ProgressOhio

“The power of perception is at work here. If self pity did any good, I would be all for it. But a negative self image undercuts a community's morale, and it undercuts a community's prospects. It's a self fulfilling prophesy - why should investors go where people have given up on themselves?

You know the old line, "A lie will go round the world while the truth is pulling on its boots." Well it seems to me just about every bad thing folks feel about Ohio gets shouted through a bullhorn while every good thing is whispered. And this matters in everything we do.”

Ohio Governor Ted Strickland, July 11, 2008

Watching Ted Strickland stand before the City Club last week, even on videotape, you felt the energy of a room looking for a messiah – answers and hope.

He was right both in his tone and in his lambast at a national press that has been unkind, unfair and biased about Ohio’s economy. He was right to talk about the significant investment his Administration has taken in using government to address innovation.

But if there is a challenge that emerges from the heavy investment of jobs dollars in the University system it was best emphasized in Ohio Board of Regents Chancellor Eric Fingerhut’s own speech to the very same City Club on May 4, 2007 where he spoke of the challenge of University systems long neglected who had dug in self-sufficiently in order to survive:

“For too long, out of necessity, many have become used to operating this way, and have become resistant to change that could benefit us all. If we are honest with ourselves, however, we would admit that this path has resulted in schools that , in many cases, cost too much and deliver too little.”

Ohio Chancellor Eric Fingerhut, May 4. 2007

And survival has meant that University Administrations were forced to become politically savvy – whether lobbying the legislature, fundraising from some of the very same wealthy donors as politicians and political parties, and in securing streams of funding sources from federal and state sources.

In effect, University’s have by necessity linked with the very same confluence of influentials in Ohio as those who walk the halls of the Statehouse. Which leads to a few problems. Whether it is bureaucracy, politics, or just complex communications – all too often the simple goal is lost in the rhetoric, lobbying and jockeying for contracts to meet government’s and in this case a University’s goals. And while State government has evolved into tight ethics and disclosure practices to solve some of these problems, Ohio’s University system has not.

So at the risk of the wrath of Strickland loyalists (a hearty bunch who create 99-0 House budgets), accountability on job creation money working through the University system needs a systemic overhaul.

Why, you ask? Well, for starters let’s take a look at the Taft-inspired Third Frontier programs which pump hundreds of millions of dollars into Ohio’s university system to incubate jobs. Ohio awarded $698 million in grants, spent $291 million and directly created or retained 5,641 jobs in a six-month period ending in December of last year. ODOD reports that it cost $51,661 per job created or retained and we know that during the Bush years, it is estimated that Ohio lost 209,400 jobs through last December.

Is that efficient? Well, if you figure it costs $51,661 per job, it would cost the state $1,081,979,200 to replace those jobs. Putting it another way, if you forecast the same growth level every six months it would take 18 years and six months (that would be February 2026) just to regain those lost jobs.

Even if you include spin-off and indirect jobs, Ohio DOD’s reported numbers would need 7 years and two months to replace those 209,400 jobs. So Lt. Governor Lee Fisher has his hands full in trying to take the money he has and stretch it to its limits.

And before Matt Naugle and the Buckeye Institute cheer with joy, in the last six months of the Taft Administration only 166 jobs were created or retained by the vaunted Third Frontier program – pretty ridiculous when it is one of Taft’s legacy programs.

Taft kicked off the original Third Frontier campaign at the Arthur G. James Cancer Hospital promising to “create new jobs and help existing business become more competitive to keep Ohio working.” This first bond issue tanked at the ballot box in 2003, resurrecting itself in 2005 promising more accountability in job creation. I highly doubt 166 jobs over six months was what Ohio voters had in mind.

So in that respect, 5,641 jobs are more than respectable growth. The problem for Lee Fisher is that he needs more for each leveraged dollar.

And as always, the Achilles heel in Ohio has to do with who gets the money and how it is put to use especially with less accountability and ethical rules at the University level.

In October 2005, as the Third Frontier Bond Issue was headed to the ballot the second time, Policy Matters Ohio released an analysis that concluded that implementation of the initiative needed accountability. At the time Jon Honeck wrote:

“Even though the amendment only refers to state funding, the legislature also should take steps to ensure the accountability of public funds used by all levels of government, universities, nonprofits, and private entities involved in research and product commercialization. In addition to accountability of public funds after they have been spent, it is also important to ensure that the selection process for investments and grants is competitive, transparent, and insulated from political pressures.

That seems almost prophetic when you realize that it was little coincidence that “ole” Tom Noe was Chair of the Turnpike Commission and the Ohio Board of Regents while doing business with the Bureau of Worker’s Comp with his infamous coins.

All three of Noe’s agencies dealt with large budgets with departmental discretionary grants. And only two of those agencies have an Inspector General. Ohio’s university system has no such oversight.

So when our friends in Akron picked up the Beacon Journal last week and read about the availability of Buckeye tickets to legislators and other influentials in Columbus – was it any surprise? “I’m in with the in crowd” is an old tune in Ohio politics. You may remember that Bob Taft brazenly used his Buckeye suite for political fundraising, and a look at the annual who’s who that get to buy Bowl Game tickets, shows the often cozy relationships of past and present Ohio influentials.

Look, sure they buy these tickets at no discount, but try buying a bowl game ticket on e-bay like the rest of us who get gauged. Access is influence – whether you are the Director of ODJFS who oversees millions of dollars that flow through OSU hospitals, a legislator overseeing budgets, the Inspector General who has no oversight of the University but does oversee other state agencies with close ties, or a newspaper reporter or Editor who make coverage decisions. We’re glad you have an opportunity to pay your own freight – but don’t tell us that everyone has the same access to these privileges. Perhaps that is why Governor Strickland turned down this opportunity last January.

As the ABJ’s Dennis Willard pointed out last weekend, reporters are also on the list of those who can purchase the covered tickets. Word is once you are on the list – you stay on the OSU list. The whole issue creeps in as discretionary decisions are made over who gets grant dollars – including Third Frontier money.

Prove it, you say.

Well, here is exhibit one.

Google up the term Third Frontier and up pops a Google ad for Hicks Partners. Who, you say?

Why Ohio State University Board of Trustee Brian Hicks, Governor Bob Taft’s former Chief of Staff. Here’s what he has to say about the Third Frontier:

The professionals of Hicks Partners helped create this economic development initiative. As chief of staff to the governor, Brian Hicks was a driving force in developing and branding the project. Pat Valente was a key architect in turning broad policies into discreet and measurable programs, and Ann Hamilton led the marketing efforts behind the project.

Given the extensive background our team has with the Third Frontier Project, Hicks Partners is uniquely qualified to assist companies in securing Third Frontier grants and other incentives.

Hicks Partners offers the following Third Frontier services:

Project Development:

•  
  • Project visioning, alignment and strategy development
  • Assess organizational capabilities
  • Analyze grant application return-on-investment
  • Research and evaluate similar Third Frontier applications
  • Develop strategic partners and collaborators

Grant Writing and Support:

•  
  • Grant research, writing and planning
  • Proposal and process management
  • Budget and cost-share analysis
  • Scientific and business plan review and evaluation
  • Coaching, counseling and mentoring
  • Facilitate collaborator communications
  • Presentation development and support
  • Interacting with Third Frontier staff
  • Proposal editing, revision and submission

Grant Management:

•  
  • Prime Award Agreement coordination
  • Maximize draw-down of awarded funds
  • Prepare quarterly and annual reports
  • Facilitate collaborator meetings and reports
  • Promote grant award to other possible investors
  • Troubleshoot with Third Frontier staff
  • Prepare for follow-on grant applications

Any wonder that in May the Dispatch reported that OSU would receive a large chunk of Third Frontier dollars – more than any of the other universities. And OSU has the opportunity for pieces of an additional $50 million partnering with other state universities?

OSU is littered with a who’s who of former influentials on their roster, including a former Gubernatorial Chief of Staff, a former Budget Director and a host of other Celeste, Voinovich, Taft and even Celebrezze influentials. Nothing new, this is part of the culture of survival during the lean years. There is a former Chief of Staff in the Senate down at Ohio University, a former Lt. Governor candidate at a community college in the Dayton area, former Senators at Cleveland State, a former Senate Finance Committee Chair at Akron and on and on it goes.

Jobs are where the money lie, and Ohio now has a history of sending term –limited and connected former legislators to college campuses and handing them a plump salary so they can eventually retire with a higher pension.

Maybe that’s why there is a wink, wink and a nod, nod when E. Gordon Gee spends $2 million to renovate the O.S.U. President’s house. When Gee spent lavishly at Vanderbilt, he was subject of a Wall Street Journal expose. Here in Ohio, the Dispatch responded to a similar spending spree by putting out a glossy section fit for Architectural Digest.

Things are so cozy that the Ohio Department of Development even features Gordon Gee among others in its ads.

Gee justifies the expense of his expensive house because of the need to raise funds. He is great at raising money, but quite adept at spending it. He knows that money begets money, not just in entertaining at his home but through one of the main draws of OSUs endowment growth, the lure of government research dollars that things like the Third Frontier draw to the University. So in a backdoor way, the bond money you voted on helped him leverage funds to build his $2 million lair.

Not cozy enough you, say. No direct nexus of job dollars to access issues. Well, take for instance the case of the Hawk family from the Lima, Ohio, area.

During the 2006 election cycle, the family gave over $70,000 to Ken Blackwell’s campaign for Governor (Full disclosure, Ted Strickland got a paltry $100.)

That same year, Governor Bob Taft announced more than $7.4 million in Third Frontier projects. Over half of that money went to the University of Dayton and to the James Rhodes State College in Lima to do research on behalf of – you guessed it -- Hawk Enterprises.

And oh, by the way, guess who now works at the private University of Dayton? Former Governor Bob Taft.

The research grant in fact funds a program called Advanced Materials Commercialization Center that is housed in one of the Hawk’s buildings at American Trim in Lima –at no cost to them. At the time they had open EPA violations after – oops – releasing 280 pounds of nitrogen dioxide without informing the state. American Trim also has plants in Mexico and has received an additional $1 million in 2007 for the team of American Trim, General Motors, and Ohio State University's Department of Materials Science and Engineering to research developing an economic way to manufacture fuel cells.

So access does play a rather large role in economic development issues in Ohio, or it sure seems that way. I don’t believe the University of Dayton or James Rhodes Community College is in the habit of locating their labs in corporate buildings.

It’s starting to look as if universities act as pass-throughs for development money. Is it any wonder that public-university president salaries are increasing at a rate that would make corporate CEO’s proud?

Be mad at the messenger if you will – but Shadows predicts the next Noe-like scandal will come from the cozy confines of these discretionary grants through a large, bureaucratic university system that lacks the accountability of other state agencies.

If the culture of ODOD and the University system is to change regarding job creation dollars:

• An Ethics system over the University should be created that is parallel to ethics laws governing ODOD’s own staff including:
  • An Inspector General-type system to police university ethics.
  • Ethics and influence provisions that currently apply only to those on the Third Frontier Board should be expanded to include university personnel, Trustees and politicians and cabinet members as in the Hicks case.
  • The Legislative Inspector General should require registration for lobbying the University system, as they do the legislative and executive branches, with full disclosure.
  • A revolving door should be put in place regarding lobbying on grants in front of an institution in which a party has present ties, and for three years after that service.
• Grant accountability regarding job creation and retention needs to be in a laser-like focus. Among its components:
  • An audited job creation/retention system for all grants to accurately measure and pressure compliance with job creation needs promised by the State’s leveraged investment.
  • Emphasis on grant deliberation should be on realistic job creation numbers and secondarily on retention with full disclosure of the percentage of grants spent on administrative, research and overhead costs to prevent skimming of pass-through money and maximize investment in job creation.
  • ODOD should determine a reasonable cost-per-job goal, try to get the current number reduced, and concentrate on both job quality and quantity.

If we can demand that fourth graders meet criteria in the classroom, and high school students pass a competency test to graduate as a return on our tax dollars, the least our government can do is determine whether public money spent on job creation creates jobs.

To be clear, this is not the Strickland Administration’s creation, but it is an inherited liability that is rife for a cluster of bad headlines in the future.

And the danger for Strickland is that the networking in this small community of the “in” crowd that has spread from Broad and High to our University campuses could produce the next Noe through this loosely unregulated system in which money is passed from government through Universities and on to private sector companies.

There are those who will read this as an indictment, rather than what it is meant to be. When it comes to job creation, it can’t be about Ohio’s “I’m in with the in crowd” culture that frittered away government money. Instead, the focus needs to be on serving those who need jobs – 209,400 if you believe those statistics.

Ted Strickland, Lee Fisher and Eric Fingerhut have given Ohio a great blue-print for job creation. But large sums of money tend to attract the kind of ethical problems that sidetrack and even ruin good ideas. Tightening up University ethics and accountability can move those dollars where they are needed – Ohio wallets.