COLUMBUS: Gov. John Kasich introduced his much anticipated and feared two-year state budget Tuesday that — as promised — included sweeping changes to fill an $8 billion shortfall.
His proposals include selling five Ohio prisons, cutting funding to local governments, revamping Medicaid, doubling the number of vouchers to send children to private schools, lifting the cap on charter schools and leasing the Division of Liquor Control to help pay for the new, private JobsOhio economic development program.
Kasich also wants to give parents and teachers the opportunity — with a majority vote — to take over underperforming schools.
''This budget is woven on one reform after another,'' he said during a news conference attended by about 40 journalists from news organizations across the state. ''It's the most reform in a budget in Ohio history.''
Kasich, a Republican who took office in January, couched the $55.7 billion, two-year general revenue fund budget as both necessary to make up for one-time federal money that has disappeared and part of a reform agenda he has been working on with his top advisers for several years.
He pointed with pride to his preservation of an $800 million income tax cut.
Kasich and his Cabinet members detailed the 774-page budget during the news conference and a first-ever town hall meeting later that evening in the Capitol Theatre of the Riffe Center in downtown Columbus.
''There's change in here,'' said Kasich, who was at times fiery and waved his hands for emphasis while discussing the budget.
As expected, not everyone received the budget warmly.
A group of protesters opposed to legislation Kasich supports that would limit collective bargaining for public employees held hand-made signs with such messages as ''Don't Let Him Destroy Our State'' and ''How Do U Politicians Sleep At Night'' across the street from the Riffe Center before Kasich held his news conference. Some of them then went into the Riffe Center, where they could be heard chanting, ''Save Our Rights'' during the briefing.
The budget cuts worried local government leaders, who were bracing for reductions.
Akron Mayor Don Plusquellic said the budget would result in a $9 million loss for the city over the next two years. Kasich is ''passing the buck to cities,'' he said.
''I fear that, as a result of this reduction, Akron will have no choice but to once again look at layoffs in the biggest part of our budget: police and fire salaries,'' Plusquellic said.
The GOP-controlled legislature must approve the budget before June 30, when the current fiscal year ends.
Mike Dittoe, a spokesman for House Speaker Bill Batchelder, R-Medina, said the speaker and state Rep. Ron Amstutz, R-Wooster, who heads the Finance Committee, are committed to a public vetting of the budget in hearings that start today.
The initial reaction from local lawmakers was mixed Tuesday, with the split, not surprisingly, along party lines.
State Rep. Vernon Sykes, D-Akron, said he was ''troubled'' by the cuts to the local government fund, which would reach almost 50 percent by 2013. He said the state has been providing this funding for many years based on an agreement with local governments.
''That is violated with this budget,'' he said. ''Torn apart. . . . They will have to raise taxes at the local level or go without.
''This is a matter of the state not living up to its long-standing obligation [and] shifting the burden from the state budget to that of local government.''
Sykes, the ranking minority member on the House Finance Committee, hadn't had the chance to look over the budget and said he wasn't sure what his party's focus would be. He said the Republicans weren't forthcoming in sharing information prior to the budget's release.
''At this point, it's so much that it's hard to prioritize,'' he said.
State Sen. Tom Sawyer, D-Akron, who has a long history in government — from the local to the national level — called the changes in the budget ''unprecedented.''
''But then, the size and scope of the problem — as a product of the state of the economy — is unprecedented,'' he said. ''An $8 billion deficit in a $50 billion budget is an enormous hole.''
Sawyer wants to take a closer look at the privatization plans.
He said the ''use of sales assets is virtually the same as taking stimulus money and calling it one-time money,'' referring to the criticism Kasich and other Republican leaders have of former Gov. Ted Strickland using stimulus funds to balance the last state budget.
Senator lauds creativity
State Sen. Frank LaRose, R-Akron, who attended an overview Kasich gave to the Republican caucus Tuesday, thinks the budget represents ''pretty creative and out-of-the-box thinking.''
He was impressed the governor was able to balance the budget while not raising taxes and increasing — albeit modestly — funding to primary/secondary and higher education.
LaRose, however, said he is opposed to plans to eliminate prevailing or union-scale wages on some public projects.
The freshman senator, whom many in the Akron area have criticized for voting in favor of Senate Bill 5, which would limit collective bargaining rights, thinks prevailing wage works and ''is worth defending.''
Kasich said his reforms won't stop with the budget. He said he favors looking into other privatizations, including the Ohio Lottery Commission and the Ohio Turnpike. He also supports the elimination of the estate tax, which is another revenue source local governments depend on.
Kasich pointed to increased flexibilities built into the budget that should help those that stand to lose to ''cope.''
For example, the budget would create a health insurance program that local governments and schools could opt into and would allow county governments to adopt quarterly spending plans to change their budgets in response to revenue changes. And the governor said, local governments would realize $1 billion in savings from Senate Bill 5, a figure some have disputed and claim would be realized only over time.
Outdated funding plan?
Kasich and Randy Cole, his newly appointed head of the State Controlling Board who is from Akron, both described funding for local government as outdated. Kasich said he wants to form a committee to look into whether the 3,700 local governments and school districts should be consolidated.
''We need to take a look at the savings,'' he said. ''Do we really need six school districts in Hancock County?''
Kasich said he can only ''take so much on,'' but he would like to have Democrats and Republicans do an analysis of local governments and possibly form a ''base-closing'' type of commission.
''It's important for local governments to do everything they can to get their budgets in line,'' he said. ''They need to do better.''
Stephanie Warsmith can be reached at 330-996-3705 or swarsmith@thebeaconjournal.com.
Ohio operates on fiscal years ending June 30. Gov. John Kasich's budget is for the next two fiscal years ending June 30, 2012, and 2013. The budget goes to the legislature for consideration.
Estimated total spending:
Fiscal year 2011: $62.7 billion
Fiscal year 2012: $59.4 billion, (-5 percent)
Fiscal year 2013: $60.2 billion (+1 percent)
Tax income predictions
Income tax
First year $8.1 billion, (+2.5 percent)
Second year $8.6 billion, (+6.5 percent)
Sales and use tax
First year $7.9 billion, (+5.4 percent)
Second year $8.4 billion, (+5.5 percent)
Tax changes: None disclosed.
Fee changes: No compilation of fees was released, although some are likely to occur. For example, indigent drunken drivers would be required to pay a portion of intervention programs.
New revenue sources
• Sell five prisons — $200 million in one-time revenue.
• Privatize the Ohio Turnpike and Ohio Lottery — no estimates on one-time revenue.
• Transfer liquor wholesale distribution to the recently privatized state development agency, JobsOhio. JobsOhio would make an upfront payment to the state of $1.2 billion but revenues from liquor sales that previously went to the general fund will instead go to support business expansion.
Miscellaneous cuts
• Proposed closures: Seven Department of Taxation service centers, including in Akron, Cleveland and Youngstown.
• $2 million annual reduction in aid to public transit systems in Akron, Canton and the six other major cities.
• $93 million or 16 percent cut in the first year for the Ohio EPA, Department of Natural Resources and related agencies; less than 2 percent reinstated in second year.
HIGHER EDUCATION
Summary
Gov. John Kasich would reduce funding to state universities and colleges, place a cap on tuition increases and require faculty to teach more classes.
Funding This year: $2.56 billion, including more than $300 million in federal stimulus funds that is no longer available.
Next year: $2.29 billion
Second year: $2.38 billion
Highlights
* The State Share of Instruction, which is the primary source of state aid for tuition, is reduced 13 percent the first year and 12 percent the second from current levels, to about $1.75 billion each year.
* Continues a formula launched this year that funds the SSI based on course completions and graduations, not the number of students who enroll.
* Holds tuition hikes at institutions to 3.5 percent each year.
* Reduces funding to Ohio State's Agricultural Research and Development Center in Wooster by 10 percent to $30.6 million each year.
* Eliminates $257,000 in state funding to the Bliss Institute of Applied Politics at the University of Akron and to similar public service programs at Ohio University and Ohio State.
* Creates a $20 million Co-op Internship Program, although the details were not immediately available.
* Eliminates $374,000 in hazardous materials training for emergency personnel.
* Reduces funds to support the clinical education of medical students by 10 percent to $3.17 million both years at the Northeastern Ohio Universities Colleges of Medicine and Pharmacy in Rootstown and at five similar programs statewide.
* Dramatically increases funding in the Higher Education General Obligation Debt Service from $87 million this year to $108 million in the first year and $201.5 mill lion in the second.
* Establishes a charter university program that gives institutions more flexibility from state mandates.
* Requires universities to offer some three-year bachelor's degrees starting in 2012.
* Requires faculty to increase teaching loads by one class every other year.
* Allows colleges and universities to replace multiple prime contractors with a single prime contractor on some building projects to bring construction costs down.
Quotes
"There are a lot of interacting pieces. It will take a couple of days to sort out the elements. . . .Wehavesomeveryclear ideas of what we will do under various scenarios."
- University of Akron President Luis Proenza
"Of course we are disappointed. The state funding has allowed us to support ourinternship program, but these are tough economic times.... The program might have to be smaller."
- University of Akron Bliss Institute Director John Green
"Kasich is like a Wall Street bull in a china shop. Tell him I'm out doing research [at the U.S. Army War College in Carlisle, Pa.] on my spring break."
- History professor Walter Hixson, president of the University of Akron chapter of the American Association of University Professors.
K-12 EDUCATION
Summary: Spending for primary and secondary education is reduced by 6 percent in the general fund over two years.
However, school districts will be facing an almost 19 percent cut in basic state aid. State aid makes up about 45 percent of total school spending. That means districts on average would see about a 9 percent cut. But districts aren’t average. Louisville, for example, receives nearly 68 percent of its revenue from the state, while Copley- Fairlawn receives only about 21 percent.
Unlike previous Republican and Democratic administrations, Kasich did not produce spreadsheets showing how individual districts would be affected.
The cuts are the result of the loss of local business taxes and one-time federal stimulus money over the two years totaling $1.5 billion that will be replaced only partially. Districts that depend heavily on local business taxes will be especially hard-hit.
Funding Estimate for this year: $6.9 billion
Next year: $6.5 billion
Second year: $6.8 billion
Highlights
* Does not replace about 7 percent of current state aid to districts that came from expiring federal stimulus money. State also won’t replace additional federal stimulus money districts received to prevent teacher layoffs.
* Speeds up the phase-out of local business taxes and does not make districts whole for that reduction.
* Increases aid for private schools by about 3 percent.
* Doubles the number of vouchers available to attend private schools and takes the cap off of charter schools.
* Cuts funding for Science, Technology, Engineering and Mathematics (STEM) initiatives from $5 million to zero.
* Eliminates 88 percent of the nearly $70 million for gifted education, reserving remaining money for gifted programs offered by county Educational Service Centers.
* Eliminates $13.3 million for drug-free schools program and $200,000 for violence prevention and school safety.
Quotes
"We were fully guaranteed for the next two years [to be made whole on lost local business taxes]. We were always lucky, being smaller, that we didn’t get that much. . . . But if you have districts – the Mogadores and Twinsburgs of the world – geez, holy smokes. That’s a bunch of money.’’
– Manchester Treasurer David Osborne.
"Are they taking that money out of education and using it elsewhere or are they just reducing those taxes on businesses in order to make the state more competitive? They were reducing that revenue source for us and those taxes were going away over time under a phase-out. It looks like they’re just accelerating that phase-out and it’s going to happen a lot sooner rather than later.’’
– Akron Superintendent David James.
John Higgins -- Beacon Journal education reporter
MEDICAID
What you should know:
The governor’s budget proposal attempts to slow the growth of spending for Medicaid, the public health insurance program for more than 2 million low-income children and parents and disabled and elderly residents. The plan includes policy changes that reduce or avoid costs totaling $4.3 billion over the two-year budget.
Funding summary (all sources)
Estimate for this year: $17.9 billion
Next year: $18.8 billion (+5.5%)
Second year: $19.9 billion (+5.4%)
Highlights
* Reduces payments to hospitals ($477.8 million), nursing homes ($427 million) and community-based nursing services ($35 million) during the two-year period. Includes the elimination of $6 million per year in supplemental payments to pediatric hospitals.
* Continues a temporary hospital fee that will cost facilities more than $888 million during the two-year period and generate a total of $1.2 billion with matching federal funds.
* Changes payments to Medicaid managed-care insurance plans to save $158.7 million.
* Moves more than 37,000 disabled children covered by traditional Medicaid into managed-care insurance plans, effective July 1, 2012, as a first step toward care coordination.
* Limits the amount, frequency and duration of some behavioral health services Medicaid enrollees can get, reducing costs nearly $135 million.
* Begins creating a single system for Medicaid enrollees who need long-term care services, including everything from in-home care to nursing- home services.
* Integrates physical and behavioral health services, with funding moving to Ohio Department of Job and Family Services.
Quotes
"Hospitals value the Kasich administration’s willingness to include OHA’s proposal to bring $1.2 billion in additional revenue to help the state during the most challenging state budget in Ohio’s history by temporarily extending the hospital franchise fee. Despite anticipated policy changes to reduce payments to hospitals by $478 million, hospitals look forward to working with the administration and Ohio General Assembly to achieve a mutual goal to transform health care in Ohio.’’
– James R. Castle, Ohio Hospital Association president and CEO.
"Akron Children’s Hospital is taking a careful look at the budget released [Tuesday] and, along with the Ohio Children’s Hospital Association, is working to fully understand what it means for all of Ohio’s children’s hospitals. Of course we are concerned about any changes to Medicaid that would impact our programs and services, and our ability to care for our patients.’’
– Grace Wakulchik, vice president of operations and chief operating officer for Akron Children’s Hospital.
Cheryl Powell - Beacon Journal medical writer
LOCAL GOVERNMENTS/LIBRARIES
What you should know:
Communities and public libraries relyheavily on financial support from the state. The money helps pay for such services as police protection and programs for indigent offenders.
Local governments would receive less money for services and programs under Gov. John Kasich’s proposed two-year budget. For example, the governor has proposed reducing one of the most significant sources of revenue – local government funds – by 21 percent next year and 49 percent overall by 2013.
Summit County had been preparing for a potential 10 percent or 20 percent drop, so the proposed cut is substantial.
The county and its municipalities shared $33.5 million in local government funds in 2009, according to the Ohio Department of Taxation. The county received $10.2 million of that total.
Highlights
* Local government funds for counties and municipalities would drop from $665 million this fiscal year to $526 million next year to $339 million two years from now. That’s a 49 percent reduction.
* The amount of money provided to local governments for the reduction in tangible
* personal property tax on electric and natural gas public utilities would decline from $90 million this year to $16 million next year to $11 million in two years. That’s an 88 percent drop.
* The amount of money provided to local governments for the reduction in tangible personal property tax would fall from $414 million this year to $291 million next year to $181 million in two years. That’s a 54 percent drop.
* Summit County officials were still searching through the budget Tuesday, but said there appeared to be other cuts, as well. For example, it appears that the state will provide less money to counties for medically disabled children and indigent defendants, they said.
* The budget says libraries will be hit with a 5 percent reduction. But the Public Library Fund would increase from $349 million this year to $354 million next year, then decline to $345 million. That’s a 1 percent drop. Library officials were trying to figure out Tuesday the discrepancy.
* While counties and municipalities are getting whacked by the state, there is a little good news. The state expects to distribute $138.8 million in casino revenue to communities in 2013.
Quotes
"It really seems like they are pushing the state’s problems down to the local level. I’m not sure we’ve solved anything here.’’
– Summit County Finance and Budget Director Brian Nelsen
"This budget says [reduce services and employees] or raise taxes locally. Well, whoopee. That’s no easier to do at the local level than it is on the state level.’’
– Ohio Municipal League Executive Director Susan Cave
"I fear that as a result of this reduction, Akron will have no choice but to once again look at layoffs in the biggest part of our budget: police and fire salaries.’’
– Akron Mayor Don Plusquellic
"Basically, we’re relieved that the proposed cuts aren’t deeper than they are.’’
– Ohio Library Council Executive Director Doug Evans.
– Rick Armon Beacon Journal staff writer
Story by Carol Biliczky, Beacon Journal staff writer
