Ohio House Republicans make major changes to Kasich's proposed budget

4/9/2013

COLUMBUS — Ohio House Republicans dealt major blows today to their own governor’s proposed budget, shelving his plan to expand Medicaid, stripping out two-thirds of his tax overhaul, and changing how he wanted to fund schools.

The revised two-year budget, about $2 billion smaller than Gov. John Kasich’s $63.3 billion proposal, cuts personal income tax rates across the board by 7 percent a year, a cut of $1.5 billion over two years. The House GOP plan counts on continued growth in existing tax revenue sources as well as nearly $400 million in surplus funds that Mr. Kasich had planned to give back to taxpayers next year in the form of a tax rebate.

Rep. Ron Amstutz (R., Wooster) conceded that this means the tax cut is at least partly funded by one-time money while also stressing that the income tax cut is permanent.

Mr. Kasich had originally proposed a total $1.4 billion cut over three years — 20 percent for individuals and 50 percent on the first $750,000 in small business profit.

The House Finance and Appropriations Committee swapped out the governor’s budget proposal for its own plan as it begins a final round of hearings leading to expected passage in the full House next week. Debate will then shift to the Senate.

Mr. Kasich had proposed greatly expanding the state sales tax base to previously untaxed professional services and hiking severance taxes on shale oil and natural gas drilling primarily in eastern Ohio to help fund his income tax cut. The first two legs of that tax reform stool are now gone, and the plan now largely relies on anticipated revenue growth in other existing tax sources to fund the tax cut.

While guaranteeing that no school district would receive less money than it did last year, Mr. Kasich’s K-12 education proposal still would have left about 60 percent of the state’s districts with no spending increases next year. That didn’t sit well with lawmakers on both sides of the aisle given the severe cuts that schools and local governments suffered in the current two-year budget and the fact that the state is now planning to sock away surpluses and cut taxes.

The GOP plan reworks the funding formula to reduce the number of districts that would have seen no additional money by about half.

Mr. Kasich knew some in his own party would balk at the idea of partnering with the federal government to expand eligibility for Medicaid, the government health-care program of last resort, but he decided that the state couldn’t afford to pass up $13 billion in promised federal subsidies to pay for it.

The federal government has promised to pay 100 percent of the cost for the first three years of the expansion. The federal share would gradually decline to 90 percent after that.

House Speaker Bill Batchelder (R., Medina) portrayed the removal of the Medicaid language as potentially temporary as lawmakers seek clarity from Washington as to exactly how President Obama’s signature health-care reform law will work.

“This is so screwed up,” he said. “We have all these regulations that have to come out.”

He said he doesn’t know what the Senate will do, although Senate President Keith Faber (R., Celina) has also been critical of the Medicaid expansion plan.

In the meantime, the House has proposed increasing funding by $100 million over the two-year budget for county mental health agency services and drug and alcohol addiction treatment. Those are two areas often cited by Mr. Kasich where the Medicaid expansion could help.

The expansion would cover families earning up to 38 percent above the federal poverty level. That’s about $31,800 a year for a family of four.

The expansion has the support of unlikely allies like the Ohio Chamber of Commerce, labor unions, social service organizations, advocates for the mentally ill, Right to Life, Planned Parenthood, hospitals, doctors, and county commissioners.

“Ohio has an historic opportunity to provide health care for some of our most vulnerable citizens,” said Randy Runyon, president of the Ohio Association of Community Health Centers. “The House had in front of it a proposal that will provide healthcare and a ladder up and out of poverty for almost 300,000 working poor Ohioans. It is deeply disappointing to see this opportunity squandered.”