Gov. John Kasich unveiled a $55.5 billion, two-year state operating budget on Tuesday that he said can’t be compared to past proposals because it is contains so many innovative approaches to state operations.
“The one thing that I think you need to understand is that this budget is loaded with one reform after another,” Kasich said at a media briefing on the plan. “It is, I would guess, the most reform-oriented budget in modern Ohio history.”
For that reason, the new Republican governor and his Cabinet resisted direct comparisons to the current state budget. Their proposal is based on new assumptions about how business-like flexibility could help in areas ranging from public education and economic development to government health care to crime reduction.
It was not immediately clear exactly how Kasich’s budget team filled the $8.6 billion shortfall that has loomed for months and was a central theme of his 2010 race against then-Gov. Ted Strickland. According to administration figures, general revenue funding grows from $50.8 billion to $55.5 billion over the two-year budget cycle. Spending in all funds falls from $120.3 billion in Strickland’s last budget to $119.5 billion.
Kasich proposes selling off five state prisons to private interests. His budget expands school choice vouchers and gives parents, students and teachers ways to take over failing schools. It funnels Medicaid recipients into a more coordinated style of health care. It uses state liquor sales as seed money for the new private, nonprofit called JobsOhio, which will provide grants to fuel business growth.
Kasich said the administration wants to reward teachers for performance and hospitals and doctors for good care in the same way he says he will reward JobsOhio employees for bringing new work to the state.
Before he had even finished explaining his vision, though, critics were already assailing his budget for killing jobs, hurting the poor, punishing school districts and rewarding the wealthy at the expense of average working Ohio residents.
Among the hardest hit was the local government fund, which is in line for a 33 percent cut in general revenue — from $1.3 billion to $865 million — in Kasich’s plan.
Kasich emphasized that his proposal would free cities and counties from cumbersome regulations and that if collective bargaining changes are successful in the Ohio Legislature, city and county leaders would have even more flexibility with their budgets. As private operations, the prisons that are sold will generate between $400,000 to more than $1 million a year in new tax revenues for municipalities, and casinos being built in four cities will soon begin paying local taxes, Kasich said.
The budget would also allow them to generate new revenue by posting public notices online instead of in newspapers and selling naming rights to their buildings.
Opponents called Kasich’s handling of local governments a back-door tax increase and “a wicked shell game.”
“Under his proposal, local governments will have no other options but to cut services and lay off workers or raise taxes to keep fire stations, hospitals, and libraries open,” AFL-CIO President Tim Burga said in a statement. “And his privatization schemes will saddle future generations of Ohioans with budget shortfalls and increased costs for services with lower quality. “
Budget director Tim Keen said the goal of the new budget is to position Ohio for competition with other states and countries. He said the administration used not just the traditional state bank account — called the general fund — to make its calculations, but from all funds Ohio gets from state and federal dollars, fees and other sources.
The method was seen particularly in education funding. A look at general fund spending showed increases in both state aid to K-12 schools (up $212 million over the biennium) and state aid to public colleges and universities (up $91 over the biennium). However, when all funds are considered, schools would see cuts of 6.1 percent in the budget’s first year and 4.7 percent in its second year.
Innovation Ohio, a liberal policy group, said those cuts jeopardize 7,000 teachers’ jobs.
“By failing to make the necessary investments in education and training, the Kasich budget would make it very hard for Ohio to compete in the 21st century, or to create the kind of long-term, high-paying jobs Ohioans deserve,” said spokesman Dale Butland.
Kasich said his team of policy advisers has managed to actually increase state aid to education, to maintain Medicaid coverage for most Ohio residents while achieving $4.3 billion in savings over two years and to keep an $800 million cut in the personal income tax that went into effect in January.
“We were able to do a number of things because we set very high priorities for the operation of this government,” Kasich said. “Our Cabinet directors were all asked to go inside of their budgets and find either a 10- or a 15-percent cut in the operation of their budget without damaging their clients.”
Among cost-cutting measures in the governor’s plan is a proposal to sell five prisons to private operators to avoid mass closures and raise $200 million that was covered in the last state budget with federal stimulus dollars.
Two of the five prisons already are privately run. Combined, the four adult prisons employ 1,238 people and house 6,059 inmates, according to information from the Ohio Department of Rehabilitation and Correction. Their combined budgets are $98 million a year.
Under Ohio law, private operators have to deliver a 5 percent savings over similar, public facilities — which the state estimates will mean $9.3 million over the two-year budget cycle.
In his education plan, Kasich seeks to add $67 million in aid to higher education, with an increase of 2.7 percent in the 2012 budget year and an increase of 0.9 percent the following year. He proposes giving universities more autonomy in exchange for less state funding, including exempting them from union-friendly state rules on construction projects that the governor says increase costs.
Kasich also supports a cap of 3.5 percent on tuition increases, creating three-year bachelor’s degree programs, and increasing teaching loads for faculty by one new course every two years.
Three years is typical for undergraduate degrees in Europe, but such shortened programs are uncommon in the U.S., though students can graduate early if they earn Advanced Placement credits through testing during high school.
The plans were met with praise from some university presidents.
University of Cincinnati President Gregory H. Williams said the school is “very appreciative that Gov. Kasich’s proposed budget has done as much as possible to support higher education and suggests some first steps toward much-needed construction reform.”
Kasich also wants to double the number of scholarships that allow students in low-performing schools to attend private schools, give bonuses to high-performing teachers and allow teachers to create centers for innovation.
The prison facilities the governor has targeted are North Coast Correctional Treatment Facility and Grafton Correctional Institution, both in Grafton; North Central Correctional Institution in Marion; Lake Erie Correctional Institution in Conneaut; and a juvenile prison in Marion that closed in 2009.
Prisons director Gary Mohr said no employee who wants to stay in corrections will lack for a job under the plan.
Six-month early retirement will be offered to about 100 eligible employees at Grafton and North Central, and unions will be able to collectively bargain for how other positions will be filled. Those with seniority will be able to bump less experienced guards at other state facilities, and jobs will be available at private facilities for those bumped from the public sector — most likely those not vested in the state pension system.
Ohio received about $300 million in federal stimulus money toward prisons in its last budget, Kasich said, and the move is necessary to make up that gap. Without the sales, the state would have been forced to close six prisons and ship 12,000 inmates to neighboring states, he said.
The state will continue to oversee the most volatile or sensitive inmates, including maximum-security prisoners, women and those with mental health or medical issues.