The state budget that Gov. John Kasich proposed on Monday reflects a healthier Ohio economy than the one his first, austere spending plan responded to two years ago. His new budget makes encouraging gestures toward greater fairness and inclusion on such vital issues as health care and public school funding.
But it also offers tax-cutting proposals that threaten to make the state budget and tax code less efficient and equitable. As they act on Mr. Kasich’s two-year, $64 billion budget, lawmakers of both parties will need to distinguish its positive elements from its less-promising provisions.
The most heartening feature of the governor’s budget is his decision to expand Ohio’s Medicaid program of health insurance for low-income residents. Under the Affordable Care Act, Washington initially will pay the full cost of the expansion — which will cover a projected 456,000 more working-poor Ohioans, including 25,000 in Lucas County — then gradually taper off to a still-generous 90 percent.
The expansion will keep federal tax dollars in the state, while improving the health of many of the most vulnerable Ohioans. It will relieve medical providers — and people with health coverage — of much of the cost of emergency care for patients who lack insurance. It will increase state and local tax revenue and create an estimated 32,000 jobs.
The governor’s Medicaid plan properly places good policy ahead of partisanship and ideology, despite his continued criticism of Obamacare. Perhaps now Mr. Kasich may even reconsider his ill-advised decision not to create a state health insurance exchange, which would enable consumers and employers to buy insurance from private providers online. A state exchange could address the specific needs of Ohio residents and businesses, instead of leaving that responsibility to the federal government.
Mr. Kasich’s new budget seeks a reasonable increase in the state severance tax on shale development, from the current, absurdly low 20 cents per barrel of oil to a 4 percent rate on shale oil and natural-gas production. That proposal would enable Ohio to take advantage of the state’s expected boom in oil and gas exploration, while providing the resources to allow the state to regulate hydraulic fracturing, or fracking, adequately.
But the governor would pair this needed increase with an unnecessary 20-percent cut in the state’s personal income tax. He also wants to cut state income taxes on small businesses nearly in half.
The across-the-board personal tax reduction over three years would disproportionately benefit the richest Ohioans, who already have gotten the most from a previous income tax cut and elimination of the state estate tax under Mr. Kasich. The governor and lawmakers would do better to use the leftover revenue from the severance tax increase to start to restore the devastating spending cuts in the current budget in state aid to public schools, local governments, and human services.
Mr. Kasich also proposes rolling back the state’s sales tax rate from the current 5.5 percent to 5.0 percent, largely by expanding the sales tax on services. There is more merit to this proposal than the income-tax cut, because the sales tax falls more heavily on lower-income families. But states such as Florida have had trouble making a tax on services work; the details of how Ohio would expand its tax base will be all-important.
The new budget includes the school funding reforms Mr. Kasich outlined last week. These proposals would improve the equity of per-pupil funding between wealthier and poorer districts.
Yet the adequacy of state aid to public schools remains questionable, in light of the big cuts in the current budget. Mr. Kasich’s plan to boost aid to private-school vouchers and for-profit charter schools likely would work to the detriment of traditional public schools as well.
The governor’s budget also includes his proposal to sell bonds backed by Ohio Turnpike revenues to help pay for highway and bridge repair and construction throughout the state. Mr. Kasich deserves the opportunity to show that his plan will work without shortchanging northern Ohio, including Toledo.
In the meantime, we continue to believe that the state’s urgent road needs justify an increase in the state taxes on gasoline and diesel fuel, which have not risen in nearly eight years.
Mr. Kasich calls his spending plan a “jobs” budget. The notion that the tax cuts he proposes will do more to promote job creation than would a greater effort to reverse the state’s disinvestment in essential public services demands full debate. That is the General Assembly’s responsibility.