Nearly $56B Ohio budget heads to governor's desk

COLUMBUS, Ohio (AP) - Gov. John Kasich is ready to sign Ohio's nearly $56 billion state budget, a spending blueprint that makes such sweeping policy changes as privatizing prisons, eliminating the estate tax, banning most abortions in public hospitals and overhauling Medicaid.

The Republican-led Ohio House on Wednesday voted 59-40 along party lines to send the bill to Kasich. He is expected to sign the measure Thursday evening, a day before the state's new fiscal year begins. While the budget contains many of Kasich's ideas, state lawmakers put their mark on the bill. Their proposals included a reward program for high-performing schools and a ban on most abortions in public hospitals.

The bill cleared the GOP-controlled Senate on a 22-11 vote Tuesday. One Republican voted against it. The first-term Republican governor faced an estimated $8 billion budget gap when he took office in January.

Improved state revenues have put the gap closer to $6 billion. Kasich and other legislators have contended that such a shortfall forced them to make changes to how the state operates and to trim how much money is directed to agencies, schools and local governments. House Finance Chairman Ron Amstutz, a Wooster Republican, said he recognized the budget bill was difficult to support.

"We do have a responsibility," Amstutz told his fellow representatives. "I believe that this plan is very responsible, and a plan that will make our state stronger going forward."

Ohio has seen a 14-month string of declines to its unemployment rate, as the state tries to regain its economic footing following the worst recession since the Great Depression. The unemployment rate remained at 8.6 percent in May, compared with the national rate of 9.1 percent. The governor touts the budget measure, saying it doesn't raise taxes and keeps in place an $800 million cut in the personal income tax that went into effect in January.

"Ohio's becoming jobs-friendly again because we refuse to kick problems down the road," Kasich said in a statement after the budget's passage.

Critics, however, contend his plan makes such drastic reductions in funding to school districts and local governments that teachers and police will be laid off and residents will end up taking a financial hit as levies get passed.

"Ohio's economic recovery will suffer," said Rep. Vernon Sykes, the top Democrat on the House Finance and Appropriations Committee. Sykes, of Akron, pointed out that his colleagues have a green button for "yes" and a red button for "no" when voting on bills.

"I wish we had another button that could express how disappointed I am with this particular budget," he said.

While state aid to schools increased by roughly $400 million, it will not be enough to compensate for losses under new tax policies and with the end of a nearly $900 million federal economic stimulus program for Ohio. Recognizing a decrease in overall dollars to schools, Amstutz said, "Next year is going to be a challenge. ... These are not going to be easy budgets but they are reasonable given our circumstances."

Cities, townships and other local governments will see a drop of more than $1 billion during the next two years through a combination of cuts to state funding and changes to the tax money they get. Budget negotiators sought to give superintendents and local government administrators some flexibility.

They added a new $45 million grant program in the budget for local governments that share services. They also agreed to a provision allowing - but not requiring - school districts, cities, universities and other public employers to participate in new health insurance pools.

Kasich has called the spending plan a "jobs budget," though labor unions and others argue otherwise. The governor also added a tax break to the budget measure that he hopes will spur investment in the state's businesses. Under the proposal, residents who leave their money in an Ohio-based company for two years could avoid tax on any return on that investment. Anyone who sells stock and reinvests that gain in an Ohio company also would be covered under the $100 million program.

Democrats took issue with the proposal, which got no hearings and was inserted into the budget as a committee met this month to work out a compromise on the spending plan. "It's basically just a giveaway to rich people," said Rep. Mike Foley, a Cleveland Democrat.

Foley also took issue with the plan to do away with the estate tax. Ohio requires the tax on estates worth more than $338,333 before distribution to heirs or other beneficiaries. Eighty percent of the money from the tax goes to local governments, which have strongly opposed any changes. In the fiscal year that ended last June, local governments' coffers got $230.8 million from the tax.

"Local governments are getting killed in this budget," Foley said.

(Copyright 2011 by The Associated Press. All Rights Reserved.)