Ohio’s State Budget Maxine Goodman Levin College of Urban Affairs August 19, 2015

Ohio’s State Budget

Maxine Goodman LevinCollege of Urban Affairs

August 19, 2015

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0%

2%

4%

6%

8%

10%

12%

14%

0.2% 0.9%1.7% 2.1% 2.6% 2.9%

3.7%

11.7%

10.8%10.6% 10.2%

9.7%

8.2%

7.0%

Total state & local taxes State personal income tax

Ohio State and Local Taxes as a Share of Income, Non-elderly

(as of January 2015)

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Key elements of the tax plan

• 6.3% across-the-board cut in income-tax rates ($1.3 billion over two years)

• Expansion of business-income tax break: As of next year, no tax on first $250,000 in income, 3% rate on anything over that ($900 million)

• 35-cent-a-pack increase in cigarette tax• Overall, estimated net tax cuts of almost $1.9

billion over two years



Who benefits from tax changes in the budget



Ten Years of Tax Cuts

Ohio U.S.

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Change in nonfarm jobs, June 2005 to June 2015



An expanded tax break for business income

• Deduction approved in 2013 cost $370 million; new one will more than double the total

• Most Ohio business owners eligible for the break employ no one but themselves

• Hiring by new businesses has not increased since the deduction was first approved



Tax Study Committee

• Due to make recommendations on the severance tax by Oct. 1

• Will recommend on a transition to a flat-rate income tax of 3.5% or 3.75% in 2018.

• As glitch with business tax break shows, most Ohioans would pay more, while the most affluent would pay less.



Tax Breaks

• Study committee will review all tax credits• General Assembly rejected some attempts by

Gov. Kasich to cut tax breaks; he vetoed others• Others created or expanded – New Albany

business park, fraternal organizations • We need a broader review: Report shows 128

tax exemptions, credits and deductions estimated at $8.5 billion this fiscal year



Rainy Day Fund

• $526.6 million transferred to rainy day fund, pushing total to $2 billion

• Permitted because General Assembly authorized higher limit

• Key needs are going unmet



More than 80% of the state’s own-source funds go to education, health or human services

Source: Policy Matters Ohio, based on Legislative Service Commission’s Budget in Brief for HB 64. Excludes federal funds that Ohio places in the GRF as identified in the LSC Budget in Detail for HB 64.

Higher Education11%

K-12 Educa-tion41%

Medicaid 26%

Health and human services6%

Corrections8%

General government9%



Ohio’s Health & Human Service Funding for 2016-17:

Good investments, inadequate for need

• Medicaid expansion • Food banks • Protective services • Early learning & public childcare



Medicaid expansion is retained but new program rules could hurt the poorest

• Premiums• Penalties • Complexity• Inequitable treatment

• Access to bank accounts• Access to internet, computers• Benchmarking and incentives



Local human service levies cut again

• Ohio’s health and human services are delivered locally.• Local infrastructure is

underfunded, threatened, overwhelmed.• Close to $100 million estimated

to be cut from health & human service levies.



Local governments cut again

• Local government operations and debt levies to lose $36 million in tax reimbursements.

• Cities and larger villages to lose almost $40 million as municipal Local Government Fund distribution is largely diverted to other uses.

• This is on top of $1.7 billion cut since budget of FY 2010-11.



Missed opportunity for investment in Ohio families and communities

• Safer neighborhoods: $100 million for the Local Government Fund could rehire 1400 police.

• Childcare: $140 million could help low-income working families of 25,000 more kids get care.

• Public transit: $40 million a year could help 50,000 get to work and back.

• Prevent elder abuse: $17 million more in state funding each year could address the ‘silent epidemic’ of elder abuse.

• Keep kids safe: $17 million more in state funding could restore protective services for Ohio’s most vulnerable children


Documents

Ohio’s State Budget Maxine Goodman Levin College of Urban Affairs August 19, 2015