2-YEAR BUDGET

Kasich inks sweeping $55.8 billion blueprint

Estate-tax repeal, new business breaks included

Gov. John Kasich signs the state budget bill in a brief ceremony. The two-year, $55.8 billion spending plan includes broad-reaching policy changes such as performance pay for teachers, expansion of school vouchers, and privatization of state assets.

COLUMBUS -- Calling it "the most comprehensive piece of legislation in Ohio history," Gov. John Kasich Thursday night signed into law a $55.8 billion, two-year budget that goes far beyond credits and debits to encompass broad-reaching policy changes.

"This is the one they said couldn't be done," he said in a brief signing ceremony in his official Statehouse office.

The plan has his stamp on it -- repeal of the estate tax, a new tax break for investments in small businesses, performance pay for teachers, expansion of school vouchers, privatization of state assets, and an overhaul of Medicaid spending, particularly when it came to long-term care.

For that reason, the Republican governor used his line-item veto power just seven times to strike language from the 3,262-page budget.

"We promised Ohio a new way and a new day, and we're delivering," Mr. Kasich said.

Highlights of the items vetoed:

Language that would have allowed some school districts to leapfrog others in terms of priority for school construction and renovation funding. The governor said this special treatment could increase costs and reduce the number of districts served.

A requirement that the state has the right of first refusal to buy back the six adult and youth prison facilities that it's putting on the auction block. The governor said such a requirement could deflate the real estate prices.

A requirement that the Ohio Lottery Commission place on its tickets and advertising information about the amount of money it provides to education. The governor said this would increase lottery costs and thus reduce the amount of money provided to education.

A provision that would have repealed the authority for school districts to voluntarily perform body mass screenings of students. The governor defended the program as a means to combat childhood obesity.

"This is not your typical tax-and-spend budget," said Linda Woggon, executive vice president for the Ohio Chamber of Commerce, part of a consortium of business groups that worked to drum up support for Mr. Kasich's first budget.

"Ohio leaders were able to close the deficit without raising taxes and make major progress in reforming the way government operates, getting Ohio back on track to economic competitiveness," she said. "It took some hard decisions to accomplish that."

Opponents, however, also claim the plan makes history with billions in cuts for schools, local governments, libraries, nursing homes, and the Ohio Consumers' Counsel for residential utility customers.

"This budget passes the buck to local communities," Rep. Teresa Fedor (D., Toledo) said. "Billions of tax dollars will be taken from schools and local communities to balance the state's budget. This pass-the-buck budgeting will result in major service cuts to local communities or higher taxes for middle-class families."

But during a stop Thursday morning in Findlay for an announcement involving the Marathon Petroleum Corp., Mr. Kasich said local governments can rise above the challenges.

"If the state of Ohio can meet its challenges, then local governments can become more creative," he said.

Despite the budget starting with a projected shortfall in the billions, Mr. Kasich and Republicans pursued additional tax cuts.

They opted to let stand the final 4.2 percent increment of a multiyear income tax cut that took effect on Jan. 1. Another postponement of that cut could have meant an additional $800 million to the state over the biennium.

It sets the stage for elimination of the estate tax as of Jan. 1, 2013. That tax brings in roughly $300 million a year, $240 million of which goes to local governments. No source of replacement revenue has been identified.

"The American dream includes working hard, investing wisely, and spending sensibly so that we can pass on something to our children," said Jack Fisher, executive vice president of the Ohio Farm Bureau. "Our homes, farms, businesses, and other assets have already been taxed, which is why Farm Bureau felt taxing them again upon the owner's death was extremely unfair."

Surviving the line-item vetoes was a provision added to the budget by Rep. Randy Gardner (R., Bowling Green) that opens a two-year window for communities like Perrysburg and Rossford to ask local voters whether they want to withdraw from the Toledo Area Regional Transit Authority.

Perrysburg sought the language after its prior attempts to withdraw were blocked by other TARTA communities.

"The rules and policies of TARTA's Hotel California have been changed," Mr. Gardner said. "Now elected officials and citizens in Perrysburg and eight other communities don't have to forever accept the words 'You can never leave.' "

Local Democrats, however, have contended that the loss of revenue from suburbs that withdraw from TARTA would endanger services and place a great financial burden on the remaining communities.

Staff writer Sara Felsenstein contributed to this report.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.