May 11, 2012
COLUMBUS — The Ohio House was prepared Wednesday to send to the governor a nearly $56 billion two-year state budget bill that contains many of his policy changes for the state, including an overhaul of Medicaid, a new merit-based pay system for teachers and the sell or lease of certain state assets.
Still, state lawmakers put their mark on the spending blueprint. Their proposals would eliminate the state’s estate tax by 2013 and reward high-performing schools a $17-per-student boost in state dollars.
The Republican-led House was poised to pass the spending plan in its Wednesday afternoon session. The bill cleared the GOP-controlled Senate on a 22-11 vote Tuesday, with one Republican voting against it. Gov. John Kasich is expected to sign the bill Thursday evening, a day before the new fiscal year begins for the state.
Kasich, a first-term Republican, says he faced an estimated $8 billion budget gap when he took office in January. He has said the shortfall has forced him and legislators to make changes to how the state operates and trim how much money is directed to agencies, schools and local governments.
House Finance Chairman Ron Amstutz, a Wooster Republican, said he recognized it was a difficult budget bill to support.
“We do have a responsibility,” Amstutz told his fellow representatives. “I believe that this plan is very responsible, and a plan that will make our state stronger going forward.”
Hoping to regain its economic footing after the worst recession since the Great Depression, the state has seen a 14-month string of declines to its unemployment rate. It remained at 8.6 percent in May, compared with the national rate of 9.1 percent.
The governor touts that the budget measure doesn’t raise taxes, and keeps in place an $800 million cut in the personal income tax that went into effect in January. Critics, however, contend his plan makes such drastic reductions in the dollars given to school districts and local governments that teachers and police will be laid off and residents will end up taking a hit to their pocketbooks as levies get passed.
“Ohio’s economic recovery will suffer,” said State Rep. Vernon Sykes, the top Democrat on the House Finance and Appropriations.
Sykes, of Akron, pointed out that his colleagues have a green button for yes and a red button for no when voting on bills. “I wish we had another button that could express how disappointed I am with this particular budget.”
While state aid to schools increased by roughly $400 million, districts will have to grapple with the loss of nearly $900 million in federal economic stimulus money that’s no longer available.
Recognizing the decrease in overall dollars to schools, Amstutz said, “Next year is going to be a challenge. … These are not going to be easy budgets but they are reasonable given our circumstances.”
Cities, townships and other local governments will see a drop of more than $1 billion during the next two years through a combination of cuts to state funding and changes to the tax money they get.
Budget negotiators sought to give superintendents and local government administrators some flexibility. They added a new $45 million grant program in the budget for local governments that share services. They also agreed to a provision allowing — but not requiring — school districts, cities, universities and other public employers to participate in new health insurance pools.
Kasich has called the spending plan a “jobs budget,” though labor unions and others argue otherwise.
The budget plan would allow privatization of five state-run prisons and the Ohio Turnpike.
Under the turnpike compromise, the 241-mile toll road stretching from Pennsylvania to Indiana could be leased to a private operator — but state lawmakers would write the contract terms. That could allow the state to require the lessee to limit toll hikes, maintain the road and pay for improvement projects. Kasich has said a 30-year lease could yield the state at least $2.4 billion. Communities along the turnpike are concerned about the impact of privatization on employment and travel.
The governor also has added a tax break to the budget that he hopes would spur investment in the state’s businesses. Under the proposal, residents who leave their money in an Ohio-based company for two years could avoid tax on any return on that investment. Anyone who sells stock and reinvests that gain in an Ohio company also would be covered under the $100 million program.
Democrats took issue with the proposal, which got no hearings and was inserted into the budget as a committee met this month to work out a compromise on the spending plan.
“It’s basically just a giveaway to rich people,” said Rep. Mike Foley, a Cleveland Democrat.
Foley also took issue with the plan to do away with the estate tax. Ohio requires the tax on estates worth more than $338,333 before distribution to heirs or other beneficiaries. Eighty percent of the money from the tax goes to local governments, which have strongly opposed any changes.
In the fiscal year that ended last June, local governments’ coffers got $230.8 million from the tax.
“Local governments are getting killed in this budget,” Foley said.