The Plain Dealer: Ohio lawmakers to introduce revamped version of Kasich’s budget proposal
media mentionBy Brandon Blackwell, The Plain Dealer
on April 07, 2013 at 12:01 AM, updated April 07, 2013 at 12:05 PM
COLUMBUS, Ohio – Ohio lawmakers have spent weeks poring over hundreds of proposed amendments to Gov. John Kasich’s “Jobs Budget 2.0” as they prepare to introduce on Tuesday what could be a vastly different proposal.
Get ready for Ohio’s Jobs Budget 3.0.
Rep. Ron Amstutz, Chairman of the House Finance and Appropriations Committee, said members introduced about 800 amendments to House Bill 59, which could alter or scrap much of the governor’s sweeping, 4,200-page plan.
But Amstutz, a Wooster Republican, has remained tight-lipped about the bill’s transformation, saying only that “you can’t change one thing and nothing else.”
Finance committee Democrats also are being kept in the dark, according to Rep. Vernon Sykes, the committee’s ranking minority member.
“They don’t share that much with the minority during the budget process,” said Sykes, an Akron Democrat. “We have no idea what their amendments might be or which of ours might be included.
“It will be a surprise to everyone when we see the new bill.”
Kasich’s plan, as it stands, would: revamp the state’s school funding formula; expand Medicaid to cover more Ohians; extract extra revenue from oil and gas drillers; and overhaul income, sales and small-business taxes.
Kasich’s two-year budget is bittersweet for both Republicans and Democrats who itch for certain pieces of the proposal, but bemoan others.
Here are the major elements of the $63 billion strategy — all subject to change.
•Education: The governor’s refashioning of education funding aims to level the playing field among Ohio’s school districts by attaching tax dollars to individual students, with a promise to not cut current levels of funding.
However, analyses by The Plain Dealer and the state legislature’s research arm suggest nearly half of the state’s school districts would see a cut. Cleveland schools would likely take a $5 million hit.
The proposal has some Republicans looking to replace Kasich’s plan with some not-so-new “Building Blocks.”
Rep. Gerald Stebelton is working with other members of the finance committee to retool the “Building Blocks” funding model applied during former Ohio Gov. Bob Taft’s administration.
The model sets a base funding amount and supplements those dollars based on the wealth of each district.
•Medicaid: Perhaps the most contentious piece in Kasich’s plan is the proposed expansion of Medicaid.
Democrats laud the unexpected move by the GOP governor to bolster access to Medicaid and lend a hand to some of the state’s poorest people.
Those making up to 138 percent of the federal poverty level would receive health care under the Patient Protection and Affordable Care Act.
Many House Republicans decry Obamacare for ballooning federal programs, but acknowledge that walking away from the millions of dollars a Medicaid expansion would bring to the state each year could put the entire budget at risk.
Expanding the program in Ohio would add about 275,000 people to the program.
The federal government would cover 100 percent of the costs of the expansion for three years. The state would then have to pay 5 percent of the costs, eventually having to cover 10 percent.
Some Republicans say they fear the expansion might leave the state in the lurch if the federal government doesn’t live up to its end of the bargain. The reservations could lead to an opt-out clause in the bill.
Another possibility being discussed is to allow those in the newly expanded population — those earning between 100 and 138 percent of poverty –to use Medicaid money to purchase their individual coverage through insurance exchanges that will be set up for Ohio.
•Sales and income taxes: Kasich’s proposed tax rebuild is far-reaching.
Aside from a 20-percent slash in income taxes, the governor also wants to drop the sales tax to 5 percent and begin collecting money from never-before taxed services.
Legal work, financial planning, haircuts and movie tickets are just a few of the services that would fall under Kasich’s plan to broaden the sales-tax base. Nearly all service transactions would be taxable unless specifically exempt.
Examples of exempt services include health care, education and social assistance.
The tax proposal has miffed Democrats who say it will burden middle- and lower-income families.
A study released by left-leaning think tank Policy Matters Ohio, which cites calculations by the Washington-based Institute on Taxation and Economic Policy, revealed that Ohioans earning less than $18,000 would, on average, pay an additional $63 in taxes under the plan. A net loss would be typical for Ohioans making up to $51,000 each year.
Conversely, ITEP reported, the top 1 percent of taxpayers would save an average of $10,369 each year if Kasich’s plan remains intact.
The Ohio Chamber of Commerce, usually a staunch ally of Kasich, piggybacked on Democratic laments and testified against the proposal, saying it would unfairly shift the tax burden to the state’s lowest earners.
•Small-business tax: Kasich’s 50-percent income tax cut offered up to small-business owners would provide a $1.9 billion shot of adrenaline into the state’s economy over the next three years, according to the governor’s administration.
But an analysis by The Plain Dealer found that the money saved by nearly 80 percent of small-business owners would be small.
The proposed 50 percent cut would apply to the first $750,000 in yearly income for Ohioans who claim small-business income on their personal tax filings.
Most small-business owners would save $400 or less per year, which has led some to question whether the plan will lead to more jobs.
The governor cites small-business owners as being the engines of job creation, and Democrats like Sykes agree. But the Center on Budget and Policy Priorities, a liberal think tank, says the cut won’t be a boon to employment.
Ideologies aside, the tax dollars lost to the cut could be an impetus for shutting the whole thing down.
•Severance taxes: The governor also seeks to keep his budget balanced by siphoning more money from oil and gas drillers.
Small, conventional crude-oil drillers would not see a change in the current 20-cents-per-barrel tax, but high-volume producers would eventually pay a flat 4 percent rate.
Small natural-gas operations would not be taxed, but their larger counterparts would be taxed at 1 percent. And large, liquid-gas drillers, who have previously gone untaxed, would eventually be docked 4 percent.
The administration said the severance taxes still would be the lowest among neighboring states, encouraging drillers to come to Ohio while allowing for Kasich’s small-business tax cut.
Lawmakers have been mostly quiet on the severance-tax proposal, but the oil and gas industry has admonished Kasich to drop the plan.
The Ohio Petroleum Council said it believes the proposal could drive away energy development.
Although it is unclear what will be changed in the budget bill, its transformation is inevitable. And Amstutz hinted that lawmakers could end up with a bill that both Democrats and Republicans can agree on.
“Some of the things they want to do, we want to do too,” Amstutz said.