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Published: 4/4/2011

Ohio Inc.

When your governor is a former investment banker and his jobs guru is a venture capitalist, you shouldn't be surprised when your state starts to look like a corporation. But when the result is full-speed-ahead faith in a governance model that looks more like Goldman Sachs than John Locke, it's time to slow down and ask whether transforming the state into Ohio Inc. is a desirable goal.

A good place to start would be Gov. John Kasich's plan to lease the state's liquor distribution network to his new, private economic-development group.

Ohio is one of 19 states in the liquor business. Last year, the state made a record profit of nearly $229 million on the 10.8 million gallons of vodka, gin, and other spirits it sold. Liquor sales, which have risen by almost 5 percent since 2008 despite the recession, offer one of the state's most secure revenue streams.

A portion of this revenue paid bond debts guaranteed by liquor profits. Part of the money went to the state general fund. Minuscule amounts — $4.2 million to the Department of Alcohol and Drug Addiction Services and $1 million to the Department of Health — funded alcoholtreatment and public safety programs.

Mr. Kasich wants to shift these profits to JobsOhio for 20 to 25 years. In return, the state would get $1.2 billion.

Mark Kvamme, a Silicon Valley venture capitalist, the governor's director of job creation, and almost certainly a future member of the JobsOhio board, says that's "fair market value." But it's at least an open question whether leasing liquor profits that could total $6 billion over the next two decades for 20 percent of their value is a sound business decision.

The governor proposes using $500 million of the $1.2 billion to help balance the first year of his proposed $55.5 billion two-year budget. The rest would pay off the bonds guaranteed by liquor profits. JobsOhio would borrow money to lease the liquor profits, then use the profits to repay the loan and invest in companies that want to set up or expand in Ohio.

Ohio, through JobsOhio, would become a venture capitalist, owning part of at least some of the companies it puts money into. As questionable as that prospect is, there are other concerns.

The Republican-led General Assembly has exempted JobsOhio, which will replace the state Department of Development, from all or part of open-government laws that ensure transparency in state agencies. Control of liquor profits will make the group headed by the governor even less answerable to lawmakers, who won't control its purse strings.

Republicans often say that the market, not government, should determine winners and losers in business. How does that square with the creation of a government agency that will engage practices that are all about winners and losers, and might even have a monetary interest in making sure some businesses win and others do not?

Republicans have measured state spending by the number of private jobs it helps create, and scoff at the notion of public investment as a smoke screen for more government spending. By that measure, isn't JobsOhio another spending plan that promises jobs at some future date?

What will happen to the treatment and safety programs now funded by liquor profits? Will the people these programs are helping have to sacrifice in the drive to create corporate Ohio?

So far, Governor Kasich has offered lots of vague assurances but few details about the liquor plan. Mr. Kvamme has offered condescension: "For all you users of alcohol, nothing will change," he said. "You can still have your bourbon. You can still have your gin, OK?"

Not OK. Ohioans deserve answers to legitimate concerns, not a commentary on their drinking habits.



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