Issue 1 Analysis: Separately, an analysis from a non-partisan research group concluded Thursday the Third Frontier component of Issue 1 would overturn 150 years of constitutional prohibitions against state investment in private corporations.

Policy Matters Ohio, a non-profit institute with offices in Cleveland and Columbus, did not take a position on the constitutional amendment the General Assembly placed before voters at the request of Governor Bob Taft.
 

Issue 1 would allow the state to borrow $2 billion over 10 years, including $500 million to finance high technology research, development and commercialization projects. Another $150 million would be used for private site development. The rest of the money, $1.35 billion, would be used for local public works projects.
 

"Although public attention has focused on the amount of the state bond issuance, a much closer relationship between the public and private sectors will be the enduring legacy of the amendment," the Policy Matters Ohio analysis said.
 

"The amendment permits the state, state universities, and local governments to become stockholders in private companies and to share in any resulting financial gains, overturning constitutional prohibitions that have been in place for over 150 years," the report said. "The issuance of general obligation bonds to provide direct aid to industry is a departure from the historical use of public sector bonding authority."
 

Jon Honeck, the research analyst who wrote the analysis, said legislators improved the amendment as compared to a stand-alone Third Frontier proposal that voters narrowly defeated in the November 2003 election.
 

"The amendment contains improved language that shows a heightened concern by the legislature for the accountability of  public funds and the equitable distribution of program benefits," Mr. Honeck said in a news release. "But it's up to the legislature to give these provisions real teeth if the amendment passes."
 

Policy Matters Ohio recommended that if Issue 1 is approved, the implementing legislation should ensure the accountability of public money used for Third Frontier projects by all levels of government, universities, other non-profits, and the private sector.
 

Among other conclusions in the group's analysis:
 

--Debt service for $500 million in state obligations for the Third Frontier portion of Issue 1 will be $687 million over 17 years, based on an Office of Budget and Management estimate. Interest payments of $187 million comprise over one-fourth of the total.
 

--The amendment requires the General Assembly to restrict or limit use of eminent domain to take property for ultimate use by private business.
 

--Debt service for money the state borrows is not counted toward a 5% constitutional debt limit. "Although the state is unlikely to default on its debt, the state's commitment to make debt service payments may come at the expense of social services, education, and other discretionary programs during a financial crisis," the report said.

Gongwer News Service  10/20/2005  Volume #74, Report #206

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