Thursday, March 17, 2011

Kasich's Reverse Robin Hood Budget

On the Ides of March, thousands of Cincinnatians gathered downtown at Fountain Square to rally against Governor Kasich’s proposed budget and Senate Bill 5. The demonstration was organized by Stand Up For Ohio. A handful of speakers representing various unions, the College Democrats, and city council, voiced their opposition to SB5 and the budget cuts. At least a dozen similar actions were held in other cities across the state.

Ohio supposedly faces a $8 billion deficit over the next two years. Kasich’s proposals include selling five Ohio prisons, cutting funding to local governments and schools, 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. This forces local governments - and the people they serve - to bear the burden of the budget deficit.

Many of these ideas are complete nonsense. There is no reason why leasing a state entity like the Division of Liquor Control, which makes money for the state, to a private entity will lead to more income for the state of Ohio. The same goes for his proposals on the profitable Ohio turnpike and the Ohio lottery.

One of the themes of Kasich's budget can be called "passing the buck" or "bait and switch." Fiscal conservatives voted for Kasich hoping to inaugurate a government with a responsible money policy. Instead like so many investors, they've been tricked by a former Lehman Brothers banker. Not only is Kasich cutting the amount of state funds that typically go to local governments, he is reducing their forms of income. Revenue from personal income tax, the commercial activities tax, electric and gas utilities, and insurance companies, for example, are being directed toward the state General Revenue Fund in greater proportions and away from local governments and school districts. In some cases the local and school shares are being phased out completely.

In short Kasich is defunding local government. For all his talk about giving school districts, cities, and towns the tools they need to run healthy budgets, what he's really doing is creating panics at the local level that will show up as desperate tax levies in May and November later this year. He's shifting responsibility for public education, libraries, and other services from the state to local taxpayers. That would have a huge impact on the already wide disparity in education and other services throughout the state and increase competition among local governments in the race to the bottom to attract business and retain jobs. The degree to which local officials have to prostrate themselves before business leaders to attract or retain jobs in their locality is shameful as it is now.

Perhaps most shocking is how this crisis has been manufactured and that many of these proposals would be on the table, regardless of a deficit. Just the other day Wayne Struble, one of Kasich's policy advisers, was quoted in the Columbus Dispatch saying, "Even if there weren't an $8 billion deficit, we'd probably be proposing many of the same things."

Since 2004 Ohio has embarked on a major revision of the tax code. Proponents of the changes would call them reforms. The Ohio Department of Taxation estimates that taxpayers are saving roughly $2.1 billion each year as a result of changes to tax laws beginning in 2005 (under Republican Gov. Bob Taft), when Ohio began phasing out taxes on corporate profits and lowering individual tax rates. That's more than half of the biennial budget shortfall that the Kasich administration is claiming.

Real solutions to Ohio's budget shortfall might be to add higher income tax brackets (right now the highest bracket tops out at $201,800) to make up for the 21% rate cut since 2005, stop sending public money to private charter schools, expand the State Infrastructure Bank to service the state's debt and provide loans for more than just transportation projects, and increasing taxes on luxury items or vices (cigarettes and alcohol).

We also need an honest dialogue about Ohio's real financial situation. If there is a $8 billion shortfall, why does Kasich's 2012-2013 budget contain $5 billion MORE in expenditures than Strickland's last 2010-2011 budget? There definitely is a problem here, and it's not the making of ordinary Ohioans. Kasich is a corporate stooge and probably doesn't care much about reelection, so waiting for the next election cycle will be far too late. Our only options are to fight him every step of the way, making sure his efforts are in vain, or to recall him as soon as possible.