State News Roundup

July 26, 2012

In Michigan today, a look back at the city of Flint’s fiscal developments points to the city’s union contracts for the city’s financial problems. In 2006 the city ran a surplus of $5.9 million dollars, but today the city is  $48.1 million in debt and has been assigned an emergency manager from the state. While no one item put the city in its dire fiscal situation, contracts with public employee unions increased costs to the city during a time of falling revenues. From 2006 to 2011 the amount contributed to the public pension and benefits trust funds increased by 27 percent from $22.2 million to $28.2 million, a $6 million dollar increase in just five years. At the same time revenues from the city’s property tax, income tax and state-share revenue program plummeted $19.2 million dollars in the same time frame. Increases in the amount spent on public safety also jumped dramatically from $45.3 million in 2006 to $53.1 million in 2011, a $7.8 million dollar increase while both the fire and police departments were reduced by 187 full-time positions.

Ohio has sent a number of government contracts for services including, financial management, medical and restaurant equipment, legal and policy consultation and web design, out of state. The number has grown to $791 million since Jan. of 2009 and has local contractors upset with the process because of the inability for local vendors to bid on those contracts. Ohio, which uses a competitive bidding process to reduce costs, attached waivers to that same process to 128 out of 168 of the government’s bids this year so far. As a result local firms in the fields listed above are left without the chance to even compete for large government contracts. State Sen. Chris Widner of Springfield commented, “I know my initial assumption was we do our absolute best to try to find companies in the state of Ohio to provide these services. What we found, frankly, was practically the opposite.” Randy Cole, the governor’s appointed president of the state controlling board, said the board strives to keep dollars from leaving the state and will do so in the future, but pointed to several legitimate reasons for contracts being awarded outside the state.

Nationwide sales have contracted on U.S. home sales in June, pointing to an uneven recovery in the housing market at best. The National Association of Realtors pointed to a drop in the index of sales agreements by 1.4 percent last month, to 99.3 from 100.7 in May. While June’s reading was down from previous months, it was still significantly higher than the same numbers in 2010 when the index stood at 75.88 for the month of June. Contractors have been breaking ground on new homes lately though, as a low inventory is suggested to be one of the root causes for the slow and uneven recovery.

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