CHICAGO — Ohio Gov. John Kasich said a $500 million payment the state received in exchange for a 25-year lease of its lucrative liquor distribution system will boost the rainy-day fund to $1.9 billion and trigger an automatic tax refund to Ohioans.
Kasich made the remarks during the unveiling of a 2014-2015 budget proposal. The spending plan includes an overhaul of the state's tax code, a decision to expand Medicaid under the new federal health care law, and a $1.3 billion increase in K-12 spending.
During a press conference Monday, Kasich touted the results of a recent $1.2 billion bond sale of liquor-profit backed bonds that financed the 25-year lease.
He said he would push lawmakers to approve the issuance of $1.5 billion of bonds backed by future Ohio Turnpike revenues to take advantage of the historically low interest rates in the municipal bond market.
"We sold the JobsOhio bonds at a 4% rate, which is an incredible rate. This is why it's so important we turn the [Ohio] Turnpike bonds around -- we are in an era of cheap money," said Kasich.
"The quicker we can move through this, the more likely we are to financing this in a favorable cost-of-money environment," he said. "The longer we wait the more risk we take on, and that's why I'll be asking legislators to move with all due speed to get this done in a timely fashion."
Kasich said the $500 million cash payment from the lease deal will go into the state's rainy-day fund, boosting it to $1.9 billion after two years. That level will mean an automatic taxpayer refund triggered when the state's surplus is over 5% of general fund revenues. The refund will total $400 million. "That's good news for every taxpayer in Ohio," Kasich said.
JobsOhio, a new private agency that Kasich created to fund job growth, floated the $1.2 billion bonds two weeks ago. The proceeds were used for a $500 million cash payment to the state's general fund, a $100 million payment to close out an environmental program that liquor bonds had financed, and defease $860 million of outstanding liquor-profit backed bonds. Another $125 million will be used for economic development, as well as the roughly $100 million of annual revenue generated by the liquor distribution system.