As he has for the past several years, Governor John Kasich took this year’s State of the State Address on the road to Wilmington, Ohio, near to the home of new Speaker of the House Cliff Rosenberger (R-Clarksville).  The Governor started the speech by highlighting just how far Ohio’s economy has come since he delivered his first address in 2011 – noting that in 2011 there was an $8 billion budget deficit and only $0.89 in the state’s emergency fund to a balanced budget in 2015 and an emergency fund with $1.4 billion.  He touted the fact that Ohio has had the largest tax cuts in the country, faster than average wage growth and lower unemployment than the national average.  But Governor Kasich also stressed that Ohio continues to face challenges, from an aging workforce to unpredictable economic conditions to pressure to continue to support economic growth. 

The Governor spent most of the evening advocating for the proposals contained in his FY 2016-2017 state operating budget.  He was adamant in calling for more income tax cuts as a key driver of job growth and economic investment.  Governor Kasich strongly believes that not only do high income taxes disincentivize business growth but they also drive away the state’s best and brightest residents.  The Governor proposed another $500 million in tax cuts over the biennium – primarily in cuts to income taxes for individuals and small business.  Those tax cuts, however, are funded by increases in the Commercial Activities Tax (CAT), the tobacco taxes, the sales tax, the severance tax and others:

  • CAT tax increase: The proposal would adjust the rate from 0.26 to 0.32 percent – the first adjustment since it was enacted in 2006.
  • Expansion of the sales tax base and a rate increase: 
    • The budget proposes increasing the state sales tax rate from 5.75  percent to 6.25 percent.   
    • The Governor has again proposed broadening the base to tax some  services, though a much smaller list of services than was included in  his last budget proposal – cable TV subscriptions, parking, lobbying,  public relations, market research/opinion polling, management  consulting, travel packages and tours, and debt collection services. 
  • Severance tax increase:  The Governor has proposed a fixed rate for crude oil and natural gas of 6.5% when sold at the wellhead, and a lower rate of 4.5% for natural gas and natural gas liquids when sold downstream.  It also eliminates the tax on “small, conventional natural gas producers.”

In addition to discussing the tax reform proposals, the Governor spent significant time talking about his K-12 and higher education proposals.  As the Governor stated, the budget is more than just numbers, it’s about people. The administration has once again worked on K-12 education funding in an attempt to prioritize funding to districts with lower property tax wealth and income levels so as to provide more funding to districts least able to raise local funding.  The budget would also impose new accountability standards on charter school sponsors in an attempt to weed out those sponsors not supporting their schools and students.  And the budget checks tuition growth at the state’s public universities and community colleges, while also increasing support for programs that allow high school students to obtain college credit. 

Governor Kasich also devoted time to the health and human services provisions in the budget.  Despite the challenges faced in expanding Medicaid to the working poor in the last budget, Kasich proposed funding for that expansion but does require recipients earning more than 100 percent of the poverty level to pay premiums. The budget attempts to streamline social services in order to help Ohioans move up and off Medicaid.  In order to keep costs down, the Governor proposed continued payment reform to prioritize preventive care and to ensure that Medicaid pays for quality of care, not just volume of care.  He also discussed his commitment to rebuilding the state’s mental health system and the large investment in the developmental disabilities system proposed in the budget.  A new budget must be signed by the Governor by June 30, 2015, in time for the new state fiscal year.

Following recent tradition, Governor Kasich also handed out this year’s Governor’s Courage awards.  This year’s recipients included:

  • Jackie Fletcher – a nurse with Knox County Public Health who worked with the state’s Amish populations during last year’s measles outbreak, receiving on behalf of all the state’s nurses;  
  • Brittney and Shane Robinson – a couple who stopped to help car accident victims out of a burning car in Lorain County; and  
  • Lauren Hill – a Mount St. Joseph University student battling brain cancer who has raised significant funds for cancer research.