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Governor unveils cuts to close Ohio budget gap

Source: Thomson Reuters Foundation - Tue, 15 Mar 2011 21:45 GMT
Author: (c) Copyright Thomson Reuters 2011. Click For Restrictions.
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* Kasich plan: sell off prisons, cut aid to localities

* Budget plan would preserve ${esc.dollar}800 million income tax cut

* Ohio Republicans aim to curb public sector union rights (Updates throughout)

By Jo Ingles

COLUMBUS, Ohio, March 15 (Reuters) - Ohio's Republican Governor John Kasich on Tuesday unveiled a ${esc.dollar}55.5 billion two-year budget that would sell off five prisons and cut in half aid to local governments to help close an ${esc.dollar}8 billion budget gap.

The budget proposal follows a push by Ohio Republicans to curb collective bargaining rights for public employee unions in the seventh-largest U.S. state. Several states are pursuing similar curbs in one of the gravest threats to unions in decades.

Kasich has said the bill, which is expected to pass the Republican-held legislature this month, gives local officials new tools to contain costs as their state funding drops.

Cities, counties and other local governments would see their state revenue plummet by about 50 percent, falling to ${esc.dollar}339 million in fiscal 2013 from an estimated ${esc.dollar}665 million in the current fiscal year, according to Susan Cave, executive director of the Ohio Municipal League.

"We're to the point we're getting to critical services," she said of needed cuts that may include public safety jobs.

Kasich's budget would preserve an ${esc.dollar}800 million income tax cut and provide ${esc.dollar}34 million in tax incentives to lure jobs to the state, which suffered big job losses in recent years.

"We have got to create jobs in this state and what this budget does is set the stage for precisely that," Kasich told reporters after releasing the 774-page budget.

He and other state officials said there are no mass layoffs in the budget although there will be job reductions due to spending cuts, an early retirement program and attrition.

Kasich's proposal also calls for restructuring mostly outstanding state general obligation debt to gain ${esc.dollar}440 million for the budget by pushing debt service payments due in fiscal 2012 into fiscal 2015 through 2025.

His plan projects a slim ${esc.dollar}135 million surplus and a still-empty rainy day fund when the two-year budget cycle ends on June 30, 2013.

State officials said the sales of five prisons will bring in more than ${esc.dollar}200 million, and the state will change how low-risk prisoners are housed.

Kasich said he was considering privatizing state assets beyond the moves to sell prisons and a lease of state liquor profits to help fund a new private jobs corporation. He said leasing the Ohio Turnpike could bring in ${esc.dollar}3 billion.

Ohio's bill has provisions that prohibit strikes by public employees, give local governments power to settle disputes, and limit collective bargaining on healthcare and other benefits for 300,000 teachers, police, and other workers.

The Ohio measure follows a law enacted in Wisconsin last week curbing union rights of public workers.

Demonstrations across the nation on Tuesday protested Republican efforts to trim tens of billions of dollars from the federal budget, which would cost some 700,000 workers their jobs, according to the liberal group (Additional reporting and writing by Karen Pierog and Andrew Stern; editing by Mohammad Zargham)

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