Gov. John Kasich to reveal second 2-year Ohio budget proposal Monday

Gov. John Kasich speaks at a special meeting of the Buckeye Association of School Administrators last week about his school funding reform plan. His two-year budget proposal, to be unveiled Monday, is expected to offer an income tax cut.

COLUMBUS — Gov. John Kasich will roll out his second two-year budget Monday with the centerpiece a potential income tax cut, already having predicted the state will finish the current fiscal year flush with cash.

As demonstrated with his K-12 education budget unveiled last week, there’s little expectation the state will open wide the spigot for new funding for local governments, universities, libraries, and state programs that experienced cuts — sometimes severe cuts — in the current budget.

Nor is there expectation of another round of major cuts since this proposal will represent the Republican governor’s second-half blueprint as he prepares to ask voters for a second term next year.

“It’s a continuation of what we started in the last budget to make Ohio more jobs-friendly,” Kasich spokesman Rob Nichols said. “You never ever check a box on this stuff and say you’re done. Regulation. Taxes. Government running better. Being good stewards of taxpayer money.”

The focus is going to be an overhaul of the state’s tax system resulting in another proposed cut in the personal income tax paid by individuals and most small businesses.

The Republican governor hinted last week that he may agree to partner with the federal government to expand Medicaid — the health coverage of last resort for the poor, disabled, and infirm — to potentially cover 450,000 more of an estimated 1.6 million uninsured Ohioans. That decision could place him at odds with some in his own party.

His separate transportation budget will ask lawmakers to set the stage to borrow against future Ohio Turnpike tolls to help finance highway and bridge projects across the state.

But the overarching theme is again expected to be job creation and work-force development.

Several sources two years ago estimated the preliminary hole facing the last budget at roughly $8 billion. Arguments continue over the true size of that shortfall going in, but the narrative has been eagerly adopted by Mr. Kasich as he presents Ohio’s before-and-after pictures on the road, as he did at a recent global economic forum in Switzerland.

Mr. Kasich wants to put most of this year’s predicted $500 million surplus into the state’s once-depleted rainy-day fund reserves. That would mean a $1 billion rainy-day fund balance.

His budget director, Tim Keen, noted that would represent just 3.6 percent of the state’s total general revenue budget.

“Should we run into any kind of financial difficulty, should we have some unforeseen circumstance befall us, that money’s not going to last very long,” he said.

Ohio Democratic Party spokesman Jerid Kurtz said the Kasich administration’s talk about a surplus is misleading.

“It’s a concerted effort to lay the foundation for enormous handouts to his political friends and cronies,” he said.

The surplus figures do not include the roughly $500 million, one-time net shot in the arm that the budget received Friday with the just-consummated 25-year lease of the state’s lucrative liquor business to its private economic development corporation, JobsOhio.

The deal and JobsOhio remain under a legal cloud pending a lawsuit challenging the constitutionality of both. Mr. Keen will announce Monday how that money will be used, Mr. Nichols said.

Taxes

Mr. Kasich will host a town-hall meeting Monday night at a Columbus coffee house to tout what is expected to be a proposed income tax cut, essentially a first installment of what he has stated is his long-term goal to eliminate the tax.

His “comprehensive tax reform” proposal will build on a plan he proposed last year to raise Ohio’s severance tax on the extraction of oil and natural gas to underwrite an income tax cut. The severance hike is designed to take advantage of an anticipated boom in gas and oil exploration in the eastern portion of the state.

The plan may also involve closing some business sales tax exemptions to some businesses that would have the effect of increasing that tax base.

Republican lawmakers are also preparing to delve into local taxation, arguing that there’s a need for uniformity in the way taxes are applied from municipality to municipality.

Health care

The U.S. Supreme Court upheld the broader constitutionality of President Obama’s Affordable Care Act, but it struck down the mandate that states expand eligibility for Medicaid.

That put the ball in Mr. Kasich’s court, and he will announce Monday whether the state will agree to raise the income threshold to enter Medicaid to 38 percent over the federal poverty line. That’s $31,809 a year for a family of four.

“I don’t view this as Obamacare at all,” Mr. Kasich said last week. “Obamacare involving an individual mandate, I don’t support. ... This is about people who are at the lower economic end. This is about a government that is proposing to pay 100 percent of those costs for three years and then it drops to 90, but of course, the current Medicaid system reimburses us at about 62 percent.

“My concern about it all is, can you trust Washington to keep any promises that they make and is there a way to effectively deal with it if in fact they pull the rug from under you?” he said.

A study released earlier last month by the nonpartisan Health Policy Institute of Ohio and other organizations found the state’s costs would be more than outweighed by the additional federal dollars in the shorter term and that the state would largely break even in the longer term.

“The [Affordable Care Act] will cover the entire cost of new enrollees for three years and a significant portion of medical billing in the immediate years thereafter,” said Dr. Deepak Kumar, president of the Ohio State Medical Association. “This means we have a tremendous chance to improve the overall health of our society in a short period of time with no cost to our state.”

But some of Mr. Kasich’s concerns were echoed by the conservative Buckeye Institute for Public Policy Solutions as it argued against expansion.

“States have a choice as to whether to expand Medicaid to ACA levels,” the report states. “The expansion fundamentally transforms Medicaid into a much larger government welfare program. This is contrary to conservative, limited government, and free-market principles.”

Social service and health-care advocates argue that strategic investments in these areas go hand in hand with economic development.

“In order to have a healthy, productive, educated work force, we have to have basic spending levels in this to support food, rent, health care, transportation, community mental health, developmental disabilities, and certain programs for our seniors,” said Gayle Channing Tenenbaum, children services advocate and co-chairman of Advocates for Ohio’s Future.

Transportation/safety

A separate transportation/public safety budget to be unveiled Monday is typically fueled by gas-tax revenue, federal highway funds, and the bonds they guarantee. But this time, that budget will include a proposed boost to road and bridge projects across the state with the already-announced proposal to borrow against future Ohio Turnpike tolls.

Ultimately, over several years, the plan is expected to generate $1.5 billion in turnpike-related revenue plus $1.5 billion in federal matching funds. The plan faces opposition from some lawmakers on both sides of aisle along the 241-mile turnpike corridor.

Higher education

After experiencing cuts in the last budget, University of Toledo President Lloyd Jacobs does not expect much of an increase in basic state aid for higher education this time.

Mr. Kasich is expected to phase in a funding formula that would shift focus away from student enrollment numbers and instead reward schools more for things such as degree completion, keeping graduates in Ohio, and recruitment of high-quality, nontraditional, and at-risk students.

Dr. Jacobs has expressed concern that UT would be at least initially disadvantaged by the new formula because of issues with student preparedness and finances in northwest Ohio. Still, he remains optimistic about the longer term.

“Overall, I hope there will be a small but real increase of money coming to higher education and that increase will ameliorate the impact of the change formula,” Dr. Jacobs said.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.