Ohio can pull itself out of this economic tailspin and restore prosperity, said Bruce Katz of the Brookings Institution, but it needs to set a vision, reform state government and create an agenda for its metro regions–still the largest generators of the state's economic activity.

First, though, the state needs to step in and deal head on with the foreclosure crisis. Brookings and state policy reform group Greater Ohio hosted a Restoring Prosperity Summit in Cleveland yesterday where Katz urged immediate triage from state legislators.

“The state can require that an entity that initiates foreclosure continue the property’s upkeep, " he said. "The state can also direct seed money for stabilization.

“There is simply not enough federal money to stop the crisis. The state has to target funds to stop the bleeding (and invest) in neighborhoods with the most promise.”

Brookings released its “Addressing Ohio’s Foreclosure Crisis: Taking the Next Steps” report yesterday, which states: Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

Katz, who served on President Obama’s transition team, did offer a prescription for recovery for Cleveland and Ohio’s metro regions. Start by reforming government, he insisted, in these areas:

a. Consolidate many of Ohio’s 3,800 local government jurisdictions
“Fragmentation promotes sprawl which makes it difficult to forge agreements,” Katz said. “The state has taken the first step with a local government reform and collaboration (enabling legislation) due out in January.”

b. Enable local tax-based sharing
New York has the same issues and budget shortfalls as Ohio, Katz said, but they formed a commission which led to local tax base sharing.

c. Cooperative economic development agreements
Consolidate local economic development organizations to have one point of contact for the region. “Look at (German Rust Belt city) Stuttgart. It was a lot like Cleveland. They got serious about regional economic development. They have 79 (ED) agencies but one to attract business to the region. If Stuttgart can do it, so can Cleveland.”

d. Inter-jurisdictional collaboration that will meet the kind of shift the federal government is going to take in knocking down silos between HUD (housing) and USDOT (transportation). “I bet the Obama Administration is going to move more toward regional collaboration,” said Katz, who did a stint at HUD.

Katz criticized Ohio legislators for spreading stimulus funds ‘like peanut butter’ instead of focusing on big generators of economic activity such as university and research clusters.

“Case is poised to be a model in advanced energy research,” he said, implying that he would rather the state invest the bulk of one pot of stimulus funds in one center of excellence. “How can Ohio use that $55 million (in stimulus funds for renewable energy) to invest in innovation and jobs?”

Katz critiqued the state’s formula for neighborhood stabilization funds --which deluged some areas and left others with too few resources -- and its transportation spending. “Forty percent of the projects and little less than half of the money (some $4 billion) from the state went to metro areas. That’s not being strategic, and will do nothing to help long-term productive growth.”

At the same time, Katz acknowledged that metro areas like Cleveland, which has lost hundreds of thousands of residents, are going to need to figure out how to be physically smaller, and smarter about investing scarce resources. It can succeed if it focuses on what he calls the four forces that drive prosperity in the twenty first century: Innovation, Human capital, Infrastructure and Quality of place. “These all coalesce in cities.”

Greater Ohio director Lavea Brachman said the state is taking steps toward an urban agenda. She cited the newly formed Compact with Cities Task Force, which will focus on how cities better attract jobs and improve quality of place, a state commission on government reform, and a state director of urban affairs. She also hailed bold new ideas like the ReImagine a More Sustainable Cleveland plan, Cuyahoga County Treasurer Jim Rokakis’ foreclosure reform program, Tri-C’s Green Academy and Fairfax and the Cleveland Clinic’s Global Cardiovascular Center.

The private sector needs to do its part, said Mayor Frank Jackson, by pouring billions of dollars of annual expenditures into the local economy. “Procure local labor and create a supplier network to keep (those billions) rotating in our economy. We have to get more shelf life from the stimulus package.”

In a break out session on economic engines, Wire-Net director John Colm said its Great Lakes Wind Network, an effort to bolster the state’s wind power supply chain, has connected 22 Ohio companies to $1 billion in bids from major wind manufacturers. Other news that interested the group was Huntington Bank’s $1 billion loan commitment to small businesses in Ohio (through the Small Business Administration). In the transportation break-out, NOACA director Howard Maier acknowledged the work of local advocates in bringing important climate change language and proposed metrics to the region’s long-range transportation plan.

Read Greater Ohio co-director Lavea Brachman's remarks to the Cleveland Restoring Prosperity mini-summit.