Ohio’s Biennial Budget Bill Tackles Opioid Crisis

With Ohio still in the throes of an opioid abuse epidemic, Ohio’s lawmakers and the Governor continued their work over the first half of 2017 on addressing the issue through provisions enacted in HB 49, the biennial budget bill. Recent reports have shown that opioid overdose deaths jumped over 32% last year, and are being fed by the emergence of newer more potent opioids such as fentanyl and carfentynil. Opioid abuse remains a significant problem that is negatively impacting not only state and local governments, but is tearing apart families and leading to a decrease in work productivity in those communities most affected.

HB 49 attempts to address the opioid crisis by appropriating $180 million over the biennium to attack it on several different fronts:

Mental Health and Addiction:

  • Requires Superintendent of Insurance to develop consumer education on mental health and addictions services insurance parity and creates a hotline to help consumers understand their benefits
  • Creates medication addiction treatment (MAT) standards for prescribers
  • Creates and funds the County Hub Program to combat opioid addiction to be administered by each ADAMHS board
  • Continuum of Care Services funding to ADAMHS boards for subsidized support psychotropic medication and MAT needs of indigent citizens
  • $20 million for recovery housing
  • $2 million for workforce recruitment and retention

Child and Family Welfare

  • Community Innovation Funds of $3 million in FY 2018 and $4 million in FY 2019 to provide funding for community projects that focus on support for families, assisting families in avoiding crisis and crisis innovation
  • Data collection and sharing by agencies that serve multi-system youth
  • Permits a county family and children first council to establish and operate a flexible funding in order to assure access to needed service by families and children in need of protective services

Criminal Justice

  • Creates a pilot program for mental health courts, including antipsychotic drugs that are administered in long-acting injectable form
  • Medication Assisted Treatment (MAT) in specialized docket programs for drugs
  • Specific grants in support of addiction services alternatives to incarceration
  • Provide specialized re-entry services to offenders leaving prison
  • Creates the Psychotropic Drug Reimbursement Program, through which county jails are to be reimbursed by ODMHAS for psychotropic drugs dispensed to inmates

Wellness and Prevention

  • All Roads Lead to Home program includes a public service announcement (PSA) campaign, website and 24-hour hotline
  • $500,000 each fiscal year to support evidence based prevention in school settings
  • $1.5 million each fiscal year for ADAMHS boards to purchase the provision of evidence based prevention services from providers certified by ODMHAS

Local Government Fund (LGF) Priorities to help local communities:

  • Creates a new fund, Targeting Addition Assistance Fund (TAAF) in FY 2018 and 2019
  • Directs the funds to be utilized as follows:
  • $1 million by the Department of Health for Toxicology Screenings to reimburse county coroners for screenings for drug overdose deaths, and requires screenings for certain drugs
  • $5 million to the Department of Rehabilitation and Corrections to allocate grants to municipalities to provide services to those addicted to opiates and supplement grants distributed by Community Nonresidential Programs
  • $6 million for Substance Abuse Stabilization Centers to be allocated to local ADAMHS boards, a center to be located in each state psychiatric hospital region
  • $150,000 by ODJFS for Children’s Crisis Care facilities
  • $500,000 for Brigid’s Path Pilot for neonatal abstinence syndrome
  • $5 million through ODMHAS for ADAMHS boards to use for the Continuum of Care services
  • Continued funding for naloxone for local law enforcement through project DAWN in the county.

It is safe to say that the issue of battling the opioid crisis will remain an issue of concern for all levels of government, as the impacts of these HB 49 provisions are assessed, and the need for further state legislation is analyzed.

It is also worth noting that in addition to the HB 49 provisions, administrative rules went into effect on August 31st around the prescribing of opiates for acute pain. These rules limit prescribing for acute pain to seven days for adults and five days for minors.

 

Application Window Open for Infrastructure for Rebuilding America (INFRA) Program

The US Department of Transportation (US DOT) on June 29, 2017 issued a Notice of Funding Opportunity for small and large projects through its new program, the Infrastructure for Rebuilding America (INFRA) grant program. This program is a replacement for the FASTLANE program. The emphasis of INFRA is leveraging non-federal funding, particularly projects and have a public-private partnership.

The INFRA program is being funded initially with $1.5 billion dollars. Large projects must be seeking a grant of at least $25 million while small projects can seek a grant of at least $5 million. At least 10% of the projects funded must be small projects. A priority is given to rural projects; 25% of the projects must come from a rural area.

In Fiscal Year 2016, 18 projects were awarded from the FASTLANE program. Ten of those projects were in urban areas and eight of those projects were in rural areas. The average award size was $42,177,778. Eleven of the projects were in the large project category and seven of the projects were in the small project category.

Urban/Rural Project Name Applicant Project Size Awarded
Rural Interstate 10 Phoenix to Tucson Corridor Improvements Arizona Department of Transportation Large $54,000,000
Urban SR-11 Segment 2 and Southbound Connectors California Department of Transportation Large $49,280,000
Urban Arlington Memorial Bridge Reconstruction Project National Park Service, DC Department of Transportation Large $90,000,000
Rural Truck Parking Availability System (TPAS) Florida Department of Transportation Small $10,778,237
Urban Port of Savannah International Multi-Modal Connector Georgia Ports Authority Large $44,000,000
Rural U.S 95 North Corridor Access Improvement Project Idaho Transportation Department Small $5,100,000
Rural Cedar Rapids Logistics Park Iowa Department of Transportation Small $25,650,000
Rural I-10 Freight CoRE Louisiana Department of Transportation and Development Large $60,000,000
Urban Maine Intermodal Port Productivity Project Maine Department of Transportation Small $7,719,173
Urban Conley Terminal Intermodal Improvements and Modernization Massachusetts Port Authority Large $42,000,000
Urban Cross Harbor Freight Program (Rail) The Port Authority of New York and New Jersey Small $10,672,590
Urban I-390/I-490/Route 31 Interchange, Lyell Avenue Corridor Project New York State Department of Transportation Large $32,000,000
Rural US 69/75 Bryan County Oklahoma Department of Transportation Large $62,000,000
Rural Coos Bay Rail Line – Tunnel Rehabilitation Project Oregon International Port of Coos Bay Small $11,000,000
Urban Atlantic Gateway: Partnering to Unlock the I-95 Corridor Virginia Department of Transportation Large $165,000,000
Urban South Lander Street Grade Separation and Railroad Safety Project City of Seattle Large $45,000,000
Urban Strander Boulevard Extension and Grade Separation Phase 3 City of Tukwila Small $5,000,000
Rural I-39/90 Corridor Project Wisconsin Department of Transportation Large $40,000,000
$42,177,778

The application window for these projects opened on August 1, 2017. Applications are due by November 2, 2017. Eligible INFRA project costs may include: reconstruction, rehabilitation, acquisition of property (including land related to the project and improvements to the land), environmental mitigation, construction contingencies, equipment acquisition, and operational improvements directly related to system performance. Projects that are ready to go from a funding, engineering, planning and construction standpoint will be given priority in funding.

Montrose Economic Update, September 2017

American economic growth continues heading into the fourth quarter of 2017 but not at the pace hoped for.  Key data points related to the current performance of the U.S. economy include the following:

  • Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2017, according to the “second” estimate released by the Bureau of Economic Analysis following a 1.2 percent increase in the first quarter;
  • Real gross domestic product (GDP) increased in 43 states and the District of Columbia in the first quarter of 2017, according to the U.S. Bureau of Economic Analysis. Real GDP by state growth in the first quarter ranged from 3.9 percent in Texas to -4.0 percent in Nebraska (see chart below).

  • In July, the Consumer Price Index for All Urban Consumers increased 0.1 percent seasonally adjusted; rising 1.7 percent over the last 12 months, not seasonally adjusted and the index for all items less food and energy rose 0.1 percent in July- up 1.7 percent over the year;
  • Compensation costs increased 0.5 percent for civilian workers, seasonally adjusted, from March 2017 to June 2017, and, over the year, compensation rose 2.4 percent, wages and salaries rose 2.3 percent, and benefits rose 2.5 percent;
  • Total nonfarm payroll employment increased by 156,000 in August, and the unemployment rate was little changed at 4.4 percent with job gains in manufacturing, construction, professional and technical services, health care, and mining;
  • The Producer Price Index for final demand declined 0.1 percent in July after edging up 0.1 percent in June, and, in July, the index for final demand services fell 0.2 percent and prices for final demand goods decreased 0.1 percent with the final demand index rose 1.9 percent for the 12 months ended in July;
  • Productivity increased 0.9 percent in the nonfarm business sector in the second quarter of 2017 with the unit labor costs increased 0.6 percent (seasonally adjusted annual rates), and, in manufacturing, productivity increased 2.5 percent and unit labor costs decreased 0.3 percent;
  • Real average hourly earnings increased 0.2 percent in July, seasonally adjusted, average hourly earnings increased 0.3 percent, CPI-U increased 0.1 percent, and real average weekly earnings increased 0.2 percent over the month;
  • U.S. import prices edged up 0.1 percent in July, led by higher fuel prices which more than offset lower prices for nonfuel imports, and U.S. export prices advanced 0.4 percent in July and increased 0.8 percent over the past year;
  • Personal income increased $65.6 B (0.4 percent) in July with disposable personal income (DPI) increased $39.6 B (0.3 percent) and personal consumption expenditures (PCE) increased $44.7 B (0.3 percent);
  • State personal income growth accelerated to 1.0 percent on average in the first quarter of 2017 from 0.3 percent in the fourth quarter of 2016 with earnings and personal current transfer receipts were the leading contributors to growth for the nation and in most states.

  • Expenditures by foreign direct investors to acquire, establish, or expand U.S. businesses totaled $373.4 billion in 2016 which was down 15 percent from $439.6 billion in 2015, but was above the annual average of $350.0 billion for 2014-2015, and was well above the annual average of $226.0 billion for 2006-2008.

Ohio Venture Capital Firms with a Regional Focus

In the highly competitive and ongoing work of the investments industry to help redefine the U.S. economy, venture capital firms have expanded their focus beyond what opportunities are right next door to include those of a larger regional strategy.  Key economic sectors and technologies require a broader-based resources approach in order to grow companies, industries, and jobs.  Such investment activities include not just access to funds but also resources that encourage innovative new companies, entrepreneurship, and venture capital formation.

In Ohio, four firms having a strong local presence and a regional focus are Central Ohio’s Drive Capital; Southeast Ohio’s Athenian Venture Partners; Northeast Ohio’s North Coast Angel Fund; and, Southwest Ohio’s Cintrifuse.

  • Based in Columbus, Drive Capital was founded in 2012.  The firm raised an initial $250 million fund and then added a second $300 million fund in 2016.  Investments are targeted towards innovative technology, healthcare, and consumer companies in Ohio and the Midwest.  For additional information about Drive Capital, see www.drivecapital.com.
  • Based in Athens, Athenian Venture Partners was founded in 1997.  Investments are targeted towards information technology, digital health, and health care companies.  With a presence in three states, Athenian is able to pursue opportunities in Ohio, the Midwest, and the Southeast and Southern West Coast regions of the U.S.  For additional information about Athenian Venture Partners, see www.athenianvp.com.
  • Based in Mayfield Heights, North Coast Angel Fund, was founded in 2006.  Investments are targeted towards information technology, bioscience, advanced materials, and electronics and controls companies.  For additional information about North Coast Angel Fund, see www.northcoastangelfund.com.
  • Based in Cincinnati, Cintrifuse was founded in 2012 and its initial fund was $57 million.  Cintrifuse was created by Cincinnati’s business community, including stalwart companies Procter & Gamble, Kroger, and Western Southern who depend on Cintrifuse to help them source innovation for their business and to grow the region’s start-up ecosystem.  For additional information about Cintrifuse, see www.cintrifuse.com.

In addition to venture capital funding, these entities have a network of resources for start-up and existing companies.  And, each has extensive connections to assistance and support funded through Third Frontier, Ohio’s $2.1 billion tech-based economic development initiative to accelerate the creation and growth of investable and scalable technology and tech-enabled companies.

Ohio Energy Plan Can Lay the Groundwork for Economic Success

Energy battles abound in the Ohio Statehouse- ranging from subsidy legislation for aging nuclear power plants to pushing for more deregulation of the electric market to set back requirements for wind mills to renewable energy mandates and severance tax expansion on the oil industry. Ohio faces these energy policy battles in large part because they lack an overall state energy policy.

A state energy plan should create a strategy and framework that serves many functions and build consensus among the many stakeholders impacting the energy industry. A state energy plan is a consumer, industry and economic development related document. It informs the public and relevant stakeholders about a state’s energy policies and priorities. The document guides state regulatory and development officials in their energy related decisions, provides context based on state resources, includes projections about energy supply and demand, and reflects state goals in regard to regional and national energy-related activities. Energy plans map out a regulatory structure for the energy industry but they do the same for the important role energy plays in a state’s economic development. Energy plans also play a critical role in providing affordable and reliable energy for consumers and speaks to energy industry issues such as the future of the energy grid and role of energy efficiency.

 

Why have twenty one states adopted a state energy plan? What should be the focus of an Ohio Energy Plan? The Ohio Energy Plan should focus on the creation of a statewide energy led economic development strategy. Energy is one of the Five Drivers of economic development that has led regions as diverse as South Dakota and Houston to economic success. Energy led economic development strategies promote the use of locally derived energy through regulatory mandate, incentives and demand oriented programs to recruit high-wage jobs with companies looking for low cost energy and energy companies building corporate headquarters, energy processing facilities and other service and manufacturing facilities. Energy led economic development tactics that can be created through a state of Ohio Energy Plan involve

  1. Promoting the development of all available energy (renewable and non-renewable) sources in the state of Ohio locally derived renewable and non-renewable source of energy;
  2. Supporting the Ohio energy industry through regulatory, tax and incentive policies to ensure the state has a major base of energy companies; and
  3. Recruiting energy intensive companies to the state looking for reliable and low cost energy by developing large scale industrial and high tech sites shovel ready for development near the energy source.

State energy plans helps regions and states have to make challenging decisions related to the regulation of energy extraction operations. Whether the energy extraction project is of shale oil through a fracking process or placement of an industrial windmill, proponents and opponents to the placement of these facilities appear. Same goes for the processing facilities. Opposition can be ideologically based or a neighbor unhappy with a land use change occurring next door. Local and state policy makers adopt regulations to ensure the energy extraction process is done so safely but regulations outside of the norm can kill an energy led economic development strategy.

Regions with a new source of energy being extracted from the land have an opportunity to utilize not just a new source of energy but also this energy explosion should drive down the cost of energy in that community. In essence, the flowing of natural gas and oil from shale development drove down the overall cost and regional cost of this fossil fuel. In addition, the extraction of the energy source gives that region an opportunity to give birth to the energy industry. The cost of energy is a top factor impacting corporate site location decisions of companies considering whether to locate jobs. Energy availability and costs rank in the top 10 of corporate site location consultant factors. Energy intensive industry sectors are strong candidates for retention and attraction campaigns for regions and states with low energy costs. Companies in the chemical, aluminum, cement, iron, steel, paper and pulp, glass and refining provide high-wage manufacturing jobs but cannot operate in a region with high-energy costs. Chemical factories, as an example, have 80 percent of their costs tied to energy and energy intensive industries constitute just over 2/3 of all global energy use.

The Public Utilities Commission of Ohio is very engaged with the utility industry on energy planning issues but Ohio needs a broader energy perspective. Ohio’s adoption of a state energy policy makes a lot of sense for the state’s economic future and can be an important step forward for the next Governor to use to address many of the current issues with which the General Assembly is struggling.

Columbus Draft Incentive Policy Analysis Creates Debate About Future Economic Growth

The economic success of Columbus is impressive. Thirteen cranes cover the skyline of Columbus from the campus at the Ohio State University to the Short North through Downtown Columbus. Once struggling neighborhoods like Franklinton on the near west side are on the verge of exploding with economic growth. Columbus has added 140,000 residents since 2000. Columbus from a fiscal standpoint is very healthy—with its famed AAA Bond rating to back that up. Columbus City Schools, while struggling like all traditional urban public school districts, spend over $17,000 per pupil well above the statewide average for public school. However, with growth there are always challenges. As the Short North booms, current residents and business struggle to meet newer, higher rents. Housing growth and economic success has not spread as quickly to other neighborhoods. Unfortunately, some residents watch the economic growth and don’t see it for the tremendous economic success story it is but see an opportunity to question the success.

To chart their future economic growth path, the City of Columbus is working on an Incentive Policy Analysis to make recommendations for the city’s commercial and housing tax incentive policy. The Columbus Development Department released a draft Incentive Policy Analysis Report that, if implemented, could be the most substantial changes impacting the future growth of the City since Mayor Sensenbrenner created the annexation policy. The question is whether these changes will be positive like the annexation policy or stop economic growth in its tracks. To their credit, Columbus released a draft report for public consumption and Councilwoman Liz Brown and Columbus Development Director Steve Schoeny are holding a series of town hall style meetings to review the report and gain feedback. Now is the time to review this important report and provide feedback.

The draft Columbus Incentive Policy Analysis Report makes the following recommendations:

  1. Reevaluate the commercial and industrial incentive policy to better compete with suburban and rural communities.
  2. Consider new incentives to rehabilitate aging office products through green building and rehab incentives.
  3. Consider utilizing a system of tiered incentives to prioritized job centers and the quality of jobs.
  4. Continue to focus substantial incentives on Downtown Columbus.
  5. Consider developing a scorecard to better assess tax incentive deals.
  6. Consider raising the $12 an hour job requirement for city incentives.
  7. Explore new incentive programs for existing employers to launch local economic inclusion programs by hiring local workers.
  8. Consider simple neighborhood typologies across Columbus to guide the use of incentives.
  9. Consider changes to incentive structure and deployment by neighborhood typology.
  10. Monitor and update typology over time, use a key set of demographic, market and reinvestment indicators.
  11. Consider qualitative factors in awarding incentives in order to prioritize public benefit realized through development.
  12. Consider to support market stability by providing a predictable incentive regime.

The draft Columbus Incentive Policy Analysis suggests a number of changes to Columbus’ housing and economic development tax incentives through an analysis of targeted residential neighborhoods including the Short North, East Side, Linden, and the Hilltop. The report also reviews Columbus’ economic development incentive policy that primarily relates to retaining and attracting industrial development with targeted tax abatements. The draft report suggests tax abatements are not needed anymore for low rise (below six stories) market rate housing projects in the Short North. The report does not speak to the future of incentives for Downtown or Franklinton but clearly could have implications for tax incentives everywhere.

As the Columbus Incentive Policy Analysis is reviewed, it is critical for the City of Columbus to remember a couple key points:

  1. Successful regions continue to succeed when they keep the policies that got them there and the economic success of the Columbus’ current incentive policy should not be measured just in terms of the real estate benefit but in a Return on Investment analysis for the city as a whole.
  2. Ohio taxes everything including being in the minority of states that permit cities to charge an income tax and tax incentives exist to encourage the investment in Ohio when other high-growth markets are more attractive from a tax standpoint.
  3. Columbus’ weak commercial and industrial economic development tax incentives are driving industrial jobs to surrounding Central Ohio suburban and rural communities and should be increased to meet this competition.
  4. Columbus has a highly competitive and affordable home value rate at $129,000 that offers much lower cost of workforce housing than economic competitors and an “affordable housing” crisis should not be created where it does not exist.
  5. Columbus’ economic future lies with the Millennials who continue to be recruited not just by higher education and high-wage, advanced services jobs but by the economic renaissance of the Short North, Arena District, Downtown Columbus and soon to be Franklinton and removing incentives from these booming areas could impact not just the growth of new housing but hurt the economic success of the region.

Three Conclusions from Recent Ohio Campaign Finance Filings

Primary Elections for statewide offices in Ohio are won by two things: connection with ideological voters likely to vote in low turnout off year Primary Elections and money. It is too early to determine where the ideological Democrats and Republicans will align between the candidates but recent campaign finance reports submitted to the Ohio Secretary of State’s office indicate who is winning the money battle.

Monday, July 31, 2017 marked the filing deadline for semiannual reports illustrating fundraising activity since the state of the year. The semiannual reports, required to be filed for non-judicial candidates who did not file post-primary numbers in January, give the latest look at the candidates’ war chests with 10 months to go until the 2018 primaries. Three conclusions can be drawn from the recent Ohio campaign finance filings for those seeking a statewide office.

  1. Republicans seeking Ohio statewide offices hold a substantial lead over potential Democrat opponents. As the table above illustrates, Republicans while not holding any of the offices they are seeking hold a substantial fundraising lead against their Democratic counterparts. Three of the four Republicans seeking the Governor’s office have over $4M in bank while the leading Democrat seeking the office has just over $700,000. Now two of the leading Governor’s candidates are statewide elected officials themselves but the early money lead is substantial for Republican candidates seeking the Governor’s office as well as Secretary of State, Auditor, Treasurer and Attorney General. As an example, former Ohio Senate President and current State Representative Keith Faber has a 7 to 1 lead in fundraiser of over Democratic challenger, former Congressman Zach Space. State Auditor and Republican Attorney General candidate Dave Yost has a 2 to 1 fundraising lead over his Democratic opponent.
  2. Republican Primary Fundraising Leaders are Dewine, Husted, Renacci, LaRose and Sprague. Early results illustrate the strength of Ohio Attorney General Mike Dewine and Ohio Secretary of State Jon Husted. Both Husted and Dewine have over $4M in the bank with Dewine raising the most funds at $4.6 M cash on hand. Congressman Jim Renacci has raised a low amount of money but loaned himself $4M just in time for the campaign finance filing so he has a similar amount in the bank. Dewine, like Congressman Renacci, has the ability to self-finance what is likely going to be a Governor’s race costing well over $20M. Ohio Lt. Governor Mary Taylor is far behind the Husted and Dewine fundraising race with only $436,883. State Senator Frank LaRose is leading his Republican and fellow Ohio Secretary of State candidate State Representative Dorothy Pelanda by a 5 to 1 fundraising margin. Also, State Representative Robert Sprague of Findlay is leading his primary opponent Franklin County Auditor Clarence Mingo in fundraising and cash on hand by a 3 to 1 margin.
  3. Democratic Front Runner Betty Sutton Trailing in Fundraising. On paper, former Congresswoman Betty Sutton appears to be the most experienced candidate the Democrats have for their declared four candidates for Governor. However, Sutton is not leading the fundraising battle. Former Cincinnati area State Representative Connie Pillich is leading among the announced Democratic candidates for Governor with $720,525 in the bank. Sutton is behind not only Connie Pillich but also Democrats Senator Joe Schiavoni, and Dayton Mayor Nan Whaley who are also seeking the Governor’s job. Democratic Governor’s candidates fundraising efforts could be harmed by the questions about whether any of the current candidates will actually be the Democratic standard bearer. Former Ohio Attorney General and current Director Consumer Financial Protection in Washington DC Richard Cordray remains a focus for Democrats to return home and run for Governor. Even Cincinnati’s own Jerry Springer is rumored to be considering a run.

Mid-year campaign finance reports 10 months away from a Primary Election do not tell the tale of the Primary Election results but they do begin to create opportunities and obstacles for the winners and losers in the battle for fundraising dollars.