For conservatives, it’s a recession-era dream budget. “It balances the budget, preserves our tax cuts, and sets the stage for renewing the ability of Ohio to create jobs,” Ohio governor John Kasich tells National Review Online.
The $55.5 billion budget, which covers the next two fiscal years and fills an $8.6 billion shortfall, cuts $1.4 billion from Medicaid funding, sells five prisons to private operators, and slashes the money sent to local governments by 25 percent next year and an additional 25 percent in the following year. That last decision has proven to be controversial already, with critics charging that Kasich is passing the deficit problems to local governments, forcing them to raise taxes or severely restrict services. Kasich sees the cuts as an opportunity — and says it would be a “huge mistake” for local government to raise taxes, thus “providing disincentives for companies to locate in their communities.”
“Our local governments need to get into the 21st century. They have not had the same commitment to management and cost savings and reform that we have at the state level right now,” he remarks, noting that the state government has offered local governments “significant tools” to help them consolidate administrative and safety services.
Senate Bill 5, the bill limiting collective-bargaining powers for government workers that has passed the senate and is currently in committee hearings in the assembly, also could enable local governments to cut costs by giving them new flexibility in their employee contracts. “It gives the local governments the tools with which to manage their costs. When it comes to health-care and pension [costs], that will be up to the taxpayers, who are represented by mayors and school boards, to decide,” Kasich notes. The bill will also force government employees to contribute another 2 percent of their salary toward their pensions. “It’s fair to taxpayers. Most of them don’t even have a pension. Their 401(k)s have been reduced,” says Kasich.
While the unions haven’t explicitly attacked the increased pension contribution — perhaps recognizing that the public is unlikely to be sympathetic — they have slammed the overall budget. “Governor Kasich’s budget proposal is a disaster for hard-working, middle-class families and threatens everything Ohioans hold dear,” wrote the SEIU chapter that includes Ohio, while the Ohio AFL-CIO criticized it as a “draconian budget proposal” that “is less about balancing our budget and more about a partisan political agenda.”
What makes Kasich’s budget unusual is its detailed attention to reform. Like Indiana governor Mitch Daniels, who often talks about how he reduced DMV wait times from 40 minutes to less than 8 minutes, Kasich’s budgetary vision isn’t just for a more limited government, but also for a better, more efficient government. “We’re serving the customer a better product at a lower price,” Kasich says.
Take Medicaid, which swallows nearly a third of Ohio’s budget. Kasich opted to reduce costs not by reducing the number of services offered (some predicted vision and dental services might be eliminated) but by reducing provider payments. In particular, he focused on nursing homes, shrinking their funds by 7 percent.
That’s raised howls from the nursing-home lobby in Ohio, which estimates that 6,000 health-care workers could lose their jobs. But for Kasich, the fact that 4 percent of Medicaid patients were responsible for 50 percent of the costs meant that a new approach was needed. “A significant percentage of them are people who, if you would give them coordinated care [and] direct them to a setting that is appropriate for their health and that actually works better for them, not the most expensive setting, you would save a lot of money,” he says. “We believe that if a senior citizen qualifies for a nursing home, but they can stay in their own home at a fraction of the price — and be healthier and more independent — we want to make sure the resources are there for them to do it.”
On education, over the next two years, Kasich is expanding school choice by quadrupling the numbers of vouchers available and rescinding a statewide cap on charter schools. He is capping higher-education tuition hikes at 3.5 percent, requiring that all university professors teach an extra class, and asking universities to look into ways of offering three-year bachelor’s degrees.
On the jobs front, he’s adamant about the need to forgo tax hikes, even preserving an $800 million tax cut implemented in January. “States with lower levels of taxation have faster economic growth,” Kasich observes. He’s also setting aside $100 million — the profits from the state’s liquor monopoly — to fund JobsOhio, a new initiative dedicated to attracting and retaining businesses in Ohio. With an unemployment rate of 9.2 percent and a loss of over 600,000 jobs in the last decade, Ohio could use the boost.
Both the state house and senate are Republican-controlled, and Kasich is “very optimistic” that the budget will pass. “I’ve told [state lawmakers] that if they have some better policy ideas, that’s fine — but we will not negotiate the numbers. We will have a balanced budget, and we will preserve the tax cut,” he says.
Ultimately, it’s an ambitious venture for the former House Budget Committee chair, who played a crucial role in the Balanced Budget Act of 1997. Kasich, who beat Democratic former governor Ted Strickland by two percentage points, is staking his political future on this measure leading to an economic recovery. He’s currently lagging in the polls — his job approval is only at 30 percent, while his disapproval is at 46 percent, according to a Quinnipiac University poll released this month. An even higher number (51 percent) disapprove specifically of Kasich’s budget.
But if the budget succeeds in bringing about an economic resurgence, look for Kasich to reap the benefits. In a piece headlined “Kasich’s beliefs at heart of plan,” Columbus Dispatch writer Joe Hallett commented that the “plan is as much a social budget as a fiscal one, built on ideology as much as practicality,” and said that “Ohio, at least in modern times, has never seen a state budget like [this].”
Kasich is ready to be judged on the results. “Budgets are just a means to an end. They’re not an end in themselves,” he observes. “This budget can set the stage in our state for recovery.”
— Katrina Trinko is an NRO staff reporter.