So today, our Budget Watch wrote about a small provision buried in Kasich’s budget that would seem to give the Office of Budget and Management practically unlimited authority to privatize any State service the Administration desires subject only to Controlling Board approval.

After the jump, we’ve got the four relevant pages from the non-partisan Legislative Service Commission’s analysis of this provision.  The bill only limits the Administration to contracts “no longer than 75 years in duration,” because apparently 72 years after he is no longer Governor struck even Kasich as too ridiculous of a time period to bind the State to his Administration’s decision.

But the LSC analysis ends with what I hope to be a sentence that is misleading and not what it appears to say:

“The gross receipts and income of a proposer derived from providing a  service under a contract are to be exempt from taxation levied by the state and its subdivisions.”

Again, I haven’t had time to locate and read the statutory language myself, but I generally trust LSC’s analysis.   And unless I’m misreading what they’re saying, it sounds like that not only does Kasich create a massive executive power grab that lets him privatize State functions at his pleasure, but it creates a massive tax break to the businesses he awards these contract to.

Folks, even for-profit charter schools don’t get as generous of treatment as this provision would seem to give.  How do you even score something like this fiscally?

HB153 Privatization Provision

Seriously, someone tell me this budget doesn’t do this.  That the LSC statement is a little misleading or something.  We seriously aren’t thinking of handing government services over to the private sector and declaring any income they make off of providing such services tax-exempt.

That would be crazy, right? Right?!?

On top of that the bill says that if your service is privatized, even partially, then your work is no longer covered by your collective bargaining agreement, nor does the contractor have to pay prevailing wage.  Yep, even if you are still considered a State employee who is just working at or on the privatized project, no public employee collective bargaining for you applies.  Period.  No exceptions.

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  • teacher

    Ok, ModernEsquire, what do I do about this—do I email/write legislators? Senate or House? I don’t know what to do about this, but I’m ready to work on it!

  • The tax exemption is in the bill, pages 266-267, lines 8314 et seq.

  • Anonymous

    Write and call both your House and Senate members, regardless of their party.

  • Anonymous

    Whatever happened to the Ohio Constitution’s prohibition that the General Assembly cannot make appropriations that last beyond the biennium? How does this General Assembly make a 75-year appropriation for contractual services that binds successive General Assemblies for decades? So we will be paying some private prison system for 75 years, without competively bidding out the services, in my lifetime and that of my college-age children?

  • JohnP

    I read the exact text to say the same thing the LSC does.

    Here is the text, as listed in the version of the bill that can be accessed from:

    Line numbers in the bill are included. (sorry for the formatting)

    Sec. 126.604. The exercise of the powers granted by sections 8303
    126.60 to 126.605 of the Revised Code will be for the benefit of 8304
    the people of the state and shall be liberally construed to effect 8305
    the purposes thereof. As the performance of public services will 8306
    constitute the performance of essential government functions, any 8307
    project or part thereof owned by the state and used for performing 8308
    any public service pursuant to a contract entered into under 8309
    sections 126.60 to 126.605 of the Revised Code that would be 8310
    exempt from taxation or assessments in the absence of such 8311
    contract shall remain exempt from taxation and assessments levied 8312
    by the state and its subdivisions to the same extent as if not 8313
    subject to that contract. The gross receipts and income of a 8314
    successful proposer derived from providing public services under a 8315
    contract through a project owned by the state shall be exempt from 8316
    taxation levied by the state and its subdivisions, including the 8317
    tax levied pursuant to Chapter 5751. of the Revised Code. Any 8318
    transfer or lease between a proposer and the state of a project or 8319
    part thereof, or item included or to be included in the project, 8320
    shall be exempt from the taxes levied pursuant to Chapters 5739. 8321
    and 5741. of the Revised Code if the state is retaining ownership 8322
    of the project or part thereof that is being transferred or 8323

  • Shaitanpyrik

    That is just goddamn ballsy, even for this tool.

  • Annekarima

    Seems to be the way of things to come. Companies are too big to pay taxes although I was always told by the IRS that companies do not pay taxes. They collect them from us and we pay them for them. I guess now they collect them from us and store the money offshore.
    What about the workers who live overseas and work for these US corporations? Do they pay US and US state taxes? Or does everyones make out/lose all the way around. I suppose there are pretty good kickbacks to someone for all of these “privileges”.
    Folks, are the powers that think they be, attempting to drive us into time before time? Check your history of Europe/Germany the first of last century. See what it was like. Check history against the propaganda. Go back further. See why our ancestors came to Ellis Island. Religion? Naw. They wanted a better life. Today that is all any of us wants and why someone who seems to want to be superman would deny us that … well …. you tell me why…. there seems to be lots of supermen tryouts going on.

  • Annekarima

    Will it do any good, Modern? The reps must of known what Kasich had in mind before this happened? Why would they allow this to happen? Did they get pay offs? Or promises? What is in it for them to allow this to happen? Get into their heads and think how they are thinking.

  • clambake

    So, they want public money to provide these services. And, like a governement service provider they don’t want to pay taxes.
    What exactly is “private” about this?

    Oh yeah, the profits.

  • Anonymous

    The issue is that the referendum provision in the constitution says that appropriations are not subject to referendum. But as the Ohio Supreme Court ruled as recently as the LetOhioVote (VLT at racetracks issue), there is a long line of Supreme Court precedent that just because something appears in the budget doesn’t grant it immunity from referendum. If the provision substantially changes existing law, then it is still subject to referendum.

  • Anonymous

    There is a budget hearing today with the new Development Director. If you contact your legislator (especially if they are on the House Finance Agriculture & Natural Resources subcommittee) and make sure they are aware of these provisions (see the Budget watch post, we include page numbers in the legislation) and ask hard questions at today’s hearing. What this provision does is remove legislative oversight and members of the General Assembly should not be fans of that.

  • Annekarima

    Thank you.

  • santoshama

    So does Modern Esquire or any other attorney reading this blog know if this privatization language might qualify as a “substantial change” to existing law…and thus subject to referendum?

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