Governor tells Ohio newspapers state must cut costs, taxes

Ohio Governor John Kasich brought his message of change and secrecy to a room full of professional skeptics attending the Ohio Newspaper Association’s annual convention Thursday in Columbus.

Gov. Kasich set the stage for his message of change with his assessment of our condition: “Our misery is only exceeded by Michigan and, maybe now, California,” he said. We have lost 400,000 jobs in the last four years, college graduates are leaving and our depressed economy breeds crime, hopelessness and poverty, he added.

The solution?

“The key to giving people hope and to strengthening our families is economic growth and jobs,” he said.

The centerpiece in Gov. Kasich’s plan to attract jobs is the formation of a non-profit corporation that will not be open to public scrutiny until contracts are finalized with incoming employers. The plan also calls for lowering taxes, lowering the cost of government and reducing regulations. To implement his strategy, Gov. Kasich hired Mark Kvamme, a venture capitalist from California’s Silicon Valley. His successes include funding start-ups such as Google and YouTube.

Kvamme spoke later in the afternoon. He said he came to Ohio because of his friendship with the Governor and as a way to achieve one of the goals he set for himself as a young man--to help one million people. He took the job for a salary of $1 a year, which he says eliminates any conflicts.

Both are backing Jobs Ohio, the non-profit corporation funded by public money that would operate under certain exceptions to the state’s sunshine laws. Gov. Kasich said Ohio is hampered by its transparency. Governors and economic development leaders in surrounding states know what companies Ohio is courting and what it offers. Furthermore, CEOs prefer to negotiate in secrecy, so they don’t call Ohio.

There are legitimate reasons for secrecy--protecting proprietary information and fast-tracking the process to beat the competition. Kvamme recounted a story about being approached by Google to invest in its expansion. He says his firm, Sequoia Capital, had 24-hours to make the decision. Google had competitors developing similar products and wanted the competitive advantage of being first in a new market.

“We need stealth and speed,” Kvamme said. “We need to keep secrets secret. Once the deal is done, the contract will be made public.”

Kvamme said Jobs Ohio would be similar to nonprofit economic development agencies in Dayton, Cincinnati and Cleveland.

I can attest to this need for secrecy. When Worthington Steel in 1994 considered building a mini-mill in Northwest Ohio, I was chairman of the membership committee for the Oregon Economic Development Foundation. Company officials saw opportunity in the global marketplace for a new mini-mill. If their competitors knew Worthington was considering a new mill and negotiations stalled, they would then have an advantage in the race to capture that market. Worthington eventually built its mill in Delta.

On the other hand, secrecy does not allow for public input. A victory for Jobs Ohio could mean your new neighbor could be a hazardous waste dump or a corporation with a history of pollution violations.

This issue of secrecy will be contested in the next few weeks.

Gov. Kasich also restated his position on taxes and the cost of government. He said revenue from Ohio’s capital gains taxes has declined from $12 billion to $3 billion in the last 10 years. He blames the decline on Ohio’s tax rate of 23 percent. Florida’s rate, on the other hand, is 15 percent. The higher rate drives entrepreneurs to other states, he claims.

“Taxes matter. What would you do?” he asked.

Gov. Kasich also countered the perception that he proposes eliminating the state’s income tax. He clarified his position saying the state should gradually move towards that goal.

Cutting taxes will mean less revenue and Gov. Kasich once again called for the elimination of both binding arbitration and the right to strike for public employees. These tools would help the state, as well as local governments and schools, contain costs at a time when the state is $8 billion in debt and both the state and the federal government are sending less money to local communities. He also wants the prevailing wage eliminated. This would allow infrastructure to be upgraded faster and projects to be built cheaper and quicker.

The Governor also proposes privatizing the turnpike. “Wouldn’t it be fantastic if I could take another country called the turnpike and privatize it and generate as much as $2.5 billion…I could take that money and I can put a billion dollars in infrastructure. Wouldn’t that be fantastic instead of having an asset that is under-utilized in the state at a time when we are in a crisis?”

Gov. Kasich also said he welcomes Chinese investment. He recalled not so long ago when Americans feared the Japanese were going to take over America with their high quality small cars and electronics. He reminded the audience that Governor James Rhodes attracted Honda to invest in a plant in Marysville.

He also criticized state officials who knew federal stimulus money was coming to an end, but they still held on to the belief that they could lift up their pillow and find money left them by the tooth fairy.

“How could you know that this was coming and not prepare for it. That’s irresponsible.”

The Governor also said he intends to change the way Ohio sentences criminals to prisons. More than half are sentenced for less than one year and the cost to do so is high.  Gov. Kasich wants alternatives that will cost less while keeping the public safe.

The Governor’s prescription to eliminate the $8 billion deficit and bring prosperity to the state will anger unions and foster the belief that he’s conducting a race to the bottom for what remains of the middle class.

The critics will not deter him. “Change is hard. I understand this is hard. At no other time would I have been elected governor. I’ll be honest with you. My party wouldn’t have had me and people wouldn‘t be listening.”

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