What happens if legislators rewrite Issue 2?

Earlier this month, Ohio became the 24th state to legalize the sale and purchase of marijuana for recreational use. Even before Issue 2 was passed by the voters, leaders in the Ohio General Assembly were signaling their intentions to change the law after its passage.

Unlike Issue 1, which was a constitutional amendment, Issue 2 is an initiated statute.

That means legislators can go back and change the law afterwards. And it seems like they intend to do so.

While some of the public discussion about changes to Issue 2 from the legislature have revolved around public health measures, legislative leaders have focused their attention on the use of tax revenue raised by excise taxes levied on purchase and sale of marijuana for recreational purposes.

Researchers at the Ohio State University Drug Enforcement and Policy Center study estimate hundreds of millions of dollars are likely to be raised by the excise tax.

My firm Scioto Analysis decided last summer to conduct a cost-benefit analysis of recreational marijuana legalization. This lined up perfectly with the discussion around Issue 2. We released the cost-benefit analysis last month, finding the current proposal would likely lead to economic benefits exceeding costs by $260 million.

Legalization of the sale and purchase of marijuana for recreational purposes in Ohio will not be costless. We expect there to be new cases of impaired driving that will likely lead to crashes and even deaths. But the largest impact we expect is productivity. Based on what we have seen in other states that have legalized recreational marijuana, we expect the costs of recreational marijuana to rise to the level of $760 million worth of lost productivity.

These costs, though, will be offset by the benefits of programs funded by excise taxes levied on the industry. In particular, if the Cannabis Social Equity and Jobs Fund and Substance Abuse Addiction Fund authorized by Issue 2 are spent on evidence-based programs, we estimate its benefits to be about $800 million in job training and substance abuse treatment benefits.

Changing the use of these funds, though, could potentially have impacts on the economic efficiency of recreational marijuana legalization.

A big problem with reallocating these funds toward policing from an economic standpoint is that policing is an incredibly understudied public policy area. Very little work has been done to evaluate the economic impacts of policing interventions and less has been done on impacting the economic benefits and costs of investing in jails and prisons as some assembly leaders have suggested.

On the other hand, the current evidence on job training and substance abuse programs
suggests benefits on the scale of $6 and $9 respectively for every $1 in costs.

The best evidence from the Washington State Institute for Public Policy suggests deployment of police can have benefits that outweigh costs. Deploying police can lead to reductions in property crime, about to the tune of $5 in benefits for every $1 in costs.

While this is one way to tackle crime, another is to fund general job training programs, which reduces the value of crime relative to regular employment activity.

Training is a different story. The evidence for the economic benefits of new police training is not strong right now. This leads me to conclude that reallocating money currently allocated toward job training and substance abuse treatment toward police and jail construction will likely reduce the economic efficiency of marijuana legalization.

Let us hope that if we are going to reallocate funds going toward effective programs that we will at least put resources toward evaluating these new programs they fund.

This commentary first appeared in the Ohio Capital Journal.

The evolving story about marijuana and public health

Last month, Scioto Analysis released a cost-benefit analysis looking at the recreational marijuana ballot initiative that passed on election day. Our goal with this analysis was to hopefully offer some insight into what the impacts of legalization would be so Ohio voters could make an informed decision. 

Overall, we found that the ballot initiative as written would likely generate over $250 million in social benefits for the state. One notable exclusion from our analysis was the lack of a monetized health impact. In other words, we did not explore what increased marijuana use would mean for public health. 

There are a few reasons we chose to exclude this particular impact. The most important reason was the uncertainty that surrounded it. Specifically, we were unsure of the effect that recreational marijuana legalization would have on alcohol use. Some studies have found that states with recreational marijuana use see decreases in their alcohol consumption, and if that is true then we might expect some of the negative health outcomes associated with marijuana use to be balanced out by positive health outcomes associated with less alcohol use.

Evidence of the negative impact of recreational marijuana legalization on health was presented last week at the Association for Public Policy Analysis and Management conference during a session about the impacts of recreational marijuana laws. One presenter in particular was able to measure the impact that recreational marijuana legalization had on asthma hospitalizations.  

Taking this new information into account, our final results probably would not change substantially. Doing some back-of-the-envelope math, I figure these added asthma cases would have a monetized value somewhere in the tens of millions. Certainly a major cost and an important consideration, but not enough to change a margin in the hundreds of millions.

Another consideration is the fact that this research was being presented as a work in progress. The researchers’ estimates were preliminary, with more questions that need to be addressed in order to fully understand the connection between recreational marijuana legalization and asthma hospitalizations. 

This situation highlights the differences between academic research and policy analysis. Academics need lots of time to carefully estimate each individual effect, while policy analysts need to provide useful information quickly. The goal of academic research is to poke holes and see how solid an argument can be made. This is with the goal of advancing “knowledge” writ large. Policy analysis, on the other hand, is focused on improving the knowledge policymakers have when they make decisions. This is usually on a shorter timeline than academic publishing.

As more states legalize recreational marijuana, there will be more high quality research about the associated health impacts of the legalization of the sale and purchase of marijuana for recreational purposes. I especially hope some academics are up to the challenge of measuring net health benefits, including any impact these laws have on alcohol use.

Either way, according to the evidence we have now, Ohio’s economy will be better off from a social perspective as a result of this vote (assuming the legislature doesn’t reallocate the tax dollars currently allocated by the program for employment and drug abuse treatment). In the event there is groundbreaking research about the negative health effects of marijuana use, then most of the country is going to have to reevaluate their laws. This is the purpose of the laboratories of democracy, though: to test policies and see what happens when policy changes.

Will more school spending improve student achievement?

The Journal of Policy Analysis and Management has a section at the end called “Point/Counterpoint” where two people present different sides of an open question in the field. In the most recent edition, the subject of the Point/Counterpoint was school spending. 

Scioto Analysis is currently conducting a cost-benefit analysis on school spending in Ohio, so this is a great place to explore the strengths and weaknesses of our approach. So, let’s go over some of the key points the researchers make.

Before going over both sides, it’s important to understand exactly what is at the heart of this debate. Neither side believes that school spending is unrelated to student achievement, instead the question is whether we can use spending broadly as a predictive variable. In other words, we are trying to figure out how much per-student spending alone can tell us. 

To illustrate this, let us begin by looking at the negative side.

Counterpoint

This section written by Josh McGee from the University of Arkansas is titled “Yes, money matters, but the details can make all the difference.” The thesis of this argument is that knowing the school spending amount alone is not enough, we need to have an idea of what these additional resources actually are.

From an intuitive standpoint, this claim makes a lot of sense. Not all spending is worth the same amount and there can be a lot of value in finding the best way to spend additional resources. 

For policy analysis, this would suggest that using school spending alone as an input into a model would not be enough to accurately estimate what the impact of a proposal would be. We'd need to know more about what that money would actually be going towards. 

One final point McGee makes is that school spending might be extremely context dependent. It might not make sense to use the results of increasing school spending in one context to inform policy somewhere else. 

Point

The argument supporting the use of school spending  as a predictor of student achievement written by C. Kirabo Jackson from Northwestern University and Claudia Persico from American University is fairly straightforward: so far, the data suggest that there is a causal connection between spending and achievement. 

A recent meta-analysis of the literature about the impact of school spending found that there is a positive relationship between overall per student spending and test scores. This trend has been consistent over time and across multiple contexts. 

If we assume this is true, then indeed we could use generic school spending as an input into some model. More information about exactly how this spending would be used could certainly be helpful still, but overall there is a measurable effect of school spending.

—

What does this mean for policy analysts looking to measure the impact of increased school spending? Mostly that there is still some uncertainty about exactly what the value of increased spending exactly is. 

It is good that academics challenge these results, and work to see if there is a way we can improve our understanding of this topic. However, I believe that the results showing a direct link between spending and student achievement are strong enough to improve decision making, even if they aren’t perfect. For policymakers and policy analysts, this helps improve the quality of our decision making. 

Ohio economists believe medical debt forgiveness will improve health

In a survey released this morning by Scioto Analysis, a majority of economists agreed that using public funds to forgive medical debt will reduce health disparities. This comes just after the City of Columbus voted on a plan to forgive medical debt for middle income residents. 

Paul Holmes from Ashland University who agreed that forgiving debt would reduce health disparities wrote “I suspect this would reduce the number of people avoiding medical care for financial reasons, though again I don't expect the effect to be large. But it does seem relatively well-targeted, so I'd be optimistic it might make health care access more equitable.” 

Kathryn Wilson from Kent State who was uncertain about this proposition wrote “I think it will definitely reduce economic disparities. Those who have their debt purchased will have more disposable income, a higher credit score, and be in a better position to finance purchases such as a house or car in the future. The economic security may provide some health benefits, but I see the primary effect as reducing economic disparities rather than health disparities.”

A plurality of respondents agreed that this policy would additionally encourage people to access preventative care, though more were skeptical of this claim. Bob Gitter from Ohio Wesleyan wrote “I am not sure that preventative care is a big share of medical debt. Also, this program forgives debt for past expenditures. It is hard to know if an expenditure I make now would get forgiven later.”

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here. 

What will Ohio look like if Issue 1 fails?

Next week, Ohio voters will go to the polls to vote to establish a state constitutional right for residents to make reproductive decisions about abortion, contraception, and miscarriage care.

In the wake of the decision made by the U.S. Supreme Court in Dobbs v. Jackson Women’s Health Organization to overturn the court’s previous opinion of a federal constitutional right to abortion, state legislatures across the country have moved to ban or severely limit abortion.

Ohio currently borders three states with total bans on abortion: Indiana, Kentucky, and West Virginia. Abortion is currently legal in Ohio due to a judicial order to freeze a 2019 law that would ban abortion at around six weeks of pregnancy.

A group of economists led by Middlebury College’s Caitlin Myers have studied the impact bans have and will have on access to abortion in the United States.

Currently, the average drive time to an abortion facility in Ohio is around 36 minutes. This estimate is nearly identical to the 34 minutes researchers at health research firm Altarum estimated Americans typically drive to the doctor’s office.

Because of clinics in Akron, Cincinnati, Cleveland, Columbus, Dayton, and Toledo, people living in those metropolitan areas can generally reach a clinic that provides abortion in under an hour.

Proximity to those clinics as well as clinics in Pittsburgh mean most of the rest of the state is currently within a two hour drive of a clinic that provides abortion. The exception is eastern Lawrence County on the Kentucky and West Virginia borders, where bans in neighboring states and distance from cities in Ohio and Pennsylvania push the drive time over two hours.

The researchers estimate that if Ohio’s abortion ban went into effect, average drive time in Ohio would grow from the current 36 minutes to over two and a half hours.

People living in the Cincinnati, Columbus, and Dayton metropolitan areas and large swaths of the Cleveland Metropolitan Area would have to drive over two hours to reach a clinic that provides abortion. People in Akron, Toledo, Youngstown, and portions of Cleveland would still have access to clinics that provide abortion within an hour in Pittsburgh and southern Michigan.

Portions of southern Ohio would be over four hours from a clinic.

The researchers also estimate the current average distance to a clinic that provides abortion in Ohio is 28 miles but that the ban would increase that distance to 159 miles. A 2020 study by a group of researchers at Texas A&M found increasing the distance to a clinic from under 50 miles to over 50 miles reduces abortion rates by 16 percent, suggesting distance will have an impact on how people access abortion care in Ohio. This would likely lead to an increase in rates of unplanned births and self-managed abortions.

If voters in Ohio pass Issue 1 next week, the right to abortion will be ensured up to the point of fetal viability, which would ensure the right to choose abortion care is limited to women and their doctors. We will find out next week if voters in the state are ready to codify a right the Supreme Court was not able to.

This commentary first appeared in the Ohio Capital Journal.

The daylight saving tradeoff

Earlier this week, Scioto Analysis released our most recent demonstration cost-benefit analysis, this time looking at the impact daylight saving time has on Ohio. Overall, we found that the downsides associated with switching between daylight and standard time leads to about $40 million in social costs for Ohio every year. 

Essentially, we found that switching our clocks twice a year isn’t really worth the hassle it creates. 

However, if policymakers want to make a change, they will need to decide which time to adopt. If they choose permanent standard time, that means Ohio would have lighter mornings and the sun would set earlier. Permanent daylight time of course means darker mornings and later sunsets (currently, states are barred from adopting permanent daylight time at the federal level, so this policy would require a federal change first).

The decision between permanent standard time and permanent daylight saving time is particularly interesting because although our research shows that these two are roughly equivalent from a social benefit standpoint, there are important practical implications of each. 

The main tradeoff we found was between energy consumption and crime. Permanent standard time reduces overall energy consumption, but the earlier sunsets mean we expect to see increases in crime rates. Conversely, permanent daylight time should reduce crime as a result of the later sunset, but at the cost of increased energy use. 

The monetized value of these effects are basically equal (the benefit of reducing crime is just slightly larger), meaning from an economic perspective it largely doesn’t matter which choice policymakers go with. Either way Ohioans will get roughly the same value. To fully understand these two policy options, we need to understand how we monetize these benefits. How are we able to say that a reduction in crime is equal to a reduction in energy use?

The big question with monetization is the following: how much are people willing to pay for something? Consider the crime example. Some people are very risk-averse and would be willing to pay a lot to reduce their risk of experiencing crime. Those who are comfortable with more risk would likely find better uses for their resources elsewhere. But ultimately, everyone has a point at which they would stop paying to reduce their risk of crime.

We see this in security markets. Some people pay more than others for security systems on homes, showing that there are differences in willingness to pay for reductions in risk of crime victimization.

The important point is that our monetized values try to capture the opinions of everyone in a society, and individuals may disagree with these values. 

This means that although from a social perspective permanent standard time and permanent daylight saving time are basically the same, individual policymakers may see one benefit as outweighing the other. The preferred option will be the one that most aligns with the views of the people deciding on the policy. 

Either way, Ohio would benefit economically from doing away with the time change every year. The increase in car crashes and decrease in productivity that results from messing with peoples’ sleep schedules twice a year isn’t worth it.

As election season approaches, this is an excellent reminder that the people we choose to represent us have a lot of influence over the way our society functions. Even in years where there aren’t any federal or state offices to vote for, local elected officials can have a big impact. City councils, mayors, and school districts all have major sway over local policy. Make sure to inform yourself about the candidates in your area, and go vote on election day.

Intern perspective: What I learned during my first cost-benefit analysis

I just finished my first cost-benefit analysis on daylight saving time as a policy analyst intern for Scioto Analysis. During these last few months, I faced the ups and downs as anyone does when doing research. 

One minute I was finding rich data on the topics I need to calculate impact and the next, I found a report that conflicted with my past findings. While this was a frustrating process, when I was able to pull together all the pieces into the report, I was amazed by the amount of research that went into the study.  This experience taught me a lot about my time management, research and writing skills. 

One of the most important parts of building a cost-benefit analysis is choosing which impacts to calculate. During my early research, I was able to identify some impacts that are already well known to be affected by daylight saving time. 

Energy was an impact that first emerged when I began to look into why daylight saving time was initially implemented in the 1900s. There were many conflicting reports about the true effects of daylight saving time on energy and I decided to use a report done on Indiana as I felt it was applicable to Ohio. 

I was aware that daylight saving time added another hour of sunlight so my assumption was that we saved energy during this time but my research showed the opposite. I hadn’t taken into account the use of air conditioning or other energy sources whose usage increases during the extra sunlight and heat in the summer. This impact showed me that we make assumptions about things we don’t know much about because it makes sense to us.

Another impact that surprised me was the benefit of decreased crime. Crime was not in my original list of impacts until I came upon a report that claimed that the extra hour of sunlight saved the U.S $12 million every day it occurred. As I began to investigate, it amazed me the rate of crime reduction during daylight saving time because there was less darkness in which crime may occur. While the impacts of energy and car crashes had the odds stacked against daylight saving time, crime brought daylight saving time effectiveness back to the discussion. 

During this experience, I realized how important cost benefit analysis reports are to policymakers and vital to making the right decisions. Policymakers have to decide on many issues and without having the research to assist them, those decisions can be disastrous. These reports help provide evidence from a wide range of sources and collect all the data in an easy to read way. 

When I was deciding what impacts I wanted to investigate and include in the report, I felt a lot of responsibility. It did make me realize the pressure that policymakers deal with when making decisions that not only affect their own constituents but also potentially the country. I want to thank Rob Moore and Michael Hartnett for giving me this opportunity and all their support and wisdom during this process. 

This blog post was written by Scioto Analysis Summer Intern Amy Townend. Amy is currently studying economics at Bates College in Lewiston, Maine.

Permanent Daylight Saving Time would reduce crime

Earlier this morning, Scioto Analysis released a new study measuring the economic impact of daylight savings time. We found that if Ohio switched to permanent daylight savings time, the state could see net economic benefits ranging between $39 and $41 million annually. 

The most significant impact of permanent daylight savings time would be the impact it has on reducing crime. Having the extra hour of daylight in the evening has been found to lead to fewer crimes each year. By adjusting the clocks so the sun sets an hour later for part of the year that is currently standard time, we expect there to be a reduction in crime. We project Ohio would save $9.4 million every year from crimes prevented by changing to permanent daylight saving time.

If Ohio were to convert to permanent standard time, we project the state to see total benefits between $36 and $39 million. In this scenario, having the daylight be permanently earlier in the morning would lead to less energy use for Ohioans.

The other benefits of switching to permanent daylight savings time are related to removing the bi-annual changing of the clock , which research has shown can cause additional car crashes and lower productivity. 

Currently, states are not allowed to operate on permanent daylight savings time, only permanent standard time. In order for Ohio to permanently set their clocks on daylight savings time, a federal change would need to happen first.

This study is part of a series of cost-benefit analyses conducted by Scioto Analysis. Previous cost-benefit analyses were conducted on the recreational marijuana, child tax credit, harmful algal blooms, and urban canopy programs.All previous cost-benefit analyses can be found on the Scioto Analysis website.

The costs of recreational marijuana legalization

Earlier this week, Scioto Analysis released a cost-benefit analysis on legalization of the sale and purchase of marijuana for recreational use. As part of this, principal analyst Rob Moore and I had the opportunity to speak with the League of Women Voters of Metropolitan Columbus about our findings. 

Because we specialize in cost-benefit analysis, we decided to frame our discussion as using that context. Rob talked about the benefits of legalization (you can find his blog post about the topic here) and I got to talk about the costs. 

Here is what we found about the economic costs of legalizing recreational marijuana:

Productivity 

One major concern for opponents of recreational marijuana legalization is the effect the policy change will have on people’s ability to do their jobs. If legalization makes marijuana easier to access and enables more people to become users, there may be an increase in the number of people who fail to perform at their jobs because of marijuana use.

One paper used a difference-in-differences model and found that across four industries (mining; construction; arts, entertainment, and recreation; and accommodations and food Service), the legalization of marjuana led to a roughly 1% decrease in productivity. 

Although a 1% decrease in productivity seems small, these are extremely productive and important industries to our society. We estimate that this decrease in productivity would lead to a net loss of roughly $760 million across the state. 

From an economic perspective, this is actually a very surprising result. This is because productivity is not likely to fall by 1% for every employee in these industries. Instead, it’s much more likely that a very small percentage of employees become extremely unproductive. 

Because of this, we might expect the labor market to correct for this loss by letting go of less productive employees in favor of more productive ones. While this might be true in the long run, there is a lot of friction in the labor market that makes adaptations like this quite slow. 

For example, it can be very expensive for employers to fire old employees or hire new employees. If those costs are greater than the private cost of having less productive workers then employers won’t be incentivized to make a change.

Car Crashes

Another important downside of legalized recreational marijuana is the impact it has on car crashes. Similar to the productivity decrease, it follows that if we increase the number of people using recreational marijuana the number of people who end up driving while under the influence is going to increase. 

Our models project that in Ohio, the increased number of people driving under the influence will lead to just over $120 million of costs for the state. This comes from a combination of increases in property damage, injury, and fatalities. 

There are other potential negative effects of recreational marijuana that we chose not to monetize for our report. One significant one that gets a lot of attention in the media is the health effects of marijuana. 

We chose to not include direct health effects in our models for one main reason: the interaction between marijuana use and alcohol use. There is some evidence to suggest that marijuana use may be a substitute for alcohol use, meaning that legalized marijuana could decrease alcohol use rates.

If this is true, then depending on how much alcohol use decreased, we could see positive health effects from legalizing recreational marijuana. However, more research is needed to understand exactly what the health outcomes for society will be. 

At Scioto Analysis, we believe that good policy decisions happen when the policy makers are well informed about the subjects they are deciding on. This year, the public gets to help make some policy decisions. Hopefully this helps inform your vote when you head to the polls in two weeks.

The benefits of legalization of recreational marijuana

Earlier this week, Scioto Analysis released a cost-benefit analysis on legalization of the sale and purchase of marijuana for recreational use. A couple of months ago, I wrote a commentary for the Ohio Capital Journal about what the potential impacts would be of legalization of recreational marijuana infor Ohio.

A member of the League of Women Voters of Metropolitan Columbus contacted me soon afterwards to see if I would speak on the topic for their Education and Advocacy committee. They were interested in having someone come in to speak on the “pros” and “cons” of the initiative.

My colleague Michael Hartnett and I decided to present on the costs and benefits of legalization of recreational marijuana use, inspired by the cost-benefit analysis we were conducting at the time. I spoke on the benefits, and Michael spoke on the costs.

In that spirit, we thought it would be valuable for us to write a pair of blog posts on the topic as Ohio draws nearer to a statewide vote on the legalization of the sale and purchase of marijuana for recreational use.

Here is what we found about the benefits of recreational marijuana use.

Tax revenue for employment and substance abuse treatment programs

The largest benefit we project from the legalization of sale and purchase of marijuana for recreational use is tax revenue generated for employment and substance abuse treatment programs.

A 10% excise tax will be applied to all purchases of marijuana for recreational use. These funds will mostly go to a new “cannabis social equity and jobs fund” and “substance abuse addiction fund” which will finance employment and substance abuse treatment programs.

We estimate the state will raise about $190 million per year from excise taxes. Because estimates from the Washington State Institute for Public Policy show large social benefits for both of these types of programs, we estimate the benefits of these programs will generate a value of about $800 million per year.

It’s worth noting these funds may change after the ballot initiative is passed. The state legislature can amend Issue 2 however it wishes to since it is an initiated statute and some legislators have already indicated interest in particular in changing the use of tax revenue.

Industry Employment

Legalization of the sale and purchase of marijuana for recreational purposes constitutes creation of a new industry. Looking at the size of industries in other states that have legalized the purchase and sale of marijuana for recreational purposes, we estimate Ohio will add about 3,300 new jobs to support this industry. We estimate this will lead to about $190 million in new wages due to the new jobs.

Consumer Surplus

Another benefit of legalization of the sale and purchase of marijuana for recreational use is that more people will have access to a good they did not have access to previously. We estimate the total value consumers will get from having access to a new market at $98 million.

Crime

Finally, the legalization of a market means fewer people facing prosecution for marijuana-related crimes. Using trends seen in other states around legalization, we estimate there will be about 4,400 fewer arrests per year if the sale and purchase of marijuana for recreational use were legalized.

So there it is: more tax revenue for employment and substance abuse treatment programs, more jobs, more things people want, and less crime. There will certainly be benefits to the legalization of the sale and purchase of marijuana for recreational purposes. Now hang tight for when my colleague Michael releases his blog post on the costs of the program.