Sunday, July 12, 2009

A New Kind of Double-Speak

Our state is in a jam. Unless drastic action is taken, the State of Ohio could find itself going the way of California – issuing IOUs in the place of paying its debts. Backed into that corner, Governor Strickland and the General Assembly have finally given in to the powerful gambling lobby and agreed to allow several very "lucky" horsetrack operators to add video slot machines to their repertoire of gaming choices.

In announcing that decision, the Governor said "We have reached a final agreement on a budget that is not only balanced, but invests in education without raising taxes on Ohioans."

However, as reported by The Columbus Dispatch in their July 11, 2009 story, the education community pointed out that the Governor was continuing an old shell game in regard to education funding.

Remember how when people of Ohio were being sold on the idea of a State Lottery, the big selling point was that the profits would go to support our schools? It turns out that while indeed all the Lottery profits are wheeled in the front door of school funding, a nearly equal number of dollars are sneaked out the back door to fund other priorities. The net effect is that education gets no new dollars.

The same game is being played with this video slot machine scam. Except this time Governor Strickland is pulling a new strategy – telling the truth, kinda, and only after the fact.

According to the Dispatch, when Strickland was confronted about this, his answer was...

"The difference between what we're suggesting and what has happened in the past is that we're being fairly candid about what we're going to do."

In other words, it's okay if prior to the decision the truth was distorted (ie – implying that the new tax income from these video slot machines would generate additional money for the schools) as long as after the decision is made the truth comes out, if someone bothers to ask.

This whole thing about the video slots stink. The voters of Ohio shot it down four times. The Governor said during his campaign that he was against expanding gambling in Ohio. Yet when things got tough budget-wise, he ran right to the arms of these seven track operators and gave them a monopoly on the market they've always wanted. If you're going to have video slots, why restrict it to just these seven operators? Don't other Ohio businesses deserve a chance to supplement their revenues with video slots as well?

I think we know the answer. There were favors to be repaid, and new favors to be earned…


  1. What modern leaders consistently lack - almost infallibly so - is any willingness to fall on their sword and hurt their chances of re-election. Re-election is their god. Given the choice between potentially becoming a one-term governor and going against his own stated principles (i.e. he was against slots before he was for them), Strickland chose the latter.

    But the flip-flop really doesn't bother me, nor do the slots as revenue-enhancer either. To me, whether a political leader acknowledges a shell game as such is a good test of their honesty and leadership potential.

    I quit donating to United Way for years because they had the same scam in which if you designate a specific charity then other dollars that would've gone to it are given to different charities within the United Way family. (That is no longer the case - I think UW got enough flak for it to change.)

    I would prefer Strickland or the UW simply either rule out special designations or honor them, but not try to have it both ways. I would and have donated to the UW either with or without designation, but I did not donate to them during the period when it tried to deceive its donors. Also with Strickland, I feel honest accounting will actually get him farther.

  2. Eire:

    I was once a UW Campaign Chairman for my company, and learned about the policy you write about. And I agree with you - honor the designation, or don't play the game in the first place.


  3. Personally, I'm not against the video slot machines as a source of revenue, (although I do believe that it should have been presented to the voters - I think it wasn't so much the issue of gambling in the past election, but the specific proposal that seemed to favor specific business owners), but I am against the opportunity being limited to only horsetrack operators! I guess I don't really see the difference between video slot machines vs. lottery vs. keno.

    I haven't heard anything about those specific profits being directed toward education (the way the lottery profits were). A budget that invests in education is no different that previous budgets. The real question is whether there is an increase or decrease in education funding.

    It will be interesting to watch for financial contributions to Strickland's re-election campaign from the benefiting racetrack owners and slot machine vendors.

  4. KK:

    It's always tough to figure out to what degree a government should legislate morality. Why does the government allow the legal sale of some substances which clearly are addictive and create a massive public health burden (ie alcohol and tobacco) but criminalize others whose consequences are substantially the same (e.g. marijuana)?

    Certainly, part of the answer is that the government has itself become addicted to the revenues generated by taxing the sales of alcohol and tobacco, and the politicians addicted to the campaign contributions from the tobacco and alcohol lobby.

    In other words, if the marijuana industry had better lobbyists...

    In the case of these video slot machines, the bribes are in the form of $65 million license fees which must be paid immediately by the each of the horsetrack owners. That's close to a half-billion dollars immediately available to solve some pressing cash flow problems.

    There's not too many other sources out there from whom to raise that kind of fast cash. Some might be willing to 'sell their souls' to get access to such a sum...

  5. There was a study done when the last election voted down the video slots, which went into detail of who received what funds for education and the proposed determining factor. While I have not read the whole study, it was originally designed to help sell schools and the people on the video slots. Seeing how the horse tracks are putting up $65 Million each for the licensing fees and spent crazy money promoting the video slots for elections, I don't see why they shouldn't get an exclusive right to the machines. This is basic capitalism. The situation is really no different than a pharmaceutical drug receiving a patent. If other private companies wished to jump on the band wagon, they could have joined in support when the race track owners were trying to put it through the vote.

    What I think most people are missing here is that these revenue dollars are already flowing out of state to Winsor, WV, etc. While I think it wrong to say it's going to the schools and shoveling it out the back door to other programs, we have yet to see that happen with this revenue. Perhaps we should wait and see. If the money is backdoor, then we need not wait for the Dispatch and instead should be on the Statehouse lawn, on the phone to the Strickland's office, and making personal visits to the General Assembly members.

    If Strickland and the General Assembly will not listen to the voters, vote them out. This goes the same for every other office. The problem is so many voters are apathetic and don't believe they can fix the system. Now is the time for change.

  6. Face it - most politicians would sell their soul for this kind of revenue. Strickland just proved it. I am not opposed to video slots either - if the last vote had been for gaming at the horse tracks I would have voted yes; as it was I voted no as it appeared only one private entity was going to benefit. Having said that, I think it should still go to the voters in case I am the only one who was splitting those hairs. As far as Strickland admitting how the funds would be used, as "replacement" revenue, in truth he did not really have a choice. There wasn't much wriggle room after the lottery facts were brought up.
    Regardless, this is certainly not a savior situation for the schools; there is still only a finite amount of money in the state budget and having another source of revenue is not going to solve the inherent problem of how to distribute that money. That work is still to be done.

  7. In other words, if the marijuana industry had better lobbyists...

    And the reason it doesn't is that because alcohol and tobacco have long histories of large-scale usage (compared to marijuana) and so have large sums of money available with which to sway politicians and hire lobbyists. Now if George Soros or Bill Gates or Rupert Murdoch were potheads...

  8. Guess we'll see how that works out in California. They already have some gambling and they are still broker than broke...that is merely the latest suggestion for revenue enhancement.

  9. Justin: The argument that we should legalize gambling because the money is otherwise going to Windsor or Las Vegas should also be applied to legalizing cocaine because the money is otherwise going to Columbia.

    Nor do I agree that it is a capitalist principal that legislation should be the result of massive lobbying efforts and large campaign contributions. That's exactly the pathway the residential developers have taken to get their way in annexation and zoning matters.

    But I couldn't agree more with you that citizen apathy is what's killing democracy. We don't really know the will of the people because only a minority of them bother to show up to vote.

    Even fewer offer to serve in public office. After all, Mayor Schonhardt ran unopposed last time.


  10. Hillirdite:

    There's a pretty interesting cover story by Lyndsey Teter in The Other Paper this week. She wrote about Matt Ferris, the lone Republican candidate for Columbus City Council.

    Ferris proposes an alternative to Mayor Coleman's plan for balancing the city budget. Coleman's plan is pretty clear: pass the income tax increase or we're doing to lay off large numbers of cops and firefighters.

    A core part of Ferris' plan is an across-the-board 2.5% pay reduction to all city employees.

    I'm not sure this is the best option, but isn't it one that deserves some discussion? I'm sure not hearing any consideration of this obvious alternative.

  11. Drugs (esp marijuana)remain illegal b/c of the number of cops, lawyers, prison guards, and judges (not to mention dealers) that would be out of a job if they were legalized. It's time to start treating drugs as a public health issue rather than a law and order issue. To suggest that the consequences of alcohol and marijuana are substantially the same is silly. Alcohol is exponentially more dangerous. Sorry for derailing the convo from schools; just something I feel strongly about.

  12. Paul, I'm pretty sure you realize that the unions, etc would raise all kinds of hell if they were faced with a 2.5% reduction. We can't even get the teachers union here to consider, or even respond to, the suggestion to take only their step raises in order to balance the school budget. Taking an out and out pay cut would never fly.

  13. Hillirdite:

    I should have been clearer - I was writing in regard to the City of Columbus situation.

    I have never advocated that the Hilliard teachers take a pay cut - only that the rate of increase be reduced.

    My point was that both cities and school districts play the same game: raise taxes and pump it into compensation & benefits, or don't raise taxes and people get laid off.

    There's another choice: address the rate of increase for compensation and benefits.

    Of course, this is the reason it's better to fund schools with property taxes rather than income taxes. Both the State of Ohio and the City of Columbus are hurting because income taxes represent the largest component of their revenue. When the economy stumbles, that revenue can go down - and go down quickly.

    In contract, property tax collections can go up pretty rapidly in a time of high development, but are much less likely to fall off regardless of economic conditions - except in a severe recession/depression when the government is compelled to reappraise properties for a lower value.


  14. Paul, you were clear enough. My point is that asking any union employee to take a cut is not going to fly without stiff opposition. I would never advocate pay cuts for our teachers either - you and I are on the same page on that. I was merely pointing out that we can't even get a reduction in the increases
    so what hope would the city have with actual reductions in current pay? Another thing - haven't many city employees been forced to take unpaid days off (or is that just state employees?) which is a pay cut in reality?

  15. my last sentence should have begun with "In contrast..."

    One would have said the United Auto Workers would never take pay cuts either, but they got a new frame of mind once they fully accepted that their compensation and benefits played a large role in their company having a competitive product.

    That's the thing with public employees though - they aren't exposed to competition, except in a few rare cases (e.g. the US Postal Service).

    That would change if we can true school choice.

  16. Ah yes - competition! It drives private business but is totally ignored in the public sector since they don't operate with any kind of "profit motive" which is what they need to be doing. I see that in my business, dealing with in-plant printing facilities that don't seem to have a profit motive either, yet the companies continue to operate them at a loss instead of out-sourcing to companies such as mine. And the Postal Service? They have some competition in package services but none in letters. So they raise the rates on letters every year, meanwhile priding themselves on never laying off employees in spite of declining volume and revenues. The HCSD is actually kind of similar in that "volume" i.e. number of students served, has remained stable for several years now, yet expenses keep going up at a rate that cannot be sustained. They can't "raise rates" but they can beg for more money, which must seem easier to them than reining in costs. Until they test the "market" and risk a strike, I don't see a solution.

  17. My arguement to legalize gambling differs from your Cocaine analogy in that Federal law prohibits Cocaine and gambling is left up to the states judgement.

    I fail to understand how this isn't Capitalist in nature. Just like a pharmaceuticals time and money are spent to get gambling/pills to market and must jump through a number of regulation and legal hoops to get to market. Why then should the person who has spent the most and put the most effort into getting to market not be compensated for their efforts? Money and Campaign contributions are all part of the game these days, but people have the absolute say in the election booth.

    For example, I plan on voting against Mary Jo Kilroy's re-election just because she voted for the Cap and Trade bill that wasn't fully drafted and on the house floor, let alone take the time to read it. Her next election I will be out there promoting her competetor and contributing to that campaign. Let's hope that a quality candidate steps up and people take notice of Mary Jo's voting record.

  18. Justin:

    The point you originally made that I was reacting to is that one reason to support in-state gambling is because otherwise Ohio loses the benefit of the revenue.

    That's the point of my cocaine rebuttal - that losing revenue isn't a good argument for legalizing a behavior, especially one that the voters have shot down several times.

    And is it your position on lobbying and campaign contributions that there shouldn't be limits or controls on either? I certainly don't agree with that, because it pushes the voice of the people further into the background, increasingly overwhelmed by big money interests.

    Although raised as a Democrat (my first party selection when I registered to vote), who later became a Republican, I for many years labeled myself Libertarian and voted as such. The less government the better. I still believe that.

    But I don't like the Libertarian label any more either - too loaded with with junk I don't agree with. When people ask my party, I tell them I'd prefer to talk about specific issues rather than have you assume my position based on a label.

    The lesson of the last couple of decades is that economies need a little bit of management. We learned that once in the 1930, but managed to forget it by the 1980s.

    For example, I now realize that usary laws don't so much protect the comsumer from loan sharking as they do prevent the commercial banks from becoming loan sharks themselves - taking unreasonable risks because they can charge insane interest rates.

    In the same line of thinking, I believe we need to have a way to keep the big money interests from always being first in line at the doors of our elected representatives. Sure, politicans who fail to live up to expectations can be voted out - but only at the end of their term (although former California Governor Grey Davis would differ on that point). In the meantime, they can do much to futher their personal agenda.

    What do you do when you have a Governor like Mr. Strickland, who violates his campaign promises halfway through his term (as was also the case with Cheryl Ryan in regard to our own school board)? The voters spoke, and in both cases they were betrayed once the official took office.

    It's hard to keep all these various interests and philosophies in balance. I accept that things swing and sway over time because both the strength and weakness of our economy is that managing it is like herding cats - you can never set direction, only boundaries.