By Jo Ingles
COLUMBUS, Ohio (Reuters) - Ohio's Republican Governor John Kasich on Tuesday unveiled a $55.5 billion two-year budget that sells off five prisons and slices aid to local governments to help close an $8 billion budget gap.
The budget proposal follows a push by Ohio Republicans to curb collective bargaining rights for public employee unions in the nation's seventh-largest state. Several states are pursuing similar curbs in one of the gravest threats to unions in decades.
In a reference to the controversial Ohio bill curbing union power, Kasich said local officials should have new tools to contain costs as funding from the state is being reduced. The bill is working its way through the Republican-held legislature but is expected to pass by the end of the month.
Kasich's budget plan preserves an $800 million income tax cut and provides $34 million in tax incentives that Kasich hopes will lure jobs to the state, which has suffered big job losses in recent years.
"There are no mass layoffs in this budget," Kasich told reporters after releasing the 774-page budget. "This budget is woven with one reform after another."
Kasich's proposal also calls for restructuring mostly outstanding state general obligation debt to gain $440 million for the budget by pushing debt service payments due in fiscal 2012 into fiscal 2015 through 2025.
His plan also projects a slim $135 million surplus and a still-empty rainy day fund when the two-year budget cycle ends on June 30, 2013.
State officials said the sales of five prisons and changes to how the system houses low-risk prisoners will save the state more than $200 million.
"The most violent prisoners will not be subject to privatization," Kasich said.
Kasich said his budget obtains savings by seeking to keep more elderly people in their homes rather than entering state nursing homes.
Republicans in Ohio and other states argue that curbs on public sector unions, which are expected to pass Ohio's legislature this month, are essential to tighten stressed budgets.
Ohio's bill contains provisions that prohibit strikes by public employees, give local governments power to settle disputes, and limit collective bargaining on health care and other benefits for 300,000 teachers, police, and other workers.
Democrats say the measures amount to union-busting and are aimed at gutting a key Democratic constituency in the industrial state of 11.5 million people which has proved to be crucial in recent presidential elections.
The Ohio measure follows a law enacted in Wisconsin last week despite large protests there.
Demonstrations were also planned across the nation on Tuesday to protest Republican efforts to trim tens of billions of dollars from the federal budget, which would cost some 700,000 workers their jobs, according to the liberal group MoveOn.org.
(Additional reporting and writing by Karen Pierog and Andrew Stern; Editing by Cynthia Osterman)