Ohio State of the State Address 2003

Following is the full text of Gov. Bob Taft's State of the State Address, delivered Jan. 21, 2003:

Turning Adversity Into Opportunity

Speaker Householder, President White, minority leaders DiDonato and Redfern, Lt. Governor Bradley, distinguished guests, and my fellow Ohioans...thank you for joining us today.

First, let me congratulate Senator White on his election as Senate President. I've had the honor of knowing Senator White for many years. He is an outstanding and honorable public servant. I look forward to working closely with you, Senator, in the coming months.

And I want to thank you, Speaker Householder, for your leadership during the past session as we addressed challenging issues together. I'm also looking forward to working with you, Mr. Speaker, to build a stronger Ohio.

I thank both of you for your efforts in developing the shared legislative agenda we announced last week.

I also want to thank another group of people who have been doing a remarkable job under very tough circumstances - my Cabinet. To each of you, I say thanks for your service to our administration and the great work you do on behalf of all Ohioans. Please stand and be recognized.

As I begin a new term, I'm honored to have a new partner, a member of our cabinet, our Director of Commerce and Ohio's new Lt. Governor, Jennette Bradley. I know she will do a great job for the people of Ohio.

There is one more person I want to thank at the outset, someone who has been at my side for 36 years, my wife and Ohio's remarkable First Lady, Hope Taft.

As I come before you for the fifth time in this historic chamber, I'm honored and humbled by the vote of confidence the people of Ohio have given me.

This year we celebrate the bicentennial of Ohio's birth and the centennial of flight. But everyday, I celebrate the fact that I've been given a chance to make a difference in the lives of all Ohioans.

Ohio's bicentennial year gives us reason to cherish our proud history and chart a course for prosperity in Ohio's third century.

On March 3, 1803, Governor Edward Tiffin appeared before a joint session of the legislature. His remarks were brief - taking less than 20 lines in the journal. But his delivery was impressive. According to one historian, the Governor was "suave in speech and magnetic in personality." Well, it seems little has changed.

The next day, Governor Tiffin sent a lengthy written message to the legislature outlining his aspirations for the new state. He offered ideas for legislation, including how best to raise revenue to finance essential public services. Again, it seems that little has changed.

Of course, more recent messages from the Governor have been delivered by the spoken, rather than the written word. After my address today, some of you may be wishing I'd not delivered it at all.

In the years after the first legislature convened in Chillicothe, thousands of settlers made Ohio home. But unlike those who pioneered many western states, the Ohio settlers came, not in search of quick riches, but for the opportunity to work hard, raise a family, and build communities.

The challenges facing them at the dawning of Ohio's first century were indeed great. Yet they summoned the strength and courage to overcome adversity. They seized the opportunity to forge a great state.

That is our challenge today. We must draw on our own strength and courage to overcome modern day challenges and build an even greater state.

Last year, we worked together to tackle tough issues - terrorism, prescription drug costs, and medical malpractice among others. Some of these issues continue to be works in progress. We passed a budget, fixed it, and then fixed it again.

On behalf of all Ohioans, I want to thank you, our lawmakers, for your hard work on these issues.

But the work is far from over. Today, I am compelled to speak on two profound issues facing Ohio.

The first, of course, is our dire budget situation. The second, is our mission to transform Ohio's economy to create more high paying jobs.

As I noted in my second Inaugural Address, states across the nation are facing the worst fiscal conditions since World War II. Ohio is no different. If last year's budget gap felt like a gale force wind, this year's budget crisis will feel like the "Perfect Storm."

A number of factors have caused this crisis. But as one expert said, "two longstanding structural problems - an eroding tax base and the explosion in health care costs - are the major problems. Both...were camouflaged by the phenomenal economic growth in the second half of the 1990's."

Unfortunately, the day of reckoning has arrived.

Ohio, and every other state, especially the manufacturing states, were hit hard by the national recession. And we're still getting hit today.

In the first four months of this fiscal year, we were meeting our revenue estimates. But by November and December, it became clear that our economy was not rebounding and state tax receipts would not meet expectations.

On top of this, mandated Medicaid spending has once again spiraled out of control. Governor Voinovich once said Medicaid was the "Pac Man" of the state budget, devouring everything in sight. Well my friends, it's back and hungrier than ever.

And so, our most immediate challenge is to balance this year's budget. We've revised this budget twice, and we must do so again.

The slowed economy and increased spending for Medicaid means we are facing a deficit for the current year of $720 million.

The magnitude of the deficit and the short time left in the budget year will require immediate and drastic action.

Earlier today, I signed an executive order to reduce state spending by $121 million. Only a handful of areas, debt service, property tax relief, formula aid for schools, the student subsidy for higher education, PASSPORT and a few of our most critical job creation programs have been spared.

These reductions are on top of those already made. In total, we've reduced our state budget by nearly $1 billion in the past 27 months. $1 billion of cuts in just 27 months.

The cuts I've imposed today, and the ones made at the beginning of the fiscal year will be carried into the next budget. They will have far reaching results.

We will have to close one, and possibly more, prisons. Already, we closed one, and numerous housing units in other prisons.

Youth Services will close another facility, just as they did in the last biennium.

We will be forced to eliminate the Civilian Conservation Corps.

Mental Retardation and Developmental Disabilities will gradually move people from institutions to community-based settings, enabling us to close one or two developmental centers in the next two years.

We've reduced the state workforce by nearly 3,000 just in the last 22 months. And cuts in this and the next budget will cause our workforce to shrink further.

I would be remiss if I didn't offer my appreciation to all state workers who have sacrificed through tough budget times, but have risen to the call to provide good services to Ohioans.

But we cannot balance this year's budget through cuts alone without endangering people in need or threatening the public health and safety. We need new revenue, and we need it right away.

I propose we raise additional dollars this fiscal year by increasing taxes on tobacco and alcohol, accelerating the collection of the sales tax and other actions.

I also request authority to tap the remainder of our rainy day fund to help offset mandated increases in Medicaid spending.

The actions I'm asking you to take will be painful. Indeed, they are painful for me to propose. But the consequences of inaction are unacceptable.

If my proposal cannot be enacted by the end of February, I will be forced to make cuts to state aid to schools, higher education, PASSPORT and programs that create jobs in our communities.

Even when we balance our current budget, our season of sacrifice will not have ended. Enactment of our next budget by June 30th will be an even tougher task, requiring all of us, Republicans and Democrats, to set aside our differences, roll up our sleeves and get the job done.

My budget will be the tightest in decades. Our reserves will be gone. Our one-time revenues will have vanished. Our cupboard will be bare.

Many state programs will receive zero growth in their budgets; others will be reduced. Still others will be eliminated. We're asking state workers to contribute by not taking a pay raise. Our priorities will be funded, though not at levels you or I might like to see.

We all know that Medicaid is critical to our safety net. It provides health care to millions of seniors, persons with disabilities, low-income families, women and children. It helps people enter and remain in the workforce.

But it's also about to bankrupt Ohio, and nearly every other state in the union. The Medicaid growth rate is simply unsustainable. The year I took office, Ohio spent under $6 billion on Medicaid. By the end of the coming budget, costs will have risen to $10 billion a year - an increase of over 75 percent in just six years.

We'll continue to protect our most vulnerable populations, including children and pregnant women. We'll also make it possible for more seniors and persons with disabilities to live in settings they prefer. But we must enact tough measures to slow the growth rate of Medicaid or else decimate every other category of state spending.

I will propose to freeze reimbursement rates for all providers, require a new formula to pay for long-term institutional care, eliminate many optional services, and change eligibility criteria that will significantly affect the number of adult Ohioans receiving Medicaid services.

Due to federal mandates, Medicaid costs are hard to control. Even with the steps I'm proposing, Medicaid will increase by nine percent next year, far more rapidly than state revenues, requiring an additional expenditure of $300 million in state share alone in our next fiscal year.

The long-term solution to Medicaid lies in Washington. Few Americans know it, but Medicaid is now bigger and more costly than Medicare. Something must be done. I call on Congress to tackle the Medicaid monster now. Without reform, the system will crash and the safety net will be shredded.

As I said at the Inaugural, we can find great opportunity in our adversity. Our fiscal condition cries out for reform of our tax system. This is our chance to make our tax code more fair, more simple and more aligned with our economy.

In a recent statement, a coalition of business groups called upon Ohio to "modernize its tax system, simplify its tax code and lower its tax rates."

I couldn't agree more.

Clearly, Ohio's tax receipts are weak because of the national economic downturn. But our unstable revenues result also from a tax system that fails to reflect the realities of today's economy.

Ohio's tax system is a product of times gone by. The sales tax was established in the 1930's, the personal income tax in the 1970's, long before the advent of our modern economy.

We must begin the task of reforming and modernizing our tax code, even as we raise substantial new revenue to fund essential public services. The tax reform I'll propose will simplify the code, broaden the base, lower certain rates, and treat businesses and individuals equitably to keep Ohio's economy competitive.

In fiscal year 2005, we begin a sweeping reform of the personal income tax. Most taxpayers will pay less, and we'll eliminate all liability for more than half a million low-income Ohioans.

Ohio's corporate franchise tax has relatively high rates, and yet our revenues are below the national average. And so, we'll lower the rate, broaden the base by eliminating some exemptions, and ensure that all businesses pay a fair share.

We'll broaden the base of the sales tax to include a wider array of services, conforming to the contours of our modern economy. Finally, we'll simplify the municipal income tax, easing compliance, especially for Ohio businesses, while protecting the budgets of Ohio cities.

In the days ahead, we'll unveil more details of our plans for tax reform and Medicaid, and I'll ask for your support.

Balancing the upcoming budget may be the most difficult task of our public lives. But after 30 years in government, I've learned tough decisions are rarely made in good times. The best decisions are often made in the most testing of circumstances.

There will be those who will not like everything I propose.

There are those who will work overtime to protect their special interests. But we were sent here to do the people's business and to protect the people's interest.

I pledge to work with you day and night to balance our budget, fund our priorities and put Ohio on a sound financial footing once again. I ask that you do the same.

The other critical challenge facing our state is the economy. We must do more to strengthen and diversify our economy to create the high paying jobs of Ohio's third century.

A dynamic economy begins with a good education. We all share a common goal - we want our children to succeed.

That's why I have focused so intently on student success over the past four years. We're making progress all across Ohio.

New schools are going up at a record pace. Forty-five thousand citizens are volunteering to help children learn to read through OhioReads. We're implementing high standards, rigorous assessments, and targeted interventions and holding educators accountable for results.

The number of Effective or Excellent districts jumped from 207 to 300 this past year. In the fourth grade, the percent of proficient students was the highest ever in math, reading, writing and science.

Clearly, we're advancing student learning. But there's plenty more to do. So we'll continue our progress by building more safe, modern schools, improving reading and math skills and ensuring every child has a caring, capable teacher in their classroom.

My friends, our kids are our future. We cannot rest until every child, in every corner of Ohio, can succeed.

The progress we've made on academic success came only through consensus among parents and educators, community leaders and policy-makers.

Unfortunately, no consensus has been reached on how best to fund our schools. For more than ten years, we've been mired in litigation.

It's been "us vs. them" with Ohio's schoolchildren caught in the middle.

The day we get it right will not be determined by lawyers and judges. No, that day will come only when educators, parents, legislators, taxpayers, and employers sit down together and adopt a shared vision of school funding.

The Supreme Court has handed us a tremendous challenge and a great opportunity. Let's seize it now to build a better school funding system; one that assures no child is left behind.

My budget provides more money through the current school formula in the first year of the biennium. Additional dollars are provided to continue our progress on student success, improve the quality of teachers in the classroom and fund our key reading initiatives.

In the budget's second year, we provide even more money for education, but don't specify a funding formula.

Rather, I will establish a Blue Ribbon Task Force on Financing Student Success, composed of leaders from education and business, policymakers, teachers and parents.

I will charge the task force with proposing a better way of funding schools - a way that provides predictable funding, is affordable, spends money effectively, and supports student achievement.

The task force will report later this year. We'll use its findings to create an improved system of school funding for the 2005 fiscal year.

Now that litigation has subsided, I am hopeful we can reach consensus to fund our schools thoroughly and efficiently in the years ahead.

Of course, education doesn't stop with a high school diploma, and as I noted last week, more Ohioans are enrolled in colleges and universities than at any time in our history. That's good news.

But we face a dilemma. Higher education is more important to our economic future than ever before, yet our resources are limited. We will increase funding for colleges and universities in our budget, but we must achieve a greater return on our investment.

That's why I've called for the Commission on Higher Education and the Economy. The commission will identify how to make our higher education system more productive and best prepare our students for the jobs of the Third Frontier.

High performing schools and an efficient system of higher education are keys to transforming our economy. But for Ohio to prosper, we must also have a high quality system of transportation.

In our state's early days, it was hard to get crops to market or acquire products made elsewhere. So our forefathers built a system of canals and railroads to improve commerce and their quality of life. Today, Ohio stands as a crossroads to the country. Our central location remains a key to our economy. But a good location without good access is a prescription for decline.

If our economy is to rebound and reach new heights in Ohio's third century, we must have a modern system of roads, capable of moving people and goods safely and efficiently.

That's why we've been fighting so hard in Washington to recover more of our federal gas tax dollars. Getting back only 89 cents for every dollar we send is unacceptable. We'll continue to press the case in our nation's capital and we need our congressional delegation to do the same.

But unlike Columbus, Washington moves slowly.

We are at risk of having no monies for major new construction or rebuilding projects by the end of next year. Many necessary projects now on the drawing boards will not proceed. Congestion will grow more severe. Unsafe road conditions will not be addressed. And our economy will suffer.

Last year, you commissioned a task force to review our transportation funding system and it concluded that more resources were needed. I agree.

So my budget will call for new transportation revenue. We'll ensure a stable base of funding for road and bridge construction, even if no more federal money is forthcoming. We'll also provide significant resources to counties, cities and townships to help them rebuild and maintain their roads and bridges.

This investment will keep Ohio moving in this new century. And it will also stimulate our economy by supporting thousands of new construction related jobs in Ohio.

In our first 200 years, Ohio had a rich history of innovators who took bold risks to change the world - Edison, Kettering, the Wright brothers, Glenn, Armstrong, and many, many others.

It's now our turn to be bold, to seize the opportunity to create more high paying jobs for Ohio's third century.

That's the mission of the Third Frontier Project - to create a more robust economy because there are too many of our friends and neighbors hurting today.

Since I announced this initiative a year ago, we've made tremendous progress.

We've awarded $45 million through the Technology Action and Biomedical Research funds, generating millions more in federal and private funds.

$100 million has been provided for the Wright Brothers program to build world-class research centers to help key industries create new products and new jobs.

The Innovation Ohio Fund has been established to help existing companies, as well as new ones, develop next generation products.

We launched our Fuel Cell Initiative, a three-year, $100 million set-aside to position Ohio as a national leader in the growing fuel cell industry.

And we just enacted Senate Bill 180 to expand the pool of venture capital in Ohio.

None of this would have happened without the strong support of the House and Senate. Thank you for your commitment to improving Ohio's economy.

Since last spring, I've hosted Third Frontier Summits in all parts of the state to receive input from business and community leaders.

I've heard remarkable stories from entrepreneurs who are creating good, high paying jobs for our fellow Ohioans.

I've seen firsthand how our investment is paying off. And now I'd like you to see some of the great things happening around the state.


Friends, these are just a few examples of the companies and jobs of the Third Frontier. Please join me in thanking representatives from AtriCure, NexTech, and First Solar for taking risks, creating good jobs and for joining us here today.

The Third Frontier Project is already making a difference. But we must build on our progress in the years ahead.

My budget provides over $40 million for Third Frontier programs in the next two years. And I want to thank Senator White and Speaker Householder for placing our Third Frontier agenda at the top of your legislative priorities.

I ask the General Assembly to quickly pass our proposal to place a 10-year, $500 million bond issue on November's ballot. This money, if approved by the voters, will allow us to recruit scholars in fields that are vital to our economy, attract more research dollars, and move new ideas from the laboratory into the marketplace.

My friends, as I said last week, the Third Frontier Project is not a luxury, even in our most difficult budget hour. We must make this investment today to make Ohio better tomorrow.

Without a doubt, a daunting set of challenges lies before us. But we can meet them head on, to create a more prosperous Ohio for our children and grandchildren.

In our bicentennial year, let us draw strength and inspiration from the men and women who founded Ohio and built our remarkable state. As they have proven, we are indeed a pioneering, innovative, aspiring, and creative people, able to turn adversity into opportunity.

In the difficult days ahead, we must rise above partisanship and personal ambition to do our duty. Like the leaders who have come before us, we must summon the courage to do what's right, not what is most expedient. Let us recognize and seize the opportunities that are surely ours.

Together, let us build a better Ohio for the generations to come as we embark on our third century of statehood.

Thank you and May God Bless Ohio.
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