January 14, 2011

LIMITED CAPITAL BILL EXPECTED

Legislative leaders suggested late last week that the next capital appropriations measure is likely to be reduced and possibly absent any funding for community projects.

While expected, the development would prove a setback to local government entities and other groups that were hoping for state help to bolster public improvement works.

One of the biggest items of unfinished business from the last General Assembly, the bricks-and- mortar bill never got past the planning stages. The Strickland Administration had penciled in a budget of $1.8 billion in bonds for such a bill that could be issued by the state while staying within the 5% constitutional debt limit.

In recent capital budgets about $100 million was set aside for local requests, which amounted to only a fraction of the total of the mostly bond-backed measures. Nevertheless, the earmarking scramble always seems to consume much of the legislators' attention in processing the measures, which mostly fund new and ongoing construction and upkeep at state-owned facilities.

Due to the economic climate, the general revenue fund portion of recent capital budgets had all but disappeared. With a huge GRF budget crunch looming in the next biennium, and a new legislature stocked with lawmakers who campaigned for reduced government spending and lower taxes, policymakers appear poised to dial back even more in an effort to curb future debt payments.

Senate President (R-New Richmond) said in an interview that while the matter hadn't been fully discussed with the incoming Administration, he foresaw a minimalist approach to the next capital measure.

Mike Dittoe, spokesman for House Speaker Bill Batchelder (R-Medina), said the Speaker and House Finance Chairman Rep. Ron Amstutz (R-Wooster) had a similar take on the issue. Governor 's spokesman Rob Nichols said the incoming Administration would make a decision on the capital budget following an overall review of state finances.

1 PRIVATIZING DEVELOPMENT AGENCY, TAX INCENTIVES AMONG FIRST BILLS TO EMERGE IN HOUSE

The legislative process came to life Tuesday as the House Republican majority unveiled the first bills and outlined new process rules for the 129 th General Assembly. Reflecting Governor John Kasich's plan to convert the Department of Development into a non-profit entity, the Republicans reserved House Bill 1 as a placeholder for his proposed JobsOhio initiative. Speaker Bill Batchelder (R-Medina) said he believed the actual bill language would be drafted as early as next week.

Top priorities for the Republican House, aside from the JobsOhio measure (HB 1), include proposals to require state agency performance audits (HB 2) and to repeal the estate tax (HB 3). Among the House's other introductions are measures that would:

• Increase the sales tax prompt remittance discount and create a similar discount for income tax withholdings (HB 8).

• Create refundable tax credits to remediate a contaminated site and exempt Voluntary Action Program participants from certain fees and penalties for one year after the issuance of a covenant not to sue (HB 10).

• Prohibit state agencies from implementing or enforcing a provision of the federal Patient Protection and Affordable Care Act without meeting certain conditions (HB 11).

• Direct the Department of Job and Family Services to seek federal approval to create a Medicaid premium assistance component (HB 13).

• Authorize a $2,400 income tax withholding credit for employers that hire a previously unemployed individual (HB 17).

• Create a nonrefundable tax credit for a business that increases payroll and expands into a vacant facility (HB 19).

Some of the Republican caucus' bills that would cost money, such as tax incentive proposals, might pass the House with the knowledge that they would likely not clear the Senate, Speaker Batchelder said. "At this time, of course, we don't have the Governor's budget and it's totally unfair to him for us to start spending money that we may not have. So that will be very much in our minds," he said.

KASICH, REPUBLICANS ASSUME STATEWIDE OFFICES

The weekend saw the transition of statewide offices as Republicans were sworn in following their November victories, capped by the swearing-in of Governor John Kasich on Monday afternoon.

While the new Governor offered little in specifics in his inaugural address about either how the new Administration will deal the state’s unemployment or a projected shortfall of $8 billion to $10 billion in the next budget, he told the audience to “Get ready for an exciting time. Put on the seat belt because we’re going.”

2 Also taking oaths of office over the weekend and into Monday included Lt. Governor Mary Taylor, Attorney General Mike DeWine, Secretary of State , Auditor Dave Yost, and Treasurer Josh Mandel.

KASICH ADMINISTRATION CABINET APPOINTMENTS CONTINUE; KEY STAFF NAMED

Governor Kasich continued his appointment of cabinet officials this week, including the announcement that his Lt. Governor, Mary Taylor, would head the Department of Insurance. At the same time the Lt. Governor has been charged to head a drive among state agencies to eliminate state regulations that prove “stifling to job creation.”

Over the weekend Kasich nominated former Senator David Goodman to head the Department of Commerce and retained Christine Money as Department of Youth Services Director. Goodman worked closely with the Department of Commerce on a number of issues during his legislative tenure, while Ms. Money has served as Interim Director at DYS since May and as warden of three correctional facilities earlier in her career.

Gov. John Kasich used his second executive order Thursday to create a new office charged with consolidation and cost savings in the state's $13 billion annual Medicaid program. The new Office of Health Transformation will be headed by Greg Moody, a former Taft Administration official who has served as senior consultant for Health Management Associates for the last six years.

Also on Thursday, Mr. Kasich named John McCarthy, currently the Medicaid director for the District of Columbia, to serve as Ohio's Medicaid director.

Dr. Theodore Wymyslo, a longtime medical educator and administrator who worked at Miami Valley Hospital for 18 years, will serve as director of the Department of Health, the Governor announced.

Dr. Bonnie Kantor-Burman, formerly the head of the Office of Geriatrics and Gerontology at the Ohio State University Health Sciences Center, was named to lead the Department of Aging.

Perhaps the most intriguing appointment came as Governor Kasich named Mark Kvamme, a partner at Sequoia Capital, to head the Department of Development temporarily and help the Administration transform the agency into a private, non-profit corporation. Sequoia Capital is a private equity and venture capital firm in Silicon Valley which had helped provide early funding for a number of successful high-tech companies, such as Google, YouTube, and PayPal. Mr. Kvamme said he agreed a six month leave of absence from Sequoia Capital to serve in the Administration for which he will be paid $1.

In addition, Kasich announced a number of top staff members in his office including:

• Director of Legislative Affairs: Matt Carle. He is a former state legislative candidate who worked as Director of Development and Community Relations for the Ohio College Access Network (OCAN) and as a real estate development and zoning lawyer.

• Senior Advisor to the Governor: Jai Chabria. A former official at Schottenstein Property Group, Lehman Brothers and Barclays Capital, Mr. Chabria will oversee gubernatorial appointments and state agency personnel. He will also work on the transition of the Ohio Department of Development to JobsOhio.

3 • Cabinet Secretary: Tracy Intihar. Ms. Intihar will work with agency directors on policy initiatives and agency programs. She previously ran her own consulting firm and was a top aide to two former Ohio House speakers.

• Deputy Director For Policy: Ben Kanzeg. Mr. Kanzeg will work on policy initiatives and assist with the Governor's agenda. He was a policy leader on the campaign and worked as an aide to Mr. Kasich and U.S. Rep. Pat Tiberi.

• Chief Counsel: Mike Grodhaus. Mr. Grodhaus is a former private practice attorney who also served as first assistant attorney general and chief legal counsel in the State Auditor's office.

• Director of Public Liaison: Mike Hartley. He will be responsible for efforts to engage Ohioans in state government. Mr. Hartley was deputy manager of the campaign and has significant campaign experience over the last decade.

• Director of Communications: Scott Milburn. Mr. Milburn held the same role with the campaign and held top-level communications posts in the White House, with former U.S. Sen. and former Gov. Bob Taft.

• Press Secretary: Rob Nichols. Mr. Nichols held the same position in the campaign and with former U.S. Rep. Deborah Pryce.

• Director of Boards and Commissions: Jeff Polesovsky will advise the Governor on appointments to boards and commissions and oversee the appointment process. The campaign's political director, he earlier worked as executive director of Recharge Ohio.

LEGISLATIVE MEMBERS APPOINTED TO VACANT SEATS; HOUSE ANNOUNCES COMMITTEE CHAIRS

Appointments

A number of legislative vacancies were remedied this week, as the caucuses moved to fill seats left open by the election victories and cabinet appointments.

In the Senate, the Republican caucus chose Representative to fill the seat of Senator and Representative Peggy Lehner was appointed to Senator Jon Husted’s seat. Larry Obhof Jr., of Montville Township in Medina County, will now Congressman Bob Gibbs unexpired term, which ends in 2012. The caucus said Mr. Obhof currently works at the Cleveland office of Baker & Hostetler LLP and is an adjunct professor at Case Western Reserve University School of Law, where he teaches courses on legislation.

Meanwhile, the House Republicans appointed former Representative Richard Hollington to the Grendell seat, former Representative Jim Buchy to fill the Zehringer seat, and James Butler to fill the Lehner seat. Given Representative Hite’s appointment late Wednesday evening to the Buehrer seat, the House must once again make an appointment to fill that vacancy.

Mr. Hollington, who also served in the House from 1967 to 1970, was appointed last session after former Rep. Matt Dolan resigned to run for the Cuyahoga County executive position. He is a senior partner in the Cleveland law firm Baker Hostetler LLP and finance director for the Village of Hunting Valley.

4 Rep. Buchy (R-Greenville), another veteran of the House, returned Tuesday after an 11-year hiatus to fill the 77 th House District seat left open by former Rep. Jim Zehringer, who Gov. John Kasich appointed to head the Department of Agriculture. Mr. Buchy served in the House from 1983 to 2000 and became an assistant director at ODA from 2001 to 2004. He is the president of Buchy Food Service in Greenville and serves on the NFIB-Ohio statewide leadership council.

Rep. Butler (R-Oakwood) joined the House for the first time to fill the vacancy left by former Rep. Peggy Lehner (R-Kettering), who accepted an appointment to the Senate. The Montgomery County Republican Party unanimously recommended the attorney to the seat. Mr. Butler graduated from the United States Naval Academy in the top 10% of his class and is currently an associate at Thompson Hine LLP in Dayton.

House Committee Chairs

Speaker William Batchelder (R-Medina) appointed committee chairs and unveiled three new subcommittees Tuesday as the House geared up for more substantive work in the 129 th General Assembly.

The total number of full standing committees in the House drops from 27 to 17, but Speaker Batchelder also initiated three standing subcommittees: Health Subcommittee on Pension Reform (Rep. Schuring, R-Conton, Chair); Insurance Subcommittee on Workers' Compensation (Rep. Hackett, R-London, Chair); and State Government Subcommittee on Redistricting (Rep. Huffman R-Lima, Chair).

The Speaker went mostly with experienced lawmakers in selecting his chairs, as only one freshman - Rep. Lynn Slaby (R-Copley Twp.) - was awarded a gavel for a full standing committee. Mr. Slaby, who served as an Appeals Court judge for 15 years, was named Chairman of the House Criminal Justice Committee.

The other House committees and chairs for 129 th General Assembly are:

• Agriculture and Natural Resources: Rep. David Hall (R-Killbuck).

• Commerce and Labor: Rep. Joseph Uecker (R-Loveland).

• Economic and Small Business Development: Rep. Nan Baker (R-Westlake).

• Education: Rep. Gerald Stebelton (R-Lancaster).

• Finance & Appropriations: Rep. Ron Amstutz (R-Wooster).

• Financial Institutions, Housing and Urban Development: Rep. Bill Coley (R-Middletown).

• Health and Aging: Rep. (R-Napoleon).

• Insurance: Rep. Jay Hottinger (R-Newark).

• Judiciary and Ethics: Rep. Danny Bubp (R-West Union).

• Local Government: Rep. Terrence Blair (R-Washington Twp.).

5 • Public Utilities: Rep. Todd Snitchler (R-Uniontown).

• Rules and Reference: Rep. Lou Blessing (R-Cincinnati).

• State Government and Elections: Rep. Robert Mecklenborg (R-Green Twp.).

• Transportation, Public Safety and Homeland Security: Rep. Courtney Combs (R- Hamilton).

• Veteran's Affairs: Rep. Jarrod Martin (R-Beavercreek).

• Ways and Means: Rep. Peter Stautberg (R-Cincinnati).

For a list of the full committee rosters, please see the attached handout.

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