Running At Sacred (Budget) Cows

Last night I listened to Senator Mark Wagoner as he outlined the reasons behind Senate Bill 5, JobsOhio and Gov. Kasich’s proposed budget. I was impressed by the comprehensive reform the Governor and the Ohio Legislature are tackling in order to lead Ohio into a new era of prosperity.

Now, SB5, JobsOhio and the budget are not individual bills standing on their own. They are integral pieces of a larger reform plan that’s necessary to bring Ohio into a competitive job market and to kick start our state economy. Here’s how they all work together.

We all know SB5 is controversial – it eliminates collective bargaining for public union members for issues ranging from health benefits to sick days. The bill also reforms the wage scale for public union members as pay will no longer be based on seniority and longevity; instead, pay will be based on merit, talent and job performance. SB5 also eliminates employer pick-ups for public employee pension plans (i.e., local governments will no longer pay their employee’s contribution to their pension plan – local governments will continue to pay their contribution to their employees’ pension plans). SB5 also requires public employees to pay 15% of their health care coverage costs; currently, private sector employees pay an average of 23% of their health care coverage costs. The bill does much more than this, and you can read more about the bill here

What is the end goal of SB5? To give local governments the flexibility to deal with reduced state funding from the Local Government Fund (“LGF”). The LGF is basically a revenue sharing program between the State of Ohio and the state’s 3,700 local governments. Gov. Kasich’s budget cuts the LGF by 50% over the next two-year budget cycle. “Wait,” you say, “why did the Governor cut the LGF so much?” Well, Ohio’s currently facing the largest budget deficit it’s ever seen (and that’s not being overly dramatic): approximately $8.5 BILLION. Here’s a list of what some local governments receive from the Local Government Fund:

Erie County: $1.7 million
Ottawa County: $800,000
Perkins Township: $260,000
Port Clinton: $325,000

Without the reforms proposed in SB5, over the next two years local governments will see a 50% reduction in funds from the LGF yet would be forced to do business as usual. This would spell “F-I-N-A-N-C-I-A-L R-U-I-N” for many local governments dealing with smaller budgets yet burdened with mandated expenditures under inflexible public union employee contracts.

Gov. Kasich’s proposed budget is the most revolutionary document Ohio has seen in a generation. It is necessary to pass Gov. Kasich’s proposed budget in order to deal with this insane deficit. Where did the deficit come from? Well it didn’t fall from the sky, that’s for darn sure. In the last several years Ohio’s economy slowed down, companies’ profits started to fall and employers laid off thousands of employees. Some businesses also moved to other states, almost like American Greetings and Bob Evans did this month (no worries, they’re both staying in Ohio). Consequently, state revenue dropped as companies were paying less in taxes and fewer employees were paying income taxes. Furthermore, as people lost their jobs they looked to the state government for assistance from programs like Medicaid. So, we had a decrease in revenue and an increase in demand, which caused a deficit.

Last year, good ol’ Gov. Strickland plugged the state deficit with one time stimulus money from the federal government and then went on with business as usual. Thank goodness the man didn’t get re-elected as governor because I shudder at what his fix for the deficit would have been. So, Gov. Strickland’s poor handling of the state budget resulted in the state facing an $8.5 billion deficit for the 2011-2012 budget cycle.

So, Gov. Kasich (a man who balanced the federal budget in 1994, which resulted in the first budget surplus the country saw since we put a man on the moon), reviewed the inner workings of state government and came up with several innovative solutions. Is he running at sacred budget cows head on instead of steering clear the way his predecessors did? Absolutely, and I’m cheering him on from the sidelines hoping he continues to do so (thanks Sen. Wagoner for that metaphor).

So Gov. Kasich’s budget deals with our current projected revenues for 2011-2012. What’s he doing to increase those revenues and get people back to work? Well, Gov. Kasich signed a bill creating JobsOhio. JobsOhio replaces the government run economic development office with a non-profit corporation funded with profits from state controlled liquor stores. JobsOhio’s job (no pun intended… well maybe) is to attract outside companies to move to Ohio and to keep current Ohio businesses in Ohio. JobsOhio is headed by Mark Kvamme, a venture capitalist from California with an eye for spotting good investments (such as Google and Facebook) and has unlimited passion to see Ohio succeed. This new business-esque model on state economic development, teamed up with several business friendly reforms coming down the pike to the State House, will make Ohio a competitive state once again.

So, Gov. Kasich and legislators like Sen. Wagoner are fighting to give local governments the necessary flexibility to deal with decreased funding from the state in order for the state to permanently plug the deficit, while at the same time encouraging job growth with business friendly reforms and JobsOhio. We won’t always agree with their methods but never doubt the end-goal or their sincerity to see Ohio thrive. Furthermore, the budget won’t be an easy pill to swallow, but swallow it we must. Ohio’s facing a fork in the road – will we have the courage to take the road less traveled?

Tune in next week for a discussion of other important provisions of Gov. Kasich’s proposed budget.

Facts and figures found in the Sandusky Register, the Port Clinton News Herald, and the Columbus Dispatch.