Columbus Dispatch: Ominous signs for the economy

Ohio has losing ground to other states for years. But now, as Gov. Strickland begins to fill a huge budget hole, there are warnings that things might get worse.

Ominous signs for the economy
(Click images to enlarge)
Sunday, February 3, 2008 3:26 AM
By Mark Niquette
THE COLUMBUS DISPATCH

Less than a week after wielding an ax on the budget in response to the state's struggling economy, Gov. Ted Strickland will step to the rostrum in the Ohio House chamber Wednesday to deliver his second State of the State address.

What can he say?

The state of the Ohio budget is precarious, with Strickland announcing last week that he's slashing at least $733 million through spending reductions, job cuts and other steps to deal with a projected budget shortfall that could get much worse.

And the Ohio economy continues to languish compared with other states' when it comes to jobs, population growth, income and many other key economic indicators, a Dispatch analysis shows.

In fact, Ohio was one of three states that lost jobs last year, trailing only Michigan; had the second-highest home foreclosure rate in the nation; and leads only two other states in population growth after adding a meager 3,404 residents.

"I wish I could say the glass is half-full," James Newton, chief economic adviser for Commerce National Bank, said when asked to identify what positive state economic trends he sees. "At least the glass doesn't have any cracks."

Even in some areas in which the state improved its ranking from a year ago, either the change was not dramatic or Ohio's performance still fell short of the national benchmark.

For example, the increase in Ohio's unemployment rate during the past 12 months was less than the national increase. But Ohio's 6 percent jobless rate in December still was a full percentage point higher than the national rate.

In an interview last week, Strickland declined to discuss what he plans to say in his speech. But he said his working title is, "Fiscal Responsibility and Shared Prosperity."

"What we need in Ohio is fiscal responsibility, which I believe will lead us to shared prosperity," he said.

Strickland, who campaigned on a platform of "Turnaround Ohio," acknowledged that the economic performance in Ohio has been disappointing. But he thinks there are new investments being made and jobs being created that just haven't overtaken the number of jobs being lost.

Michael Nipple, an economist with Global Insight, said Ohio has a larger share of manufacturing and automotive jobs than many other states, so it suffers more intensely when those segments of the economy are struggling, as they are now.

"Right now, nothing's happening with the Ohio economy. It's stagnated," said Bodhi Ganguli, an economist with Moody's Economy.com who is forecasting that Ohio will slip into recession this year in the wake of a national recession.

Strickland argues that the key is to resist new taxes and cut spending to match revenue, but also protect investments in higher education and other priorities that will help spur economic growth in the future.

Administration officials say Ohio's biggest problem is the national economy, and that the state is poised for growth once the U.S. economy improves.

"We do strongly believe that Ohio's economy is very well-positioned right now to deal with the hand that's being dealt to us at the national level," Budget Director J. Pari Sabety said. "Our job is to make sure that we're weathering this challenge before us and emerging from it with the right tools in our belt."

Strickland said he decided to announce the budget cuts before his State of the State address because he had committed to releasing the information once it was prepared and because he didn't want his speech to be all negative.

The governor said he has watched parts of speeches from governors in other states and concluded that they should not be "a laundry list of negatives."

"The last thing that I want to do or should do or need to do as governor is to encourage people to feel as if state government is not working as hard as it can to enable growth to occur," he said.

Strickland acknowledged that it will be difficult in the short term to pursue major initiatives such as expanding health-care coverage to more uninsured Ohioans or offering a "fix" for an unconstitutional school-funding system as he has promised.

But he said he's not backing away from those goals and is trying to "steer a steady course" that avoids overreacting to criticism or changes in the economy that could hurt long-term growth prospects for the state.

Sueann Nuss, a 40-year-old stay-at-home mom and speech pathologist from Gahanna, says the economy is her top issue because it's scary to watch friends struggle as the state economy falters.

Although Nuss, a Democrat, isn't sure Strickland can do much about it anytime soon, she thinks he's doing the best he can.

"I don't think there's any dream package that can make it better," she said.

mniquette@dispatch.com