As required by the Ohio Constitution, and facing a governor signing deadline of this date, Ohio lawmakers passed a new 2014-2015 $62 billion state budget this past Thursday. As expected, it passed the Ohio Senate by a 21-11 vote, with only one GOP defection, and by a 53-44 vote in the House, with seven GOP defections. Beyond that, the bill is being highly criticized by most Democrats and few Republicans and while Governor John Kasich has until today to veto budget line items, he will sign the bill into law. Some of the highlights of the budget include a net tax cut of $2.7 billion over three years on incomes and businesses, $700 million for more schools compared with the past two years, ties funding for state universities and colleges to graduation rates and an increase in Ohio's sales tax.
From a tax standpoint, the proposed budget phases in a 10 percent income tax across all income brackets over a three year period and cuts income taxes for small business owners by 50 percent on the first $250,000.00 of gross income. However, in order to make up the difference in the same, Ohio's sales tax will increase from its current 5.5% to 5.75% per dollar, effective September 1, 2013. The bill also provides that said tax will now apply to digital goods such as e-books and music downloads. In Belmont County, with its current 1.5% piggyback tax to help fund the county's general and infrastructure funds, the new sales tax rate will be 7.25% come September. The Governor's severance tax proposal on oil and gas drilling, which garnered a lot of attention in eastern Ohio, did not make the General Assembly's final cut and as such, will be excluded from this biennium budget.
The budget also changes how Ohio calculates the state's share of funding to public school districts while also increasing the per pupil amount to $5,745 in 2014 and $5,800 in 2015. However, that increase would be immediately passed on to local property tax owners as the new budget eliminates the state's obligation to pay the first 12.5 percent of the local tax burden on any new tax levies passed through what is now the property tax rollback program. Currently, the state reimburses school districts the 12.5 percent of monies lost in this program and under the state's 10% and 2.5% rollbacks along with the homestead exemption program for those over 65 years of age or permanently disabled. Beginning with all levies passed this coming November, the 12.5% state-assisted funding disappears and will fall back on local property tax owners, resulting in additional tax burdens on those owning real estate. It is important to note too though that the state will continue to pay this to local governments on their existing levies and renewals. Finally, a few other education-related matters that made the final budget version include changes in funding formulas for universities and colleges that link state funding to the schools' graduation rates and an innovation fund that rewards districts that restructure and improve efficiency, with the hope of securing improved student performance. Time will tell if these proposals yield any cost-savings to taxpayers.
As expected, the state budget did not include any expansion of the Medicaid health insurance program, much to the chagrin of Democratic leaders in the General Assembly. It is an issue, however, that Republicans state will be addressed this year, outside of the budget, as the Affordable Care Act takes effect January 1, 2014, and requires most people to have health insurance coverage or pay a tax. We will see much more debate on this issue as we move toward the first of the year.
While the aforementioned items are some of the few highlights of the new Ohio budget, there are literally hundreds of policy provisions in it, including last-minute additions that garner little in depth review. Therefore, it will take some time to digest the entire budget to see how it may directly affect eastern Ohio residents, local governments and businesses.