Ohio Gov. Strickland Proposes $1.7B of Debt for Jobs Program

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CHICAGO - OhioGov. Ted Strickland yesterday in his second state of the state address proposed selling $1.7 billion of debt - the bulk of it backed by the state's full faith and credit pledge - beginning early next year to finance an ambitious job-creation program.

Proceeds from the bond sales would be invested in alternative energy and biomedical industries and road and bridge projects that together would create 80,000 "good-paying" jobs, the Democratic governor said.

"No one likes additional debt, including me," Strickland said. "But the national downturn is costing us jobs. And we need to act quickly."

The governor's proposal includes issuing $1.5 billion of general obligation debt and an additional $200 million in revenue bonds backed by liquor tax revenues.

Under Ohio law, the General Assembly would need to approve legislation authorizing debt issuance, which would then be subject to voter approval. State officials expect to introduce legislation within the next three to four weeks, and plan to put the debt plan before voters on the Nov. 4 ballot, Strickland spokesman Keith Dailey said.

If voters approve the program, the state plans to enter the market as soon as January. The state has not decided whether it would sell the debt in one or more pieces, said Dailey.

Standard & Poor's and Fitch Ratings assign Ohio AA-plus ratings and Moody's Investors Service rates the state Aa1 with a negative outlook.

Ohio would need to set aside an additional $152 million annually for debt service on the bonds beginning in 2010. The program is separate from the state's capital budget that Strickland will introduce in late spring.

Under the "Building Ohio Jobs" program, bond proceeds would be invested into seven industries across the state. Of the total $1.7 billion, $400 million would be invested in the Clean Ohio fund, which would go toward cleaning abandoned factory sites among other projects, and another $400 million would be invested in the Ohio Public Works Commission, which partners with local governments to invest in road, bridge, water and sewer projects.

The state would invest $250 million in the alternative energy industry, including solar wind and clean coal research, and $150 million in the state's infrastructure to create a "seamless network" of roads, rails, and ports.

The state would invest $200 million in the biomedical industry, with an emphasis on new medical products, and $200 million in a program called Ohio Main Streets Renewal to spur redevelopment in downtowns in cities and towns across the state. Another $100 million would be invested in products that use renewable resources instead of petroleum to create plastics and other products.

"This is a bond issuance to invest in direct job creation in Ohio, and the governor sees this as an economic stimulus that is much needed, especially in light of the projected performance of the economy over the next 12 to 18 months," Dailey said.

The program comes a week after Strickland announced the state would lay off up to 2,700 employees, expand electronic gaming and impose a host of other cuts in order to tackle an unexpected shortfall in the 2008-2009 budget.

Under various scenarios, the shortfall could be limited to $733 million if revenue growth is low, $1.3 billion if growth is zero, and $1.9 billion if a recession occurs, according to recent fiscal forecasts.

Strickland's proposals address the lowest-estimated shortfall, and he said he would dip into the state's $1 billion rainy day fund if other cuts prove insufficient.

State officials blamed the deficit on lower-than-expected tax collections, weak housing and job markets and rising costs, as well as an impending national recession.

"The weak economy is a burden to all Ohioans and a burden to our state government," Strickland said. "In the face of this challenge we cannot simply put a patch on the budget without redoubling our efforts to create good jobs for Ohioans."

Ohio's fiscal year begins July 1. q

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