Governor John Kasich unveiled the executive budget proposal for the FY 2014-2015 operating budget bill early last month with a host of controversial new proposals, including tax changes and Medicaid expansion.  As the Governor had alluded to in speeches and comments to the media, his budget includes revenue growth and spending growth over the prior biennial budget.  The proposal calls for spending of $63.7 billion in FY 2014 (all funds), a 6.1 percent increase over FY 2013, and $66.8 billion in FY 2015 (all funds), a 4.8 percent increase over FY 2014.  Spending of state-only dollars is budgeted for $30.6 billion in FY 2014, a 10.5 percent increase over FY 2013, and $32.66 billion in FY 2015, a 6.8 percent increase.  The proposal was introduced in the House by the House Finance and Appropriations Chairman, Representative Ron Amstutz (R-Wooster), as House Bill 59.

As with most biennial budget bills, the proposal includes significant policy proposals.  Highlights of proposed changes include:

  • Primary and Secondary Education Funding Reform: includes an attempt to equalize “core” state funding to school districts, additional funding for high needs students and a continuation of guaranteed funding levels, though Governor Kasich has indicated that he would like to see the end of the guarantees after this biennium.
  • Cutting and Reforming Taxes: includes proposals to cut small business taxes in half for the first $750,000 in net income, a cut in personal income taxes by 20 percent and a cut in the state sales tax rate from 5.5 percent to 5.0 percent. At the same time, the bill calls for a broadening of the sales tax base to apply to most services – everything from hairstyling to attorneys’ fees would be taxed at 5.0 percent – and an increased severance tax on owners of high-volume horizontal wells.
  • Expansion of Medicaid Coverage: includes a proposal to expand coverage to low-income adults but conditions the program on continued federal support.  As part of the federal Affordable Care Act, services provided to this population are eligible for 100 percent reimbursement from the federal government for three years, decreasing to 90 percent beginning in 2020. The bill calls for Ohio to roll back this extension if the federal government changes the rules.
  • Higher Education Funding Reform: includes a proposal to require more of the State Share of Instruction – the primary state support of higher education – to student degree and course completion and less to enrollment figures.

Public reaction to the budget has been mixed.  Many are upset that the budget surplus and the proposed increased tax revenues are not being used to help offset recent cuts in funding to local governments and schools.  Legislators and the public alike have raised serious concerns and questions regarding the expansion of the sales and use tax to cover services.  While many praise the proposed expansion of Medicaid, legislators have questioned whether it is a sound decision given its reliance on federal funding. 

The House Finance and Appropriations Committee, and its various subcommittees, has been conducting hearings on the bill since early February.  Additionally, a subcommittee of the House Ways and Means Committee is tackling the controversial expansion of the sales and use tax. Deliberations in the House, and then in the Senate, will continue throughout the spring.  A final bill must be presented to the Governor for his signature by the end of the current state fiscal year, June 30, 2013.