Can Democrats Survive a Republican Statewide Sweep?

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Substantial Cash and Polling Lead Positions Kasich for Major Victory

Following the defeat at the ballot box of Senate Bill 5 — the collective bargaining legislation — it appeared Governor John Kasich and his Republican counterparts were in trouble in Ohio. They appeared in electoral trouble because they had moved too far to the political right with budget cuts and anti-labor legislation. Move up the clock a couple years and Governor Kasich appears in a strong position to not just win re-election, but do so with a margin that will likely carry most other statewide elected Republicans across the victory line. In a politically volatile state like Ohio, it is too early to claim victory for anyone, but the Republicans appear in strong positions in fundraising and polling.

Post Primary Campaign Finance Reports indicate a substantial lead for Governor Kasich in the fundraising battle. Kasich’s campaign has a cash balance of $9.3M pulling in $1.76M over just the last two months. Kasich’s Democratic opponent, one term Cuyahoga County Executive Ed Fitzgerald, had a balance of almost $2M. More troubling for Fitzgerald is his current balance is about maxed out with support from the Democrats prime political and fundraising supporters- organized labor. Of the $835,571 raised by Fitzgerald in the Post Primary Period, nearly half came from organized labor. Unions gave the maximum amount permitted under Ohio law to Fitzgerald as soon as they could for the General Election with contributions of $323,385 in the Post Primary Report. Add in the Ohio Democratic Party, who is heavily supported by labor, and two-thirds of Fitzgerald’s money comes from labor and the state party.

As an unknown statewide candidate, Fitzgerald will need to substantially increase his fundraising beyond organized labor who lacks the ability to fully fund a statewide campaign for Governor. The large fundraising gap between the two gubernatorial candidates dwarfs that of the 2010 post-primary filings where Gov. Kasich reported an on-hand campaign balance of $5.7M to incumbent Gov. Ted Strickland’s $7.6M. This massive fundraising lead will not only permit Governor Kasich to get his message out to voters, but will give him the resources to define the unknown Fitzgerald.

Of greater concern for Fitzgerald is the fact that the Democratic Governors Association nor any other independent group failed to answer a two-commercial salvo fired by the Republican Governor’s Association supporting Kasich around the Primary Election. The RGA ads ran for several weeks and simply went unanswered by Democratic aligned groups. As July begins, no independent groups have lined up to assault Governor Kasich.

Traditionally, the performance of the Party’s top of the ticket dictate’s voter turnout. Close races generate interest from both parties. Blow-outs can result in the losing party struggling to turnout voters. A Kasich victory by 10 or more points may well make it difficult for other statewide Democrats to win. The Democratic candidates for Auditor, Secretary of State, Attorney General and Treasurer all face the additional challenge of not being elected statewide and only one candidate has even run statewide before. Fitzgerald’s weak performance creates a tough decision for the Democrats. Do they cut him off and focus big on one other statewide race? Do they pump more money into Fitzgerald’s campaign thinking it is the key to turnout? Tough questions for any party leaders to face on July 4th.

Busy Lame Duck Session Planned for the Ohio General Assembly

Gaming, Severance Tax and Municipal Tax Reform Top Lame Duck Session List

Governor Kasich’s Mid Biennium Review (MBR) legislative chaos just ended. Kasich created what is nearly a second state operating budget process in what traditionally has been a fairly quiet legislative year. Kasich does not like quiet. Governor Kasich’s MBR legislation packages state agency regulatory initiatives and pushes them all together. The MBR legislation was of such scale and scope the Ohio House promptly broke it up into 14 separate bills, filling legislative committee calendars for several months. The majority of the MBR bills passed the General Assembly, but many not in the form proposed by the Governor. Taxes in particular are an issue where Kasich’s vision has not completely lined up with General Assembly wishes. Governor Kasich continued his push to for “Tax Reform” by proposing to increase the severance tax onOhio’s booming oil and natural gas exploration industry and continuing to cut theOhioincome tax. The General Assembly found $400M extra state dollars and passed their own version of Tax Reform by expediting a planned income tax cut, saving any increase in taxes for another day. Taxes aside, the Kasich Administration gained the majority of changes it proposed for higher education, K-12, workforce, veterans, workers’ compensation and other state agencies.

Planned Session Dates Ohio Senate Ohio House
Tues Sep 16   Session (if needed)
Wed. Sep 17   Session (if needed)
Thu. Sep 18   Session (if needed)
Tue. Sep 23 Committee Session (if needed)
Wed. Sep 24 Committee Session (if needed)
Thu. Sep 25 Committee Session (if needed)
Tue. Sep 30 Session (if needed)  
Wed. Oct 01 Session (if needed)  
Thu. Oct 02 Session (if needed)  
Wed. Nov 12 Session Session
Thu. Nov 13 Session  
Tue. Nov 18 Session Session (if needed)
Wed. Nov 19 Session Session
Thu. Nov 20 Session Session (if needed)
Tue. Nov 25 Session Committee Hearings
Tue. Dec 02 Session Session (if needed)
Wed. Dec 03 Session Session
Thu. Dec 04 Session Session (if needed)
Tue. Dec 09 Session Session (if needed)
Wed. Dec 10 Session Session at 1:30 p.m.
Thu. Dec 11 Session Session (if needed)
Tue. Dec 16 Session Session (if needed)
Wed. Dec 17 Session Session
Thu. Dec 18 Session Session (if needed)

Plan on more legislative chaos around gaming, severance tax, municipal tax reform and a host of other issues too hot to be debated prior to an election.

Ohio Third Frontier Releases a Flood of Funding Awards

During its June 11 meeting, the Ohio Third Frontier Commission approved nearly $85 million in funding awards to 30 start-up and established companies, universities, research institutions and risk capital entities. Awards were made through the Ohio Third Frontier’s Technology Commercialization Center (TCC) Program, Pre-Seed Fund Capitalization Program (PFCP), Commercial Acceleration Loan Fund (CALF), Technology Validation and Start-Up (TVSF), and the Industrial Research and Development Center Program (IRDCP).

Awards were approved for the following:

  • TCC Program:  $21 million to The Ohio State University for its Neurotechnology Innovations Translator and $25 million to University Hospitals (Cleveland) for its Harrington Discovery Institute – Innovation Support Center. Both Centers will support the accelerated commercialization of research and technologies developed at these Ohio institutions and develop them into new treatments and medicines.  Additionally, the Centers will contribute to improving global clinical care, building healthcare industry partnerships, create medical technology start-up companies, and bring new venture capital investments to Ohio.
  • PFCP:  More than $26 million to ten entities, including the Impact Angel Fund (Canton), East Central Ohio Tech Angel Fund II (Athens), Development Projects, Inc. (Dayton), Cincinnati Children’s Hospital Medical Center, Cleveland Clinic Foundation, Regional Growth Partnership (Toledo), North Coast Angel Fund III (Mayfield Heights), NCT Ventures Fund II (Columbus), Bizdom Fund (Cleveland), and Lorain County Community College Foundation (Elyria). The Funds are helping to grow and support promising start-up companies with early-stage capital investments.
  • CALF:  More than $7.8 million in loans to five companies, including Cardiox Corporation (Columbus), Cervilenz (Chagrin Falls), Echogen Power Systems (Akron), Inmobly (Columbus), and MAR Systems (Cleveland). These companies are developing new products across numerous technology industries and CALF funding will support their work where other funding may be difficult to secure due to the risk associated with developing the technologies.
  • TVSF:  Nearly $1 million to 12 universities, research institutions and start-up companies, including theUniversity ofToledo,CaseWestern ReserveUniversity, Cleveland Clinic,OhioUniversity,NortheastOhioMedicalUniversity, Sense Diagnostics (Cincinnati), TeraProbes (Hilliard), Lattice Biotech (Powell), Standard Bariatrics (Cincinnati), Flexible ITO Solution (Kent), Ion-Vac (Cleveland), and Columbus Technology (Columbus). These grants support the work ofOhio’s universities and research institution to validate new technologies in order to get them to the point of licensing and commercialization and the work ofOhio start-up companies that have licensed technologies developed atOhio universities and research institutions.
  • IRDCP:  Nearly $4.9 million to the Edison Welding Institute (Columbus) to support its leadership role for the American Lightweight Materials Manufacturing Innovation Institute (ALMMII). The Institute was awarded $70 million in funding from the U.S. Department of Defense in February 2014 and involves a consortium of sixty companies, universities, and nonprofit organizations. ALMMII serves metal production, forming, joining, casting, and manufacturing sectors across the U.S. to accelerate production processes for lightweight alloys for the automotive, aerospace, defense, energy, and heavy manufacturing industries.

The Montrose Group LLC extends our congratulations and best wishes for success to all of these Ohio Third Frontier winners.

So You Didn’t Get an Ohio Third Frontier’s Commercial Acceleration Loan—What Now??

Only 15% of the companies who submitted requests for the Ohio Third Frontier Commercial Acceleration Loan Fund (CALF) were approved for awards. Even for the highly competitive Third Frontier program, this is a low success rate.

The CALF was established for the purpose of supporting Ohio for-profit companies addressing the technical and cost barriers to commercialization in Ohio of high-tech products and processes. CALF is helping to accelerate the development and growth of key Ohio technology industries by funding the move of products and services into market entry through commercial scale demonstrations in market-use conditions, manufacturing scale-up beyond pilot plant operations, final customer validation, product certification, and/or regulatory certification, acquisition of exclusive intellectual property rights, launch of the next-generation of existing products, services or processes, and engineering or packaging design.

Since May 2013, according to a status report provided to the Ohio Third Frontier Commission on June 11, Ohio Development Services Agency staff have received 145 company inquiries regarding the CALF. 77% of those companies have been pre-revenue and the average equity raised by the inquiring companies has been $3.2 million. DSA staff have participated in 67 company presentations, conducted 44 due diligence reviews, and submitted 22 requests for loan approvals to the Third Frontier Commission as part of the CALF review process. The average loan request has been $1.3 million. Of the 22 requests for approval, 17 of the approvals have either closed on their loan agreement or are in the process of closing on an agreement.

DSA statistics show that only 15 – 20% of companies inquiring to the CALF will progress to the approval stage. While CALF interest is high, program criteria is rigorous for those proceeding through the full evaluation process. For those companies not advancing to the approval stage, especially those deemed to be too early for the CALF, the question becomes one of: if not a fit for the CALF, what other funding opportunities and resources are available?

Third Frontier’s Pre-Seed Fund Capitalization Program (PFCP)- the PFCP is providing millions of dollars to numerous entities across Ohio who are increasing the availability of professionally managed capital and associated services to accelerate the growth of early-stage Ohio technology companies.

Entrepreneur Signature Program (ESP)- the ESP is providing millions of dollars more to establish deep networks of entrepreneurial services and capital within six defined regions of Ohio to accelerate the growth of early-stage Ohio technology companies.

Collateral Enhancement Program (CEP) – the CEP is designed to enable financing that might otherwise be unavailable due to a collateral shortfall by supplying pledged cash collateral accounts to lending institutions to enhance collateral coverage of individual small business loans targeting certain situations or industries, such as manufacturing.

Ohio Capital Access Program (OCAP) – Structured as a loan portfolio insurance program, similar to a loan guarantee that enables small businesses to obtain access to the credit needed to help them grow and expand, the OCAP supports the reserve pool made available to participating institutions to assist them recover financial losses incurred.

Regional 166 Direct Loan Program - The Regional 166 Direct Loan promotes economic development, business expansion and job creation by providing financial assistance for allowable costs of eligible projects in the State of Ohio by providing low-interest loans to businesses creating new jobs or preserving existing employment opportunities in the State of Ohio.

Small Business Development Centers – Since 1985, the SBDC program has fostered a strong climate for small business growth with many local community partners including college and universities, economic development agencies, chambers of commerce, and other community organizations.

Entities and individuals interested in the Ohio Third Frontier’s Commercial Acceleration Loan Fund or in resources available through other Ohio Development Services Agency programs should contact The Montrose Group’s David Robinson at drobinson@montrosegroupllc.com or (614) 738-2109.

Primary Election a Mixed Bag for Incumbents But Kasich Lead Widens

Fifty seats in the Ohio General Assembly faced Primary Races in May of 2014 and the incumbent officeholders, with a couple of exceptions, faired well. There was much attention focused on the Tea Party in Ohio. Ohio Citizens PAC, a Tea Party affiliated organization, endorsed twenty candidates for the Ohio General Assembly and five of them did prove victorious. However, only State Representative Peter Stautberg of Cincinnati proved a Tea Party victim with a surprising loss to former State Representative Tom Brinkman. Stautberg defeated Brinkman in 2012 with 61% of the vote. The Ohio Tea Party also claimed victory in four other races that included:

  • Paul Zeltwanger defeated indicted incumbent State Representative Peter Beck who could not even gain 10% of the vote
  • Nick Skeriotis defeated Kenneth Hendrickson in the 75th House District
  • Kyle Koehler surprised many in his defeat of Rick Chimento and Argeri Lagos in    term-limited State Representative Ross McGregor’s Springfield seat
  • Nino Vitale won a three way race to take over the 85th House District seat being vacated by Rep. John Adams (R-Sidney)

Current State Representative Rex Damscroder lost his chance to rectify a paperwork mistake with his campaign petition with his wife running as a placeholder for Rex. He was defeated in a write in by Tiffin car dealer Bill Reineke in this Northwest Ohio district. Democrats lost the chance to remove two Cleveland area legislators in hot water for at times siding with Republicans. State Representatives John Barnes and Bill Patmon both beat back Primary Election challenges. Probably most importantly, State Representative Barbara Sears easily defeated her Primary Election opponent. Sears is the Toledo area Republican who publicly  bbacked Governor Kasich’s Medicaid Expansion Plan and was threatened with Primary Election defeat by national conservative groups. The Ohio Senate, whose larger districts make challenging incumbents tougher and more costly, did not lose any incumbents.

Following the Primary Election, new polls showed Governor John Kasich’s lead over Democrat opponent Ed Fitzgerald widening to 15 points. Of greater concern for the Democrats is a television ad buy by the Republican Governor’s Association supporting Governor Kasich was not answered by any outside liberal groups. Spending by outside groups is a major influence in modern elections following the Citizens United case that permits groups to directly advocate for candidates with corporate and union dollars. The only requirement is the independent groups have to be independent and they cannot coordinate with the candidates’ campaign. The Republican Governors Association and the Democratic Governors Association are both independent groups that often run political ads for their current or potential members. It surely is another bad side for the Fitzgerald campaign that the RGA Kasich ad buy was not met by a competing outside group. Primary Election fundraising reports still illustrated Kasich with a substantial fundraising lead and his bounce up in the polls is a result of unemployment dipping below 6% for the first time in years, as well as his own and the RGA television ad campaign with no Democratic response. Expect more of the same to come.