House Budget Changes, in a Nutshell

Yesterday, a House committee adopted a version of the state two-year budget (Sub. H.B. 59) that represents a dramatic change from what was introduced by Governor Kasich in early February.

In brief, here’s what’s in and what’s out:

Tax Changes

  • Kasich’s plan to cut the income tax by 20 percent for individuals and 50 percent for anyone reporting business income was dramatically scaled back to a 7-percent across the board cut, effective in tax year 2013. The $1.5 price tag comes from natural growth in other state taxes and $500 million in one-time money from the sale of liquor bonds to fund JobsOhio.
  • The $3 billion increase in sales tax revenue is gone, with the House scrapping Kasich’s plan to cut the tax rate but apply the tax to a vast array of currently-untaxed services.
  • The House eliminated a modest increase in the oil and gas severance tax, which would have raised $200 million over two years and still preserved Ohio’s place among the bottom among states that impose a severance tax.
  • The House added a provision to require out-of-state retailers to collect sales taxes on purchases if they have certain operations in Ohio. The proposal, known as the “Amazon tax,” has previously been estimated to be worth up to $350 million per year for Ohio. It is unclear how much the House has budgeted in increased sales tax revenue from the move.

Education

  • The House boasts of increasing funding for schools, but there is actually less money in the plan than the Kasich proposal — widely-panned as inadequate. 
  • One-third of districts remain on temporary “guarantee” funds that will represent a funding cut down the road when they are eliminated.
  • The expansion of the “parent trigger” included in Kasich’s budget is gone, but the expansion of vouchers for private schools remains.

Healthcare

  • The House rejected $13 billion in federal funds and $400 million in cost savings included in the Kasich budget that would have come from the expansion of Medicaid eligibility to the poorest Ohioans. 
  • For the fourth time in two years, legislators have introduced a measure to block taxpayer funds from Planned Parenthood, a vital source of healthcare for thousands of poor women.

Oil and Gas

Local Governments

  • No funding was restored to local governments, cut by $1 billion in the last state budget. Policy Matters estimates that this budget deprives local communities of  another $1.4 billion in revenue compared to funding levels before Kasich took office.
  • The measure to cut local sales tax rates and keep any sales tax issues off local ballots for three years has been removed.

Testimony on the changes began today and will continue Thursday and Friday. Next week, additional amendments and a vote are expected in the House Finance committee, with final consideration by the full House of Representatives on Thursday.