The more than $100 billion mix of policy and politics known as the state budget rolls out Feb. 4 as the major spending statement of John Kasich’s final two years of his first term as Ohio’s chief executive.
With buzz beginning about what insiders are dubbing “the re-election budget,” Kasich’s blueprint for state spending is likely to be kinder and gentler than the lean-and-mean plan he drew up in 2011.
Two years ago, with a multibillion-dollar hole to fill and Ohio’s economy still reeling, the Republican governor broke out the chainsaw, carving away billions in state spending from local governments and schools.
Now, with Ohio on more stable financial footing, Kasich’s next budget is expected to feature a major income tax cut for Ohioans as well as a reshaping of the state’s formula for funding schools. Also waiting in the wings is a decision on whether the state will greatly expand Medicaid — and take the health care goody bag worth as much as $20 billion that is being dangled by President Barack Obama.
“The last budget was about stabilizing the state’s finances and setting the stage to let the governor focus on economic growth and job creation,” said Tim Keen, state budget director and architect of Kasich’s coming budget. “This budget is going to be about building on that and taking the next steps.”
Those next steps will include a “sweeping, broad-based tax reform plan” that will reduce the state’s income tax rate and focus on cutting rates for small businesses that supply the lion’s share of job growth in Ohio, according to Keen.
“This is going to be a very sweeping proposal,” said Keen. “It’s going to result in a significant competitive improvement in our tax structure.” The last rewrite of Ohio’s tax structure came in 2005 when Gov. Bob Taft pushed a 21 percent cut in the state income tax at the same time business taxes were shifted.
While Keen said the Taft income tax cut plan is “not a template,” the 2005 rewrite does suggest a possible scale for an Ohio Republican governor looking to make a big splash in the last half of his term.
It isn’t clear exactly how Kasich will pay for what should be a sizable income tax cut, although a severance tax on oil and gas drillers that Republicans balked at last year is almost certainly part of the answer. Another possibility would be changes to Ohio’s tax loopholes or expansion of Ohio’s sales tax base to cover industries such as legal services and public relations, which currently go untaxed.
“I think we are very definitely going to be looking at potential tax remedies and figuring out what those impacts are going forward,” said House Speaker William G. Batchelder, a Medina Republican.
While GOP forces have House and Senate majorities firm enough to pass the state budget without reaching across the aisle, minority-party Democrats will probably propose to scale back the signature tax cut if sizable increases to funding for schools and local governments aren’t in the mix.
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