating from the AOS offices.

I have a news flash for Auditor Taylor, those one time revenues are not the real problem.  If she were to probe her memory she may recall one change she helped enact back in 2005 that preordained the need to depend on one time revenues. 

I am referring to the tax reforms enacted in HB66.  The reforms that Taylor and others supported included a sizable 21% decrease in income tax rates over a five year period. The last phase of cuts occurs this year barring any last minute acts of common sense from the General Assembly. The alteration of the tax regime has contributed significantly to Ohio's revenue woes.  A politically motivated rush to tamp down income tax rates has left the State with a insufficient level of tax revenue.  So much for the Laffer curve inspired myth of increasing tax revenue via tax cuts.

The revenue numbers themselves speak to the short sighted nature of the changes enacted in HB66. Until the change was made the State had never had consecutive years of revenue declines in the last fifty years of experience.  The loss trend started as soon as the income tax reforms began to phase in.  Can that be coincidental . 

Yes, the down turn in the economy is a factor in the revenue decline but, the tax reforms have contributed to the shortfalls that have placed Ohio in perilous budget territory.  Consider this, in the fifty years prior to the tax reforms, there were eight  recessions. In those eight periods of economic decline Ohio's tax revenue had never experienced two consecutive years of decreasing collections.

Taylor's memory is either suppressed or she would rather not admit that the actions taken several years ago by her and her Assembly colleagues and Governor Taft have contributed to Ohio's fiscal woes.  Instead Taylor has opted to be the Ohio GOP's factotum on all things critical of Strickland.  From her lofty perch as Auditor of State she can direct her staff to pop out reports focusing on the perceived shortfalls of the adminstrations handling of the budget and finances. 

In order to take on this role it is conceivable that resources have been redirected on churning out Strickland critiques in lieu of focusing on auditing local governments.  County governments alone could use a good deal of oversight, just look at what's transpiring in Cuyahoga County. In fact large entities like Cuyahoga have to pay a few million dollars a year to contract with a large accounting firm though the State to have the annual audit completed.  The AOS claims they don't have the staff to do the largest audits. 

Unfortunately Taylor has decided to provide lip service to local governments that need more audit and performance oversight analysis and go full bore on hunting down the weaknesses in Stickland's budget plan. Why not through in a few invectives about the use of federal ARRA dollars while your at it?  

We shouldn't expect politicking not to be force in shaping the way policy is sculpted by state office holders. The Auditor's role is much more prescient at overseeing local government finances where the lions share of State dollars actually get spent.  The technocrat veneer once imbued by Taylor is wearing thin.  When a candidate runs for office on her finance acumen and CPA credentials that she possesses it's dissappointing to see them cast aside in favor of the tea party antics currently on display.  I guess we can assume she is running for governor .

Whiteguys and Wingers and Birthers, Oh My

I surveyed the attendees assembling for the Cleveland Tea Bag Festival from my fourth floor perch on Lakeside Avenue.   From this vantage point I could surmise some basic themes emerging in the gathering crowd pf proto-revolutionaries. From the signs people where carrying there was a definitive animus towards the federal government, Obama, taxes of any kind and liberals.

Here are some things I didn't see:

Crispus Attucks - Let's face it, this is a white man's movement.

Non Partisans - The whole tea party theme is a cover for the ant-Obama / Democratic party slant on display at every location I've seen coverage of.

The Independently Wealthy - Let the middle class do the work of shilling for the rich guys.

NPR - Can't imagine the anti-Fox News will do to much to acknowledge today's rallies.

History Majors - The original Tea Party was to protest the actions of a large corporation, this one intends to do their bidding.

Empty Hands - Flags or poster board signs with witty or paranoid sounding slogans were mandatory to gain entrance.

CoExist Bumper Stickers - Doubtful this was a crowd willing to embrace people of all backgrounds.

The Ability to Detect Irony

Far Right Hucksters

A Democrat is president again which means political lunacy is back in vogue.  Just like the cicadas swarm in great numbers every seventeen years reactionary fools converge to the local sports bars to plan the latest peoples' uprising when a liberal leaning president is elected.

A clip of one of one of the meetings is making rounds on the internet.  Local readers will be proud to notice the Copley High School memorabilia in the background.  I'm assuming this was the local gathering of the Glenn Beck 912 viewing party in Fairlawn.

Today's flavor of movement conservatism is a collection of two-bit t-shirt salesman.  Relegated to a series of depraved cottage industries built around a culture of fear and loathing

Here's what they're selling;

• The Tea Party movement is like the new Tupperware party fad. Find the house party nearest to you and show up with a bad attitude about government and a DIY sign. The sale of merchandise is the real pay off. Let's face it these posers will all end up paying their taxes on time.
  

• Your local gun store owner can't hear you over the din of that cash register ringing up sales. A guns and ammo boom is building via the persistent story of a looming federal gun ban. Of course rational people who actually read know that there is no serious move on a gun ban being considered at the national level. At the State level, well just look at what Ohio has done to see the right to bear lots of guns is in no way threatened.
  

• Anything that capitalizes on the fear that Obama is a socialist, communist or the second coming of Hitler is the other growth industry. A hallmark of the loony right is to label anyone diametrically opposed to their world view as a Nazi or Hitler-like. Check out the coverage of the from last week of the Knob Creek Machine Gun Shoot in Kentucky. to see the latest product line in Obama-is-a-fascist gear.
  

The purveyors of this fringe accoutrement know their prospective buyers can't help themselves. 

There is an entire class of consumers that need to accessorize their paranoia with shirts, books and specialty weapons.  Just marketing the product around buzzwords like collectivism, re-education, brainwashing and sleeper candidate gets the cash registers ringing up sales like it was 1995 all over again.  

I actually yearn for the black helicopter days of yore.  There's a fringe movement you can believe in.

Obama Avoids First Base

The right wing has been doing their best to read sinister meaning into President Obama's bow to Saudi King Abdullah.    

It was more likely a slip of decorum or protocol as result of being green around foreign leaders.  Or it could be as some righty prognosticators have suggested a sign of submission to our Saudi overlords.  Would there have been a controversy if he bowed a Japanese head of state?

How quickly memories fade.  It wasn't that long ago that our leaders expressed their admiration to our Saudi friends in an entirely different manner.

I hear the King has sweaty palms.  Maybe that's why Obama opted out of the hand holding.