Kasich budget a razzle dazzle of reforms plus Medicaid expansion

When Ohio Gov. John Kasich announced Monday that Ohio will join Nevada, New Mexico, North Dakota and Arizona, the only other states with Republican governors so far who have opted into the expansion of Medicaid, as provided in the supreme court's ruling last year that the nation's new health care law with an individual mandate is constitutional, his shining star status among fiscal conservatives dimmed.

Seth Morgan, policy director of the conservative group Americans for Prosperity in Ohio who ran unsuccessfully for state auditor as a Republican in 2010, said, "Increasing the number of Ohioans on the rolls of Medicaid is not real health care reform and will ultimately trap Ohioans in a system that badly needs patient-centered reform." Morgan, a former member of the Ohio House of Representatives said he'll work to engage Ohio's policy makers to limit the reach of government into Ohioans' lives and pocketbooks.

Another critic, this one from Washington, accused the glib holdover from Reagan-era supply side economics of helping the enemy. Philip Klein, an editorial writer at the right-leaning Washington Examiner, called Kasich's decision "a huge victory for the White House that will provide cover for more Republican governors to do the same," according to CNN.

Back in Ohio, GOP Chairman Robert Bennett decided to emphasize the positive parts of Gov. Kasich's budget, which increases spending to new highs over the next two years. "The smart and timely policies put forward in Governor Kasich's new budget really take President Obama to school," said Bennett, who is ready to step down after returning to lead the party when an intra-party fight between Team Kasich and Kevin DeWine, Bennett's hand-picked successor, ended with DeWine stepping down.

"Ohio families should be pleased with Governor's new Jobs Budget 2.0 because it tackles the big challenges facing Ohio, and is a blueprint to provide funding for our schools, incentives to our college students to graduate faster, while also cutting income taxes, sales taxes, and taxes on small businesses. Governor Kasich's bold new budget builds on the momentum from his last budget, and is essential to put Ohio's fiscal house back in order and continue our progress," Bennett said in a statement released yesterday.

Although he couched his decision to expand Medicaid with editorial comments that underscored his dislike of Obamacare, which he still thinks a "flawed law," the now geared up for a second official campaign run that will start in 2014 governor said recapturing billions warranted opting into the program expansion.

"This makes great sense for the state of Ohio, and will allow us to deliver care using our dollars," which he estimated at $13 billion, a sum he said would allow unemployed or poor people to receive consistent health care. The rule expands Medicaid coverage to adults with annual incomes at or below 133 percent of the federal poverty level, which currently is $14,404 for an individual.

Differing views

Others who have looked at Kasich's Medicaid decision think there is more federal money out there for Ohio to reap. Policy Matters Ohio, a progressive economic think tank based in Cleveland, congratulated Gov. Kasich for embracing Medicaid expansion, which it said will provide greater benefit than costs. At the same time, PMO hinted that additional federal money could be brought in through new federal programs like the Balancing Incentives Payment Program or the Community First Choice Option. The group said it isn't clear from the budget documents released Monday that these additional sources of federal funding are being pursued to enhance services and funding for Ohio.

According to a Kaiser Family Foundation estimate, the expansion could reduce the number of uninsured adults with incomes under 133 percent of poverty by more than 11 million by 2019. The federal government will pay the total cost of the expensive expansion for the first three years, then decrease funding to 90 percent.

Gov. Kasich further justified his decision by saying that by refusing the additional Medicaid dollars, Ohio would set itself up for "financial chaos" since rural hospitals will soon no longer be reimbursed for treating uninsured patients. Strengthening the ability of the Medicaid to offer a safety net to the mentally ill and addicts, the state CEO said it provided an "opportunity to rebuild that safety net so that we don't find mentally ill in jail because they receive no care."

"That's not acceptable in a big state like Ohio," the former congressman, Fox TV political talk show host and Lehman Brothers managing director said.

Included in his razzle dazzle "Jobs Budget 2.0" were a slew of other reforms pertaining to income and business taxes, education and transportation, among many others.

In a 29-page budget document, Gov. Kasich, now 60 years of age, said it was framed against a much brighter backdrop than Ohio faced just two years ago. Coming into that biennium, he said, Ohio faced an historic $7.7 billion fiscal imbalance and a sputtering economy that landed Ohio nearly dead-last in job creation.

"As a result of our decisive action, however, we prevented Ohio’s collapse and have gotten our state back on track. Things are dramatically better today. A strong commitment to fiscal restraint put Ohio’s budgetary house in order, and in the past two years Ohio reduced non-Medicaid spending from the General Revenue Fund by 0.5 percent," he said in prepared remarks

On taxes, Gov. Kasich said high taxes and a complex tax code are barriers to job creation. Ohio's "excessive dependence on high income taxes only drives jobs to other states with lower income taxes," he said. He proposes cutting small business taxes in half for the first $750,000 in net income, cutting income taxes 20 percent and cutting the state sales tax rate from 5.5 to 5.0 percent.

Gov. Kasich's tax proposals will take Ohio in the wrong direction by shifting a greater share of taxes onto lower- and middle-income Ohioans, while reducing the revenue needed to support vital public services, PMO noted. "Ohio tried cutting income-tax rates 21 percent eight years ago, and it didn't work; we have seen worse job, income and output performance over that time than the country as a whole. Why would we want to double down on a bet that hasn't worked?" it said.

The progressive group said cutting taxes on business income is a poor decision that is unlikely to do much for Ohio's economy, while creating new avenues for tax avoidance. "Extending the sales tax to services is good tax policy, as the services make up a growing part of the economy; however, it will need to be closely studied, as it contains restrictions on counties and other elements that don't make sense."

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