Ohio legislature approves $62 billion budget; Includes income tax cut

An income tax cut, a new funding formula for schools and universities and a major expansion of vouchers are among the major policy changes included in the new two-year, $62 billion budget that got final House and Senate approval yesterday.

“This budget is about opportunity for Ohioans,” said Senate President Keith Faber, R-Celina. ” Almost all of the new spending in this budget falls into Medicaid and K-12 education.”

The Republican-crafted budget, which passed the Senate 21-11 and the House 51-43, now heads to Gov. John Kasich, who is likely to make his line-item vetoes and sign it on Sunday, the last day of the fiscal year.

“I ask you to support the budget not because it’s perfect, but because it furthers the path of opportunity for my kids, your kids and all Ohioans,” Faber told his fellow senators.

Republicans stressed the importance of a tax package that will net a $2.7 billion cut over three years, as the income tax cut is phased in, starting with an 8.5 percent cut this year and ending in 2015 at 10 percent.

The plan also provides a 50 percent income tax deduction on the first $250,000 of income for business owners.

Republicans argue that the tax cuts are vital to keeping Ohio competitive, creating jobs and letting Ohioans keep more of their own money. They see the income tax as punitive — Rep. Matt Huffman, R-Lima, called the income tax “a terrible idea.”

“We should have the lowest income tax we could possibly have and still pay our bills,” he said.

Rep. Lynn Wachtmann, R-Napoleon, added: “When the government has less of my money or my constituents’ money, we have more freedom. I think we should all be for more freedom.”

The tax plan also increases the sales tax by a quarter percentage point, eliminates on new school levies the 12.5 percent the state pays on local property taxes, and eliminates the homestead exemption for those who are not yet age 65 and earn more than $30,000.

Those changes, Democrats argued, make Ohio’s tax system more regressive and shifts the burden more to the lower and middle class.

“The poorest will have to pay more while the wealthiest pay less,” said Rep. Mike Foley, D-Cleveland, adding that Republicans tried income tax cuts in 2005, but the robust job growth never happened.

Democrats also are unhappy that the budget does not include the Medicaid expansion proposed by Kasich that would cover about 275,000 low-income Ohioans, and it contains a number of anti-abortion amendments, including those impacting Planned Parenthood funding and requiring doctors to perform an ultrasound and inform the woman if a heartbeat is detected.

“I was disappointed when the reference to the ‘least of these’ was misinterpreted,” said Rep. Ron Amstutz, R-Wooster, citing a Democratic reference to the words of Jesus. “Who would the least of these be but an unborn child? Why do they have to be victims?”

Republicans noted that the bill provides $1 billion more in Medicaid spending, and covers 231,000 more people than under current eligibility standards.

GOP leaders said the new funding formula spends more than $700 million more over the next two years on grades K-12 education, compared to the past two years, and $30 million more on early childhood education. The new funding formula for universities is based more on the success of institutions in graduating students.

Democrats countered that the spending increase does not fully make up for school funding or local government cuts over the last four years. “We have come nowhere near adequate or equitable funding for public education,” said House Minority Leader Tracy Maxwell Heard, D-Columbus.

A number of lawmakers on both sides of the aisle expressed concern about the budget process, which turns the budget into a massive policy document with little time for discussion of issues that otherwise would go through the normal legislative process.

Rep. Terry Boose, R-Norwalk, suggested that, in the future, the governor be told that he is to offer a budget that includes only numbers, not policy changes.

–*

Major changes wrought by the $62 billion, two-year state budget approved yesterday:

What’s in

INCOME-TAX CUT
Cuts state rates by 8.5 percent this year and up to 10 percent by 2015. Gov. John Kasich initially proposed a 20 percent reduction.
SALES-TAX INCREASE
Increases to 5.75 percent from 5.5 percent, instead of the governor’s initial proposal to lower the rate to 5 percent but greatly expand what is subject to the tax.
SMALL-BUSINESS TAX CUT
“Pass-through entities” get a 50 percent cut on up to $250,000 net income; Kasich wanted it for up to $750,000.
ABORTION
Abortion providers must give pregnant women an ultrasound and written notice of any fetal heartbeat before the procedure, as well as share the statistical probability of carrying the fetus to full term. Also blocks Planned Parenthood from federal family planning money and prohibits abortion clinics from having transfer agreements — needed for a clinic license — with public hospitals.
HIGHER EDUCATION
Funding increase of 4 percent; individual colleges’ amounts for the first time linked to student graduation rates.
SCHOOL FUNDING
Largest increase in more than 10 years by 2015 but, because of earlier cuts, still falls short of what schools were getting in 2009.
VOUCHERS
Makes 2,000 vouchers to pay for private schooling available to kindergarten students next year in households making less than 200 percent of the federal poverty level, and partial vouchers available for those between 200 and 400 percent. Expands vouchers to 2,000 first-graders in 2015.
LOCAL PROPERTY-TAX LEVIES
State will no longer pay 12.5 percent of the cost of new levies.
SENIORS’ PROPERTY TAXES
For those who have not yet turned 65, will no longer allow senior homeowners to qualify for the homestead exemption unless they earn $30,000 or less.
LOCAL GOVERNMENT
Increases funding by $28.4 million over two years. But the total is $202 million below the current two-year budget.

What’s out

MEDICAID EXPANSION
Adding 275,000 Ohioans as proposed by Kasich removed; separate legislation may be considered.
OIL/GAS SEVERANCE TAX

Increase pitched by Kasich nixed.

———————-