Does Kasich’s JobsOhio Exceed the Governor’s Constitutional Authority?
On February 18, Governor Kasich signed House Bill 1 to establish JobsOhio, a non-profit economic development corporation that will, according to the administration, work more effectively than Ohio’s current Department of Development in efforts to retain and attract businesses. The Department of Development will be phased out when JobsOhio is fully up and running. Whether deserved or not, Ohio has developed a reputation as being a state that is hostile to job creation and business. Claiming it essential to Ohio’s future economic health to turn that perception around, Governor Kasich worked with the Republican legislature to make the passage of JobsOhio his first priority as governor.
As Ohio’s unemployment rate remains consistently higher than the national average and new job development remains anemic, the Kasich administration argues that JobsOhio is an attempt to change the paradigm on how we develop jobs in Ohio. Once looked on as cutting edge and a model for the nation, according to some observers, Ohio’s state economic development programs have become bogged down by bureaucracy. Kasich believes that the Department of Development can no longer be effective in efforts to revive the economy and create jobs. There is constant complaint that the Ohio Department of Development is not as responsive as its counterparts in other states. The Kasich administration argues that the department has become burdened by countless programs unrelated to economic growth. Now only 60 of the agency’s 400 employees are engaged in job retention and creation.
In various publications, Ohio is receiving low marks for business development. In 2009 Forbes Magazine’s Best States for Business 2009 ranked Ohio at 48th in its prospects for growth in areas like job creation, income growth, business openings and venture capital investments. According to the Beacon Hill State Competitiveness Report 2009, Ohio is 47th in its ability to compete economically with other states. The Tax Foundation 2010 State Business Tax Climate, ranked Ohio 47th in its business tax climate. And in Chief Executive Magazine 2010, Ohio is listed as one of the worst states for business. Kasich argues that it’s hard to attract and retain businesses to a state with this kind of report card.
Never shy about shaking things up, Governor Kasich has taken the responsibility of job creation out of the hands of state government. Stating that another “NCR incident is not an option,” Kasich wants to use the new entity to jump start Ohio’s economic development to bring new jobs to Ohio and to also retain the ones that are here now. JobsOhio will be managed by a board of directors who are leaders in the business world, and who will serve on the board with no pay. Kasich argued that because it’s not a government entity, it will “move at the speed of the market rather than at the speed of statute.” JobsOhio will be run by a chief investment officer nominated by the board and approved by the governor. The governor would serve as the chairman of the JobsOhio board.
The CIO will execute contracts, spend corporate funds and hire employees on behalf of JobsOhio. HB 1 provides an initial $1 million appropriation for its initial start-up. JobsOhio can also receive additional public and private funds. JobsOhio will be overseen by both its board, the Department of Development, the Office of the Governor and the General Assembly. JobsOhio will use incentives to help attract jobs and to raise private dollars that can be used to take equity in companies.
There’s only one problem with Kasich’s plan. According to a pair of Democratic legislators who teamed up with liberal advocacy group ProgressOhio, the newly created non-profit entity JobsOhio, which is designed to take over the state’s economic development activities, is unconstitutional.
Among the arguments which they point out make the newly created entity unconstitutional are the following: It is improper to require that any legal challenge be made directly to the Ohio Supreme Court and to require that a challenge be brought within 60 days; Kasich is not allowed to serve both as governor and as chairman of the JobsOhio board, as called for in the law; JobsOhio is permitted to incur debt and create liabilities, which would be distributed to the state if the entity is dissolved. The state constitution does not allow the state to assume that type of debt; and the law improperly makes the state a stockholder of JobsOhio. The case has not yet been scheduled for a hearing by the court.
This is not the first challenge to the Kasich plan by ProgressOhio. In March, a filed suit on behalf of ProgressOhio in the Franklin County Court of Appeals sought the removal of Mark Kvamme as Kasich’s cabinet-level development director because Kvamme was a California resident. Mark Kvamme is a venture capitalist at Sequoia Capital in Silicon Valley and plays a key role in the development of JobsOhio. As a result of the court challenge, Kvamme, who was serving in the position for no salary, stepped down as director and now serves as a consultant which doesn’t require state residency.
In creating JobsOhio, a non-profit economic development corporation outside of state government, has Governor Kasich exceeded his constitutional authority?