Balancing it with “no time” money.

KasichOffOnPrisonSale Like prison privatization proceeds that was supposed to be nearly $200 million?  Or State revenues from growth in the economy that has already not  performed as projected?  For the last two months, Kasich has been touring the national political circuit telling anyone who’d book him that he solved Ohio’s “unprecedented” budget crisis.   Apparently, Kasich forgot that a budget is a plan, and not necessarily the reality.  Before you declare your budget is balanced, perhaps you should wait a month into it first.  Had Kasich done that, Kasich would have realized  his budget was already running a deficit.  Today’s announcement about Kasich’s prison privatization plan going bust suggests an even growing hole in his budget

Reviewing today’s press release from the Ohio Department of Rehabilitation & Corrections raises more questions than answers.   The Kasich Administration is spinning the press that the private sale of just one prison as opposed to the five prisons is not indicative of any problems. 

I.  Does Kasich’s scaled down plan still meet the expectations set for it in the budget?

Here’s what the DRC’s press release said:

The recently-passed state budget authorized the administration to sell six prisons to private operators for a projected $75 million in revenue: $50 million for five DRC facilities and $25 million for a Department of Youth Services facility.

Here’s what the Legislative Service Commission’s Greenbook on DRC says about the budget’s private prison provisions (pg. 6):

The Department believes the sale of these facilities could generate as much as $200 million in new revenue for the GRF, however, the net one-time gain may be closer to $75 million when current debt obligations are subtracted from the total sale. The Department does not expect the sale and transfer of operations to be complete until the end of December 2011. (emphasis added.)

The difference?  The DRC press release suggests that the budget projected $75 million in gross revenues, but LSC says net.  That’s a HUGE difference.

In other words, LSC said that even if the five-prison sale generated $200 million in new revenues for the General Revenue Fund, the net of that would be closer to $75 million once current debt obligations (bonds) tied to those facilities were retired from the proceeds of the sale.  So what does $73 million for selling the Lake Erie Correctional Institution to a private company (which is still less than $75 million) gross mean?  It means Kasich’s private prison plan grossly (or net?) missed the mark and maybe only nets Ohio $43 million as opposed to the amount budgeted.

II.  What does today’s announcement say about privatization?

Beyond the sale of Lake Erie Correctional Institution to a private corporation, DRC basically broke their plan down into two steps:

  1. Marion County’s North Central Correctional Institution (NCCI) and the vacant Marion Juvenile Correctional Facility will be operated by a private company;
  2. The North Coast Correctional Treatment Facility in Lorain County, currently operated by Management Training Corporation, will become a state operation and be merged with the state-operated Grafton Correctional Institution.

So the first part is the privatization of one facility and the reopening of a closed facility that will now be under private operation.  The second part is taking a facility that is presently privatized and having the State take it over and merge it with another State-operated facility.

Pop Quiz:  Which option does the Kasich Administration say will save over twice as much as the other in operational costs?  The second option.  Yes, today the Ohio Department of Rehabilitation and Corrections said the State will save $7 million de-privatizing a facility and merging it with an existing State facility that it will save with privatizing the operations of other facilities or even the entire sale of a prison.  More than both combined, actually.

Dan Ramos“[T]he Department’s intention to bring North Coast Correctional under state control is a shining example of how government can often, though admittedly not always, offer an economical, expedient and accountable service to Ohioans. I hope that similarly diverse attention can be given to problem-solving efforts in the future,” said State Rep. Dan Ramos (D-Lorain).

“The fact that the Kasich administration found a buyer for only one state prison shows they greatly overestimated the potential cost savings from privatization,” said State Senator Mike Skindell (D-Lakewood).

“Today’s announcement is further proof that Ohio’s state-run prisons are already being operated efficiently and effectively, thanks in no small part to the hard work of the employees of the Department of Rehabilitation and Correction. If that wasn’t the case, DRC would have been able to find more private companies willing to purchase Ohio prisons with the stipulation they cut operating costs by at least 5%.”

So what does this say about privatization in general?  Will the Administration equally miss the mark on the Turnpike?  Lottery?  Liquor profits?

III. The “buy more, save more” fallacy.

The Kasich Administration says this plan will expand the number of prison beds by 702 additional prison beds but save the State in $13 million in operating costs.  But this is misleading.  The savings are based on the Administration’s frame of reference.  You see the claim of “savings” is based on what the Kasich Administration estimates what the State’s operational costs would be if the State operated the same facilities.  But remember, that before this plan, one of the facilities was one that neither the State or the private sector was operating.  So is it correct to frame it as a “savings” when the State is now paying to operate a facility it’s not presenting operating?  It’s impossible for Ohio to gain over 700 prison beds while spending $13 million less than it was without those beds, folks.  Math doesn’t work this way.

The Kasich Administration hasn’t been this far off on a projection since it promised the General Assembly that JobsOhio would be a self-funding entity that wouldn’t need much more than the initial $1 million in state money it was appropriated back in February.  Then, we were told they needed to privatize the liquor profits… and then Third Frontier money had to be thrown in, too.  We still don’t know if a single company has committed any private money to Jobs Ohio, either.

It’s like Kasich’s entire budget was based on this old  “In Living Color” sketch:

No money, mo’ problems.

2014 can’t come quick enough for Ohio.

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  • Anonymous

    I hope that that primate Kasich has to spend 20 years in one of his private prisons for the pain and suffering he has and will continue to cause the citizens of Ohio.  He is even more corrupt than Tom Noe of “Coin-Gate”.  What a scumbag, a real bucket of puss.
     
     

  • very interesting! thanksa lot ofr sharing!

  • Lauren Kinsey

    A Washington Post article about this said,”The combination of operational changes — part of Kasich’s privatization
    push — is estimated to save the state a combined $13 million annually,
    about twice as much as what was anticipated.” Are they talking about the un-privatization?

  • I agree.  By the time he is out of office, there won’t be anything left of Ohio.  Who voted for this clown?  We had a good Governor, getting us on the right track, and Johnny Wall Street does a stint on Faux News, gambles with Ohio’s pensions on Mortgage backed securities, and gets into office.   How did that happen?  I voted, everyone I know voted.  

  • Mike B.

    The $13 million includes the privatization and the reorganization. It breaks down as:

    -$3 million for privatizing North Central
    -$3 million for privatizing Lake Erie
    -$7 million for reorganizing Grafton and Northcoast

    So, they will get more savings from reorganization than privatization (of course, that’s if you trust their projections too… savings of privatization is notoriously over-estimated).

    Is the additional cost of reopening Marion Juvi factored into the ODRC budget and these ‘savings’?

  • Anonymous

    See pg. 7 of the LSC Greenbook linked above in the post.  It was projected that the sale of the five prisons would only save the State $7 million in the biennium in operating costs.  Sell one prison to a private company and the rest of the restructuring, but again it appears from the DRC’s press release that those claimed “savings” is based on what the Administration estimates it would have cost the State to operate all those facilities as currently structured without private operators/owners. 

    That seems to be the only way their claims make any sense to me, but *if* true, then such a baseline is misleading because there’s a facility right now nobody is operating that this plan calls for bringing online.

    We’re not the only one puzzled at the math here, folks.  Plenty of people are trying to figure this out.  All I’m saying is the savings number is relative, unless the Administration is honestly claiming that one private operator is going to operate two facilities at 6% (Marion JCF and Marion’s NCCI) below the cost of the State to operate just NCCI.  But if that’s what they really wanted to say, I’d expect them to say it more directly because that would be an impressive feat.

    Instead, I think they’re using some misleading math here.  Because the savings of privatization just simply have never been THAT good.  So the only other alternative is that the savings are based on a baseline of what it would cost the State to own and operate the facilities, but then that figure is misleading because it doesn’t factor in the economic costs of bringing a dorminant facility back online.

    That third part, admittedly, is the most confusing aspect of the deal, and I think the Adminsitration intends it to be rather unclear.

  • Anonymous

    Mike- That’s precisely the question I’m asking in the third part of the post.  I don’t think it does, which would greatly change the math on this.

  • Anonymous

    Mike- That’s precisely the question I’m asking in the third part of the post.  I don’t think it does, which would greatly change the math on this.

  • Anonymous

    Exactly so. I got so sick of Democrats who damned Strickland because he didn’t perform all this economic magic overnight, that he was just slowly and steadily repairing our economy despite Republican resistance and problems on a national scale. I heard from so many on the left that he was a “conservadem” because he worked with Republicans to get some stuff done or because he had to make some cuts to balance the budget. Did these people think Kasich was NOT going to cut whatever their beloved program was? (Looking at YOU, libraries). Did the think money was going to drop from the sky? At least Strickland didn’t steal their money in order to enrich his cronies and donors. we’ve gone from one of the most honest and uncorrupt governors in our history to one who will likely be remembered as the MOST corrupt — and the most destructive. Thanks a lot, all you leftie whiners. Are you happy now?

  • Anonymous

    Funny math from the Kasich administration. What a surprise! I guess I was hallucinating that Kasich promised to be an exemplar of transparency.

  • I liked Ted Strickland, he is a good man, and he was doing a good job!  Almost all of the things the Johnny Wall Street is taking credit for Strickland did.  Kasich is just part of the Cronie capitalism reverse Robin Hood Republican crowd.  The part I find the most irritating, is that he screws the people, and then talks about God.  Don’t blame God, Kasich, you are doing this.

  • Anonymous

    Kasich is doing the same thing with the state budget that got us into this economic mess in the first place; he is creating a short-term profit with no regards to the long-term loss.  He lives for today to the extreme, with no thought of what will happen in the future.  Ohio is just a stepping-stone for him, nothing more.
     
    And where did his plans for privatization of the turnpike come from? The turnpike uses no tax dollars and literally pays for itself by the tolls of only those who drive on it.  In fact, it is one of the most successful programs this state has ever had since it actually saves money for ODOT by diverting large volumes of traffic from the repair and maintenance budget for other highways that ODOT is responsible for maintaining. 
     
    The idea of privatization of state services makes no sense to me unless you are simply trying to build up your war chest’s campaign list with future donors who will pay you big bucks for the privilege of plundering the public by tolls and collecting public tax dollars for a service.
     
    Nothing says “STUPID” like tampering with things that aren’t broken.  By the way, have I told you that “STUPID” is pronounced “KASICH”?

  • Anonymous

    Kasich is doing the same thing with the state budget that got us into this economic mess in the first place; he is creating a short-term profit with no regards to the long-term loss.  He lives for today to the extreme, with no thought of what will happen in the future.  Ohio is just a stepping-stone for him, nothing more.
     
    And where did his plans for privatization of the turnpike come from? The turnpike uses no tax dollars and literally pays for itself by the tolls of only those who drive on it.  In fact, it is one of the most successful programs this state has ever had since it actually saves money for ODOT by diverting large volumes of traffic from the repair and maintenance budget for other highways that ODOT is responsible for maintaining. 
     
    The idea of privatization of state services makes no sense to me unless you are simply trying to build up your war chest’s campaign list with future donors who will pay you big bucks for the privilege of plundering the public by tolls and collecting public tax dollars for a service.
     
    Nothing says “STUPID” like tampering with things that aren’t broken.  By the way, have I told you that “STUPID” is pronounced “KASICH”?

  • Anonymous

    Kasich is doing the same thing with the state budget that got us into this economic mess in the first place; he is creating a short-term profit with no regards to the long-term loss.  He lives for today to the extreme, with no thought of what will happen in the future.  Ohio is just a stepping-stone for him, nothing more.
     
    And where did his plans for privatization of the turnpike come from? The turnpike uses no tax dollars and literally pays for itself by the tolls of only those who drive on it.  In fact, it is one of the most successful programs this state has ever had since it actually saves money for ODOT by diverting large volumes of traffic from the repair and maintenance budget for other highways that ODOT is responsible for maintaining. 
     
    The idea of privatization of state services makes no sense to me unless you are simply trying to build up your war chest’s campaign list with future donors who will pay you big bucks for the privilege of plundering the public by tolls and collecting public tax dollars for a service.
     
    Nothing says “STUPID” like tampering with things that aren’t broken.  By the way, have I told you that “STUPID” is pronounced “KASICH”?

  • Adrienne

    I don’t understand if they bought it, why are we paying them to run it? Seems like we are being robbed two ways. First we are being robbed by selling to the lowest bidder, then we have to pay them to run the same facility. They bought it; they can run it using their own money.

    People in Ohio are dumb if they voted for Prince John.

    Who voted for him?

    People who want 100% of nothing.

  • Adrienne

    They are the same one’s who are bashing Obama. We got exactly what we deserved because they lie; we don’t show up; they steal elections; they wreck stuff and rob us; lather, rinse, repeat.

  • Adrienne

    Republicans never pay for their crimes, look at Nixon.  He is the original sinner.

    We always pay to clean up their mess.

  • Love the picture with Kasich’s “bedhead” hair. With hundreds of millions of dollars in the bank you would think the gov could afford some hair gel. 

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