COLUMBUS — Gov. John Kasich unveiled a two-year spending plan Feb. 4 that includes tax cuts for small businesses and individuals, a tax hike on oil and gas production and increased health care services for low-income residents.
Kasich said the biennial budget legislation will “create jobs, create economic growth” and “run government in a more efficient and effective manner.”
He added later, “The purpose of this is to make sure Ohio remains competitive. We’ve had too many businesses, too many people that have left this state and taken their wallets with them. But we also believe that by significantly reducing the taxes for small business, we will continue to see economic growth.”
The budget totals more than $63 billion in general revenue spending, up from nearly $56 billion OK’d by lawmakers for the current biennium. That includes more than $31 billion for Medicaid, which provides medical treatment and other services for Ohioans in need, and $14.8 billion for primary and secondary schools.
Kasich’s proposal would halve taxes for small businesses on their first $750,000 in earnings, cut personal income taxes by 20 percent over a three-year period, cut the state sales tax rate to 5 percent from 5.5 percent and increase taxes on oil and gas production.
It would also expand sales tax collections to cover services, though excluding health care, construction, residential property rental, day care, insurance premiums and some other categories. Lawyers, architects, accountants and lobbyists are among the service-providers that would be subject to sales taxes for the services they provide.
State Tax Commissioner Joe Testa said the proposal includes a temporary rollback in local sales tax rates, with the state guaranteeing at least 10 percent increases in collections.
“There will be some special interests who will not think [the sales tax plan] is better,” Kasich said. “They will come to the legislature and they will pound on people. I just want to make it clear: When they win, the people of the state lose. When they win, the tax cut comes down.”
The administration also is touting a “good management dividend,” an additional but temporary 4 percent income tax cut that automatically takes effect when the state’s rainy day fund reaches $1.5 billion. Kasich said he expects the fund to reach close to $2 billion at the end of the current fiscal year, thanks in part to a $500 million payment from JobsOhio due to bonding of the state’s liquor enterprise.
“This is going to help Ohio create jobs and stimulate economic growth,” Testa said.
Kasich’s plan also would expand Medicaid eligibility to Ohioans earning up to 138 percent of federal poverty level (about $15,400 per person). But the extension comes with a condition: If the federal government fails to cover the bulk of the costs, as it has promised, the state will reverse course.
“We are going to extend Medicaid to the working poor and to those who are jobless trying to find work,” Kasich said.
The budget seeks to pump increased support for mental health and alcohol and drug addiction services, “so that we don’t find as many of our mentally ill in our jails today because they received no care,” Kasich said. “Or living under a bridge. It’s not acceptable in a big state like Ohio, a major powerhouse in the United States of America.”
Other provisions would require eligible patients to pay a portion of the costs if they turn to emergency rooms for nonemergency care and would limit certain payments when patients are readmitted to hospitals within 30 days of being discharged.
“We don’t want 275,000 Ohioans getting their primary care in an emergency room,” Kasich said. “It is not sustainable, it doesn’t work, it is not humane, and it costs everybody a lot of money.”
Kasich’s budget rollout Feb. 4 included several other major policy proposals that were announced earlier, including reforming the way Ohio funds schools, using the Ohio Turnpike to leverage billions for road and bridge projects and tying some state funding to universities’ graduation rates.
The plans are far from a done deal, however. The House Finance Committee begins its deliberations on the plan this week, and the Ohio Senate will take up the bill in coming months. Final passage is expected by the end of June.
Kovac is the Dix Capital Bureau chief. Email him at email@example.com or on Twitter at OhioCapitalBlog.