On March 15, 2011, Governor John Kasich introduced his “Jobs Budget,” which has since seen more than three months of intense deliberation by the Ohio General Assembly. On June 27, the budget conference committee voted 4-2 along party lines to send the final budget compromise to each of the respective legislative chambers for a vote. On June 28, the Ohio Senate voted largely along party lines (22-11) to approve the conference committee report, and the House followed the next day to approve the measure along party lines with a 59-40 vote.
The two-year, $55.8 billion package contained a number of policy and fiscal decisions that will impact school districts and local governments, healthcare, prisons and Ohio’s tax structure, while also adding $187 million to the state’s “rainy day” fund.
The Governor vetoed seven items, including:
- a $5 million transfer to the Facilities Establishment Fund;
- a provision that put restrictions on the state’s privatization of prisons;
- an earmark for the Hattie-Larlham Community Living;
- a provision that required the Ohio Lottery Commission to report on ticket sales and advertising;
- a School Facilities Commission provision on funding and eligibility;
- a health care pooling program study that was in the bill twice; and
- a provision that returns the Body Max Index program for children to an “opt-out” rather than an “opt-in” program.
For more information on specific portions of the budget, please visit: http://www.lsc.state.oh.us.
For the “comparison document” on a specific state agency budget, please visit: http://www.lsc.state.oh.us/fiscal/ comparedoc129/asreportedbycc/default.htm.
Below is a brief synopsis of the state operating budget.
General Tax Provisions
- Includes no tax increases, and preserves the previously enacted state income tax cut.
- Repeals the estate tax for estates of individuals dying on or after January 1, 2013.
- Provides for a sales tax exemption, income tax deduction and commercial activity tax exclusion for an entity’s gross receipts for transfers between the state and an entity that enters into a contract with the state to provide highway (i.e., turnpike) services.
- Establishes InvestOhio, a new program that will offer income tax credits of 10% of the qualifying investment and unused credits that can be carried forward for up to seven years. This provision requires that the investment be in Ohio companies with at least 50 employees in Ohio or a majority of all its U.S.-based employees in Ohio, with assets of $50 million or less or having sales of $10 million or less. Investments must be made on or after July 1, 2011. A provision limits the value of the credit to $100 million in the fiscal biennium and $1 million to any one taxpayer. Credit cannot be claimed until satisfying the “holding period” of two years beginning on the day the investment was made between July 1, 2011 and June 30, 2013; or five years if the investment is made after June 30, 2013.
- Establishes a Refundable Job Retention Tax Credit up to $25 million between 2011 and 2013, and, beginning in 2014, an amount of $25 million per year in the ensuing 15-year period for businesses that retain 500 full-time employees and maintain an annual payroll of at least $20 million, or maintain an annual payroll of $30 million.
- Creates a Commercial Activity Tax exemption for receipts from transactions involving a uranium enrichment facility.
- Applies the Commercial Activity Tax to gross receipts of a casino operator without deduction for casino user winnings and payouts.
- Eliminates mail-in voter registration materials with income tax returns.
- Expands political subdivision authority on tax levies to include emergency medical service personnel, parttime police and other personnel. Under current law, levies can only be used toward salaries and retirement of permanent police and fire personnel.
- Extends real and tangible personal property tax exemption for new energy facilities to three years by which time the owner must submit a tax exemption application.
- Accelerates the phase-out of the public utility property tax loss reimbursements for schools, and holds reimbursements at CY 2013 levels in subsequent years for units of local government other than school districts.
- Changes distribution of kilowatt-hour tax receipts, requiring 88% (from 63%) of receipts to be credited to the GRF; 9% (from 25.4%) to the School District Property Tax Replacement Fund; and 3% (from 11.6%) to the Local Government Property Tax Replacement Fund.
- Changes the distribution of excise tax on natural gas distribution companies, requiring 100% to go to GRF instead of school districts and local government.
- Changes the method of apportioning reimbursement payments for local governments and school districts for mergers and annexations from property value basis to square mileage basis.
- Accelerates the phase-out of the fixed-rate tangible personal property tax loss reimbursement for nonschool taxing units, and holds reimbursements at CY 2013 levels for units of local government other than school districts.
- Grants full or partial exemption from all sales and use taxes for equipment used in the operation of a computer data center business if the business makes a capital investment of at least $100 million in Ohio and maintains annual payroll for employees involved in the capital investment project of at least $5 million.
- Prohibits the Tax Commissioner from assessing use tax liability incurred before 2008, and places a seven-year time limit within which the Commissioner can assess any alleged unpaid use taxes. Application for refund must be made within six months.
- Exempts sales and use taxes from building materials for keeping “captive deer,” horses, fish and agricultural land tiles used in agriculture.
- Excludes from the sales and use tax the value of gift cards or certificates redeemed by a consumer in exchange for the vendor’s goods or services as part of the vendor’s awards, loyalty or promotional program.
- Extends the credit for rehabilitating a historic building, and limits credits to $60 million for application period.
- Reduces Local Government Fund dependent on the total amount allocated to the fund as a percentage of the total state tax revenue.
- Extends wine tax revenue, two cents per gallon, credited to the Ohio Grapes Industries Fund.
- Permits the Tax Commissioner to adopt rules requiring electronic filing.
- Permits school districts to propose a combined income tax and property tax levy question up to twice a year.
- Establishes a tax amnesty program from May 1 to June 15, 2012 (including state personal income tax, sales and use tax, corporate franchise tax, county and transit authority tax, school district income tax, estate tax, motor fuel tax, cigarette tax, CAT, natural gas company excise tax). Tax Commissioner may contract with a third party to administer program.
- Establishes a tax amnesty program for use tax from effective date of bill to May 1, 2013 for taxes owed on or after January 1, 2010. Authorizes the Commissioner to enter into a two-year payment plan for participants in the use tax amnesty program.
- Exempts from property tax the Cincinnati convention center, and authorizes abatement of unpaid taxes for any tax year at issue on the bill’s effective date.
- Extends authority of local governments to offer Enterprise Zone economic development incentives from October 15, 2011 to October 15, 2012.
Labor Provisions Concerning Prevailing Wage
- Changes the monetary thresholds of the Prevailing Wage Law requirements. Increases the threshold from $78,258 to $125,000 for the first year after the effective date of the amendment, $200,000 for the second year and $250,000 thereafter on construction of public improvements other than roads, sewers, ditches and other related projects.
- Changes the monetary threshold of the Prevailing Wage Law that applies to reconstruction on public improvements other than roads, sewers, ditches and other related work to $38,000 for the first year after the effective date of the amendment, $60,000 for the second year and $75,000 thereafter.
- Retains the Prevailing Wage Law thresholds for roads, sewers, ditches and other related projects.
- Exempts the Prevailing Wage Law from public improvements undertaken by, or under contract for, a port authority created by a municipal corporation, township or county after 1964 under R.C. 4582.02 or 4582.22, and repeals the prevailing wage requirement that applies to the construction or repair of a port authority facility.
- Exempts from the Prevailing Wage Law any portion of a public improvement that is undertaken and completed solely with donated labor.
- Prohibits a public authority from applying prevailing wage requirements to a public improvement that is undertaken by, or under contract for, a school district or education service center.
- Establishes provisions for determining prevailing wage, grievances and penalties for contractors and subcontractors.
Removes requirements that prevailing wage be paid to contractors for:
- projects under the Department of Development’s Job Ready Site Program;
- any industrial, distribution, commercial and research projects receiving funding from ODOD under Chapter 122 of the Ohio Revised Code;
- projects involving the acquisition, construction, improvement or equipping of property for industry, commerce, distribution or research under Chapter 165 of the Ohio Revised Code;
- projects receiving funding from the Department under Chapter 166 of the Ohio Revised Code;
- energy resource development projects or facilities supported by the Department under Chapter 1551 of the Ohio Revised Code;
- projects undertaken by community urban redevelopment corporations in conjunction with municipal corporations under Chapter 1728 of the Ohio Revised Code;
- air quality projects financed by the Ohio Air Quality Development Authority under Chapter 3706 of the Ohio Revised Code; and
- rail service projects funded by the Ohio Rail Development Commission under sections 4981.11 to 4981.26 of the Ohio Revised Code.
Labor Provisions Concerning Construction Reform
- Eliminates the requirement that the multiple-prime contracting method be used for public improvements, but does not prohibit its use.
- Authorizes public authorities to enter into public improvement contracts with construction managers at risk (CMARs) and design-build firms (D/B firms). Exempts the Ohio Turnpike Commission from this provision.
- Authorizes public authorities to enter into public improvement contracts with general contracting firms as sole prime contractors regardless of the size of the project. Exempts the Ohio Turnpike Commission from this provision.
- Increases from $50,000 to $200,000 the minimum project cost threshold that requires competitive bidding for state projects. Exempts CMARs and D/B firms from this requirement.
- Clarifies that for port authorities, the current law construction bid requirements do apply if the port authority elects to contract with a CMAR or D/B firm for such construction projects.
- Increases from $25,000 to $50,000 the professional design fee cost threshold.
General Local Government Provisions
- Reduces funding to local governments by $630 million over two years.
- Grants authority to local subdivisions to enter into contracts for shared services.
- Requires state agencies and state institutions of higher education to have Controlling Board consent for a legislative contract that exceeds $50,000.
- Creates a “fiscal caution” designation for municipal corporations, counties and townships and makes other requirements for these political subdivisions.
- Specifies that if an officer of a political subdivision is in fiscal emergency and he/she has been convicted of certain violations, he/she is ineligible to hold public office in Ohio or be employed by a public entity for seven years after conviction.
- Allows counties, townships and municipal corporations to establish a modified work week for exempt employees, including reduction in the work week, and allows for mandatory cost savings programs.
- Prohibits the use of public funds by a political subdivision, including public hospitals, to pay for abortions, except in cases of endangerment to the life of the mother or in cases of rape or incest, and prohibits the use of public buildings and equipment from these activities.
- Allows for general obligation bonds by a county for acquisition of construction or real property to have a maximum maturity of up to 40 years, instead of 30 years.
- Allows for a regional council of governments to enter into contracts on behalf of member political subdivisions.
- Authorizes county commissioners to require county offices to use centralized purchasing for certain services, except for information technology, specific types of human resources and certain software purchases.
- Makes certain restrictions to the Toledo Area Transit Authority.
- Allows townships to merge, and makes other provisions.
- Allows townships to merge with municipal corporations, with ballot approval.
- Makes general changes to public legal notices and advertisements.
- Removes the requirement that a prosecuting attorney examine and certify each item in the bill of costs prepared by the clerk for nonindigent felony convictions.
- Allows county commissioners the ability to donate or sell property and buildings to any board of health.
- Prohibits a political subdivision from enacting laws that ban or restrict certain food based on nutrition.
- Provides that no solid waste district can exempt a public hauler from a fee that is charged to private sector haulers by the solid waste district.
- Authorizes counties to adopt a quarterly spending plan under certain conditions.
- Changes the scope of the contracting authority of a county sewer district.
- Makes certain land conveyances.
- Provides pooled health insurance to local governments, school districts and institutions of higher education.
- Makes changes to public records laws.
- Makes changes for transfers of school district bond funds.
- Holds tuition increases to 3.5% in each year of the biennium.
- Changes the term of the Chancellor of the Board of Regents from five years to the term of the appointing Governor.
- Grants residency status, for purposes of college tuition, to Ohio high school graduates, regardless of residence prior to enrollment.
- Requires all state institutions of higher education to issue a statement describing a method for earning degrees within three academic years.
- Expands Choose Ohio First grants to include colleges and universities that propose scholarships for graduate level science, technology, engineering, math or medicine teacher education students who establish domicile in Ohio and commit to teach for at least three years in hard-to-staff Ohio school districts, with priority given to students who graduate from Ohio high schools.
- Makes changes to the distance learning clearinghouse.
- Creates a digital learning task force and digital learning textbook program, and requires each state institution to submit a plan to reduce the student cost of textbooks.
- Requires Tuition Trust Authority to establish a low to moderate income investor program.
- Prohibits an institution of higher education from denying benefits to a religious student group.
- Requires all presidents of state institutions to jointly establish by December 31, 2012 uniform statewide standards in math, science, reading and writing so college students can have a “remediation free” status.
- Allows state institutions of higher education the ability to enter into lease agreements with nonpublic vendors to construct and operate housing facilities and other “auxiliary” facilities such as dining halls and athletic facilities.
- Requires the Chancellor to develop a plan for designating public institutions of higher education as charter universities.
- Makes a number of GRF appropriation items for specific programs.
- Permits the board of trustees at state-assisted institutions of higher education to adopt a policy for mandatory furloughs for employees.
- Allows for alternative retirement plans by public institutions of higher education.
- Changes qualifications for obtaining and holding an alternative resident educator license.
General Primary and Secondary Education Provisions
- Repeals the current formula for funding traditional school districts, commonly called Evidence-Based Model (EMB).
- Reduces school funding overall by $700 million over two years.
- Provides for an additional subsidy of $17 per student for schools classified as “excellent” or “excellent with distinction.”
- Requires school districts to lease real property to community schools under certain conditions.
- Allows for five new e-schools to open each year after the moratorium ends in January 2013.
- Makes changes to community schools and allows for 20 new charter schools in the next five years.
- Makes certain provisions against community schools to collectively bargain.
- Requires school districts that are receiving Race to the Top funds to pay teachers according to a performancebased schedule beginning in the 2013-2014 school year and allows for additional payments of compensation to teachers who agree to perform additional duties.
- Requires additional statewide standards and evaluations for teachers.
- Provides for additional requirements for out-of-state teachers.
- Changes qualifications for alternative resident educator license and specifies that Teach for America participants are ineligible for alternative resident educator license.
- Increases the number of Education Choice scholarships from 14,000 to 30,000 for the 2011-2012 school year and 60,000 for 2012-2013 school year and thereafter, and makes other provisions for the program.
- Removes the requirement that, in order to receive a Cleveland Scholarship for high school, the student must have already received a scholarship in grades K to 8, and increases the dollar amount of the scholarship.
- Allows for Education Service Centers (ESCs) to enter into service contracts with other political subdivisions.
- Allows for additional end-of-year assessments.
- Creates a pilot program in Columbus City Schools for low performing schools, and a pilot program in Columbiana County for a multiple track curriculum.
- Creates requirements for the Ohio Department of Education to rank each school district based on certain performance index scores.
- Makes certain requirements for school districts with daily membership below a certain threshold to enter into agreements with ESCs.
- Makes changes to ESCs.
- Repeals provision restricting the calorie and fat levels of milk sold in schools.
- Makes changes to calamity days.
- Allows school districts the ability to terminate transportation employees and contract with an independent agent.
- Makes changes to college-preparatory boarding schools.
- Removes requirements that school districts adopt their textbooks from the list provided by ESCs.
- Allows for a school district to enter into a contract exceeding the lesser of $500,000 or 1% of total revenue for the current fiscal year without certification indicating adequate revenue to cover the contract if the multi-year contact is for materials, equipment or nonpayroll services essential to the education program of the district and provides savings as compared to the single year contract.
- Requires the Governor’s Director of 21st Century Education to develop a plan for consolidation and shared services and makes other provisions regarding this measure.
- Permits school districts to transfer unencumbered textbook funds to the district’s general fund.
- Increases Early Childhood Education funding.
- Eliminates the School Employees Health Care Board and transfers all assets to the Ohio Department of Administrative Services.
Economic Development Programs
- Creates JobsOhio, which is the Governor’s central job creation strategy for the State of Ohio. The program envisions contracting with regional economic development agencies to help make economic development deals. The budget allows for a 25-year lease or conveyance of the state’s liquor wholesale operations to JobsOhio, and contains a provision to have the enterprise acquisition project conveyed or transferred back at no cost.
- Establishes the Local Government Innovation Program for purposes of making loans and grants to political subdivisions; creates a 15-member council to evaluate projects; uses Public Works Integrating Committee structure for proposals to be submitted; and provides $45 million in funding.
- Provides for $5 million per year for economic development purposes related to the Department of Defense facilities in Ohio.
- Allows for $750,000 for the Alternative Fuel Transportation Fund to provide for diesel emissions reductions grants.
- Permits the Director of the Ohio Department of Development (ODOD) to seek $75,000,000 in federal funds for the Historic Preservation Tax Credit Fund.
- Transfers the Ohio Coal Development Office from the Ohio Air Quality Development Authority to the ODOD.
- Makes general appropriations for existing economic development programs.
- Allows for five state prisons to be privatized.
- Allows for the lease of the state liquor operations to JobsOhio.
- Allows for the lease of the Ohio Turnpike, with approval of the General Assembly.
- Allows school districts the ability to terminate transportation employees and contract with an independent agent.
General Healthcare Provisions
- Reduces nursing home funding by $340 million, with average daily rates dropping from $177.53 to $167.25 per patient, totaling a 6% reduction.
- Increases total Medicaid spending for long-term care, with most of those resources directed to PASSPORT.
- Reduces Medicaid funding to Ohio hospitals by $1 billion in each year of the biennium.
- Extends the hospital franchise fee, adding $1.2 billion in additional revenue.
- Reduces aide services and nursing services of independent providers, and transfers those savings to agency homecare providers.
- Establishes an incentive program to encourage electronic health records.
- Makes changes to physician assistant Medicaid claim submissions.
- Mandates automatic suspension of a Medicaid provider reimbursement if there is a credible fraud allegation.
- Permits ODJFS to recover Medicaid overpayment to hospitals.
- Increases general Medicaid provider fees.
- Exempts a facility from the Power Siting Board Certification regulatory process if it is a manufacturing facility that creates byproducts used in the generation of electricity.
- Reduces assessments made against nuclear electric utilities by $2.8 million in each year.
- Reduces assessments utilities pay for the operations of the Ohio Consumers’ Council, resulting in $7.2 million in savings to consumers over the biennium.
- Prohibits the Ohio Consumers’ Council from operating a call center for consumer complaints, and requires those calls to be transferred to the Ohio Public Utilities Commission.
- Removes the Community Voicemail program that was established in Senate Bill 162.
- Extends real and tangible personal property tax exemptions for new energy facilities to three years, by which time the owner must submit a tax exemption application.