Editor's Note: Ohio Gov. John Kasich has seen a busy first five months in office as he deals with an $8 billion budget deficit and pushes an agenda to solidify the state's financial future. Kasich and his budget director, Tim Keen, sat down with Sunday News-Register Executive Editor J. Michael Myer recently to discuss where Ohio is headed and the governor's political future.
One thing that I'm confused about ... I believe that the two-year budget the General Assembly is working on now is about $128 billion. I think that's either close to or even a little in excess of the current two-year budget. Am I correct about that?
Kasich: Yes, but when you take into account things like Medicaid, which are growing at an enormous rate, your (budget's) going to go up. When you take a look at the cuts in many of the areas, they're going down. It's just that there (are) some programs, for example the programs for the poor ... what states have wrestled with is their inability to control Medicaid costs. We've done that in this budget. Medicaid will still go up, but not at the rate in which it was going up. ... The bottom line is the budget is structurally balanced now, and we're not playing smoke and mirrors and all that stuff to get us where we need to get to, which is a stable financial future along with the opportunity to continue lowering costs.
Kasich: When you get an $8 billion deficit on your doorstep, you're not worrying about things four years down the road. Obamacare will drive up our costs enormously. I'm opposed to it. ... We're doing things in our state where we are operating from the standpoint of creating a health care program that is future looking. When you are slowing the increase of Medicaid ... some people would slow it by just cutting dental care for poor people. We didn't do it that way. We're trying to coordinate care. We're integrating physical health with mental health. These are things that hadn't been done before. We're creating a medical home so nobody is confused about the kind of care they ought to get. So all these things are putting us in a position to be able to manage our health care costs going forward, which is why we have so many partners with hospitals, doctors, mental health advocates, developmentally disabled ... but just to pile on Obamacare, it would be a disaster for the state.
We don't spend a lot of time thinking about this, the reason why we don't ... is we have enough problems. You've got a tsunami on your doorstep you don't think about what's coming down the road.
Keen: We do know that ... while in the early years the federal government will pick up 100 percent of the cost for the expansion of coverage under the Medicaid program (through the national health care law), in the out years the state will be expected to contribute significant sums of money, which will present budget challenges for us in some of our future years.
Kasich: The whole key is for states to design their own program, to be a laboratory for what works. And we can look around the country and see what works in one state and maybe take some of it.
I actually believe that our Medicaid program, the reforms we have in there, will be used as a national model because people have a hard time understanding 'how could you save this much money yet have all these people for it'? It's because we are partnering with the health care professions to say 'Look, we've got to get off this treadmill we're on, which is driving up costs, and we need to get to a place where we coordinate care.'
One of the things we've found about Medicaid is about 6 percent of the Medicaid population drives over 50 percent of the costs. ... There's a percentage of that population who are just high cost, there's nothing you can do about it. There just very sick people. But there are ways in which you can manage the rest of the population to get them the care they want but yet at a lower cost, without having a default option being the highest cost programs where they don't necessarily get better care. Ohio is leading the way on Medicaid reform and we're really proud of it.
Kasich: Well, you can get people to sign, but that doesn't mean they'll abide by it. What we want are care coordinators, somebody who will be in a position to manage that caseload so they're not confused about where they're going to go. For example, our efforts with nursing home reform, people need a nursing home that's fine, they've got to have it, we've got to have quality nursing homes, but if they're in a position where they can be in their own home and get some help if they qualify for a nursing home, we want to provide that. So what happens is the person is more independent, probably healthier, certainly happier, and we save a ton of money. That's the way we look at it.
... One of the things we want to do is ... have places people can go when they get ill instead of just running to the emergency room, which drives up the cost of everything. So all these things are designed to coordinate it, and I believe we are just getting started.
I have an office of health transformation, with a terrific guy running it by the name of Greg Moody. ... As a CEO of the state of Ohio, my job is to find the best people I can find. I have the best budget director Ohio has ever had. I've got a terrific guy running health transformation. ... Once I start micromanaging every element, that's when I fail. People know where I want to go, they talk to me about innovation, new ideas, and I set them free to do their job and we form a really good team and frankly, we're direct, honest with one another, we have kind of a family atmosphere ... we all share in this, we share in the good and we share in the tough stuff. That's the way I've run it for four months and I think whenever you start trying to know every detail of every program, that's when you become Jimmy Carter and you melt to the ground.
Kasich: Before 1963, there was no department of development (in Ohio). Jim Rhodes, the iconic governor of Ohio, he had a thing called 'Rhodes Raiders.' They traveled all over, they were business people who, with public spirited attitude, went out and brought business to the state. In 1963, he created the department of development. That was 48 years ago. I'm kind of a believer that every 48 years, you should change things.
(The Ohio Development Department) has become bureaucratic. That doesn't mean the people are bad, they've not been as responsive as we would like. Businesses have been frustrated. So we have a new group in there, people who have been energized by the attitude we have to basically get out there and talk the business of business with people who create jobs. We also are creating a not for profit entity called Jobs Ohio. The wonderful thing about that is that it gets you out of all the restrictions, you are able to move at the speed of business instead of the speed of a statue. ... This entity is going to be unique, it will be staffed with people who really understand the (business) clusters that are important in Ohio.
Keen: I think the idea is that a dedicated stream of revenue (the state's liquor profits) that Jobs Ohio can use to carry out its public mission of improving economic development opportunities for Ohioans, combined with the opportunity to have a different type of person who can understand business and talk to business, positions Ohio very effectively to work hard to retain the businesses we have and sell the benefits of Ohio and attract other businesses here.
Kasich: We've had some people come in from out of state, and we've had some success - American Greetings, Debolt, we kept Bob Evans in Ohio, helped to a degree on Goodyear - but there are lots of other things happening now. What we don't have is a big cadre of people in (development) who can go out and have credibility with CEOs. ... If you're going to do economic development, you can't do it on the basis of checking a box. You have to do it in a 360 manner. We've had some results, we're going to have a lot more results that will be announced, companies we've talked to ... give you a good example. I found out about (an Ohio) company that was thinking about expanding their business in Michigan. The CEO was in Europe, I happened to know who the lead director of the company was. I called him, he said 'You know, it's all about shareholder value.' I said yes, but shareholder value is more than just some deal somebody gives you, because when you operate in a state there are a myriad of issues that you have to deal with. ... The CEO, I talked to him once he got home, he said 'Look John, we're not moving anywhere else, we're going to expand in Ohio. But I'd like for you to meet with my people and see if you can help us figure out a way to expand this product we're developing in this new business. My people from development who are involved in creating Jobs Ohio ... they sat down at the table and figured out a way, a very unique program that we think can be very helpful to the company and very helpful to everybody in the state. ... You have to be able to get to the lead director, get to the CEO, putting your team together, and the comment I heard back from a university president who met with the CEO was 'God, we met with normal people down there.'
... The problem we have largely in government today is we have people who never had any business experience so they don't really understand the urgency of what business thinks is critical. Or secondly, we have business people who don't understand politics, so they go in there and they flail around and they don't know what they're doing either. So the best combination are people who have experience in both business and politics who can take the best of both worlds and apply it out there for fixing your state or your local government or your federal government for that matter.
Kasich: One of the things we want to do to measure a teacher is find out how much a child learned during a school year. If a child is not learning anything during a school year, that's not good. So, we have actually invited the teacher community in Ohio to participate in helping to set the criteria. Honestly, I had an argument with Michelle Rhee, the great reform former chancellor of the District of Columbia, because we have a lot of reform in K-12. We've expanded vouchers, charter schools, if your school's not performing, bottom 5 percent for three consecutive years, teachers can take it over, parents can take it over, we have a whole series of things ... but also the idea that we want to pay teachers on the basis of performance ... I don't know anyplace else where we don't do that. Some teachers will say I just don't want to be judged by my principal, because my principal doesn't like me, or I don't want to be judged by parents, because I give them a hard time when they're not paying attention to their kid ... We have time to figure this out. But the idea that you're the last person in, you're the first person fired. We can't figure out a way to make a fair and honest assessment of teachers, and pay them what they should get - I'd like to pay teachers $100,000 a year if they're changing our kids' lives. So we've asked the teacher community to get involved. We've had some response ... and we will develop criteria. This is not just Michelle Rhee who believes this, it's Bill Gates (who) believes in performance pay. So we'll work it through and in a couple years ... if it doesn't fit we won't do it. But we're going to get it done.
... You want to have criteria that is fair to the teachers. ... I think part of the problem with the standardized tests have been that the teachers felt this test was shoved on them and they didn't have much input into what a test should look like. You want to have teachers involved. Initially when this was brought to me I didn't like the idea. I said I don't think we have enough criteria to do this. ... I went home and I thought about it and I said what, are you kidding me? Everywhere in America we try to pay people on the basis of how they do, we can certainly do it with our most prized and loved things in our society, which is our children.
Kasich: First of all, we have structured our school funding formula that if you're a poorer district, you get more state help. Secondly, one of the tragedies in Ohio is that we are 46th in America in putting dollars in the classroom. ... Where's this money going?
We also have given schools the tools to deal with their financial problems. People pay a little bit more for their pensions, a little bit more for their health care, shared services, a statewide health pool. We've given them all these tools. I don't know if they've embraced them, what happens is a lot people say we don't have enough money, but we don't like your tools. That's kind of silly. We've given you the tools, use them. ... No district in Ohio is being cut by more than 7.9 percent, and most of them are being cut, all monies, by less than 5 percent. So I don't know what these districts are saying. ... We think we've designed a pretty good program. We're also working on a new school funding formula that is essentially going to put dollars behind pupils so we get dollars in the classroom rather than dollars in the buildings. ...
One other thing we have to talk about when it comes to these school districts. If you take Bellaire, for example, probably the most serious problem we have is an exodus of jobs and people. If you are a state that is not putting itself in a position for economic growth, and you lose your young people, you lose your families and you lose employment opportunities, then you don't have any revenue. So the one thing that people have to face up to is that Ohio has to be put into a position where we can create jobs. If we keep monkeying around with this, and not facing the most serious problems which we are currently doing in the budget, with Jobs Ohio, with the Common Sense initiative to repeal rules that don't make sense, to the fact that we want to align curriculums and have teacher performance that drives up the quality of our students ... you're in a losing war. This is all about economic development and everybody must share in the effort to get there because everybody will be healthier once we start creating jobs in Ohio.
Kasich: No. I have a job to do here. I said to my wife 'Sweetheart, look, we're going to have a target on our back, we're going to lose our privacy, it's going to be tough on the family, I really think I should run for governor. What do you think?' She said 'That's fine with me, you'll just be sleeping outside for the next four years.' So, I did this, took this race on, because this is my mission. I'm here to help Ohio. I'm not here to help John Kasich. And frankly, going to a job like that, how would that be helping me anyway?
I have absolutely no interest in any other position. In fact, when I go to Washington I break out into a cold sweat.