Listen to John Kasich, and almost invariably he pitches a narrative along these lines: “We’ve had a climate in this state where we over-regulated, overtaxed, overspent. We didn’t respect the job creators and we just drove them out. It takes a lot of work to drive out 400,000 jobs.”
Those words were uttered at an event last month announcing the location of a new Parker Hannifin plant in Columbus. A couple of weeks earlier, the governor shared: “We’re not going back to yesterday. We are not going to spend this money. We’ve had a long period of time of tax and spend and we’re not going to do it.”
“This money” refers to the fiscal year-end balance of $552 million. Advocates for schools and local governments argue that a portion should be devoted to reversing part of the deep spending cuts in the current state budget. The governor isn’t interested, to say the least. He has in mind turning any surplus into income tax cuts, insisting that such a step amounts to proper respect for job creators.
Worth recalling is that in 2005, state lawmakers launched a 21 percent reduction in income tax rates. They eased the tax burden on businesses. The governor needles about losing 400,000 jobs. That loss followed those tax cuts.
The Kasich argument is, apparently: They just didn’t cut enough.
Yet tax rates had practically nothing to do with the job losses. The brutal recession hit. Virtually all states experienced sharp declines in employment. If anything, studies show some states with higher income tax rates have performed better than states without an income tax.
What about overspending? Surely, the governor is right, isn’t he?
Not really. Terry M. Thomas, a former president of the State Controlling Board and once an analyst at the Legislative Service Commission, among other posts in state government, has taken the long view of state spending in a recent report for the Center for Community Solutions.
Thomas examined state spending in the 1980s, 1990s and 2000s, extending the frame to 2013 to cover the current state budget. He focused on “state-source expenditures,” the general revenue fund, local government fund, public library fund and lottery profits education fund.
No question, spending increased dramatically in the ’80s, by 143 percent, from $4.4 billion a year to $10.7 billion a year. Much of the increase followed the commitment made in establishing a state income tax in the early 1970s, addressing unflattering comparisons to Mississippi, a neglect of priorities, including the poor and vulnerable, captured in the state share of education funding falling to 29 percent in the late 1960s.
The ’90s featured increased spending, though at a slower rate, 63 percent for the decade. The largest increases came in Medicaid and prisons. The one area of decline (37.6 percent) was cash assistance to the poor, mostly reflecting the end of the modest General Assistance program.
In the 2000s, with Bob Taft and then Ted Strickland as governor, things changed. Spending expanded a mere 8.9 percent, from $17.4 billion to $18.9 billion. Funding for higher education dropped 9 percent; cash aid to the poor, another 39 percent.
Local governments felt the squeeze, a decline of 22 percent, a prelude to the blow the Kasich team would deliver in its budget.
Most striking are the amounts when adjusted for inflation. In 2010, the state spent 25 percent less than it did in 2000, or slightly below the level in 1990. Primary and secondary education fared relatively well in the decade, yet in real dollars state support declined 11 percent. Human services, minus Medicaid and cash assistance, dropped 34.5 percent.
No surprise that Medicaid has consumed an ever larger share of state spending, expanding from $311 million in 1980 to $4.9 billion today. Hard to miss the trade-off, other priorities suffering as a result, making all the more crucial the governor’s bold efforts to reshape Medicaid, the largest share of the cost involving not poor families but the indigent elderly.
What should most alarm about this trade-off is the neglect of higher education, long battered in the budgeting process. In real dollars, state spending on higher education declined 37 percent from 2000 to 2010, Ohio today spending roughly what it did in 1980 on colleges and universities.
No wonder tuition levels are comparatively high, students and their families coping with heavier debt burdens. Of all places, Ohio, struggling with the transition to a new, knowledge-driven economy, should not be erecting such barriers to obtaining college degrees.
Yet look at the governor’s budget. He isn’t somehow corralling years of runaway spending. The vise already has been tightening. He wants to keep squeezing, primary and secondary education, the foundation of academic success, down 17.4 percent since 2000 under the current budget (again in real dollars).
Advocates are not asking for the moon, say, reversing the tax cuts of seven years ago that have resulted in a $5 billion reduction in revenue for the current biennium. They simply ask: At this point, isn’t there a better way to use the surplus than another round of income tax cuts?
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at email@example.com.