Governor holds steady on vision for taxes, tech

Jan. 29--COLUMBUS -- Dismissing any suggestion he's a lame duck, Gov. John Kasich this week will use his final budget proposal to double down on income tax cuts, steer the state toward driverless vehicle technology, and continue the push for cooperation between K-12 schools, colleges, and job-training efforts.

Elementary, secondary, and higher education should expect minimal funding increases in the wake of fading state tax collections. Local governments, whose aid formula is tied directly to weak state tax collections, are already worried.

How much of the governor's plan will be adopted by fellow Republicans in the General Assembly remains to be seen. He's coming off a period in which he clashed with them over renewable energy mandates, special interest tax breaks, putting expiration dates on agencies under his supervision, and how far to push state restrictions on abortion.

"It's a restrained budget, and it's going to have to be a restrained budget," Mr. Kasich said. "We don't want to create structural imbalance, because once you have that, then you find yourself in the position where businesses say, 'I can't go there. I don't know if the roof is going to fall in on me.' "

He will outline his budget proposal to reporters on Monday and send it to lawmakers Tuesday. His budget director will be before lawmakers on Wednesday to defend the stark revenue forecasts on which it will be built. A final budget must reach his desk before the start of the next fiscal year on July 1.

"It's frustrating," Senate Democratic leader Joe Schiavoni (D., Boardman) said. "We hear this, that the revenues are going to be soft, but he doesn't address why. He doesn't address that we've been giving tax cuts every single year mostly to the highest earners and that we failed to make the investments into our schools, local governments, and those programs that affect our most vulnerable citizens."

The current two-year budget that took effect on July 1, 2015, totaled about $71 billion. Mr. Kasich has warned that there will be little growth in its successor. Through the first six months of the current fiscal year -- which is July through December -- the state has collected nearly $297 million, or 2.7 percent, less in taxes than it the projected $11.1 billion.

This is the first year during the Kasich administration where revenues did not exceed projections.

Medicaid an X factor

Uncertainty continues over the future of Ohio's expansion of Medicaid, the government-supplied health insurance of last resort for the poor and infirm that has tentacles reaching through other areas of the state budget. Mr. Kasich partnered with the now endangered Affordable Care Act to add 700,000 Ohioans to the rolls with the federal government picking up 95 percent of that tab.

The state has used this funding to expand Medicaid access to opiate and heroin addiction treatment, mental health treatment, and care for inmates newly released from prison.

After years of largely flat funding, public four-year universities and two-year community colleges are seeking increases over the next two years while also urging the governor and lawmakers to steer clear of what they consider to be arbitrary freezes on their ability to raise tuition. The governor has made it clear that's unlikely to happen.

"That's a whole system that really needs dramatic reform," he said, suggesting the bricks-and-mortar colleges and universities are in danger of pricing themselves out of the market that now includes online degrees if they don't control costs.

Even as Mr. Kasich has repeatedly warned that this budget will be the tightest since his first in 2011, there are calls for more money for social services like children's and adult protective service agencies and food pantries.

In addition to the likelihood that the revenue sharing formula will send little new funding to local governments, Mr. Kasich will not propose a permanent fix to a $400 million problem expected to be created for sales tax-dependent counties and transit authorities beginning this fall.

The problem was created by the federal government's crackdown on the state's scheme to expand the sales tax to managed-care services tied to Medicaid in order to draw down more federal matching funds that, in turn, were spent on Medicaid.

Lost transit money

Counties and some public transit authorities will lose a portion of their sales-tax collections as a result. Lucas County expects to lose about $10 million a year.

Mr. Kasich plans to replace some of the lost local funding, but only in the short-term to wean them off that revenue source.

"It is not a full dollar-for-dollar replacement of the dollars that are being lost," Sen. Mike Skindell (D., Lakewood) said. "... It is my understanding that there's going to be a redistribution formula brought into this. ... That's very concerning to Cuyahoga County and the urban counties across the state."

Mr. Kasich is again expected to propose a tax-reform package with the ultimate goal of underwriting a small additional cut in the state's personal income tax paid by individuals and small businesses. But that package will likely propose increases in other taxes, most notably in the severance tax on shale oil and natural gas production, an idea repeatedly rejected by fellow Republicans.

Anti-tobacco advocates are again urging him to raise cigarette taxes by $1 a pack after he received just a portion of what he sought in the last budget.

In the state's separate transportation budget that would have to reach his desk by April 1, the governor plans to invest more into research and testing of driverless cars and trucks.

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

Related Items

Ohio Gov. John Kasich, Joe Schiavoni, Budget, Jim Provance, Sen. Mike Skindell, medicaid, Driverless car

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