Governor Kasich signed the 2-year, $133 billion state budget late on Friday June 30th. Unfortunately, our tax policy decisions continue to haunt us, as this budget is full of cuts for schools, health care, and other vital services.
After a $1 billion revenue shortfall was announced a few months ago, we knew this budget was going to get tough. Instead of identifying sources of revenue to balance the budget – like the business income tax deduction that has taken so much heat for its poor targeting and high cost – the legislature decided to make cuts to vital programs. As a result, at least 374 school districts will receive flat funding or funding cuts next year, along with cuts to dozens of state agencies. Likewise, the budget failed to make meaningful investments into higher education that are essential to increasing wages and building our future workforce. Instead, tuition will be allowed to continue to rise, raising already major concerns about college affordability.
While the legislature-passed budget made important new investments – approximately $175 million – to address the opioid crisis in Ohio, it also substantially undercut those efforts by freezing new enrollees in Medicaid expansion beginning July 1, 2018, likely causing 500,000 Ohioans to lose health insurance. Fortunately, the Governor vetoed this Medicaid freeze (as well as 47 other provisions). But, legislators have threatened to attempt to override the Governor’s vetos, so we will be watching closely, particularly over the next week.
It is important to understand that these budget cuts are a result of poor tax policy decisions over the past decade. But, we did hear many legislators, from both parties, questioning the wisdom of the tax shifts and tax cuts that started in 2005. In particular, many legislators recognize that the $1 billion business income tax deduction is poorly targeted by benefiting the wealthy the most without any proof of job creation. Furthermore, the House and Senate both completely rejected the biggest component of the Governor’s initial budget proposal, which included another regressive tax shift from income to sales taxes.
So, while this budget is full of disappointments, we believe there is clear reason to keep the pressure on. In addition to more legislators showing a willingness to consider a “balanced approach to balancing the budget” that would include revenue increases, we can look to our west for inspiration. This year in Kansas, we’ve watched as their legislature – not dissimilar to Ohio’s – passed income tax increases, eliminated their business income tax deduction, and invested hundreds of millions of dollars into schools and other vital public services. They did this over Governor Sam Brownback’s veto and after years of tax cuts and shifts like we’ve seen here in Ohio. While there are notable differences in our states and our tax policy decisions, we believe the needle is moving as more legislators of all stripes recognize that the tax cut strategy will not generate promised economic growth.
We have already heard legislators discussing a budget correction bill for next spring where these revenue issues will, once again, be front and center. We have serious work to do so we can invest in our state and get our economy on the right track. So, we look forward to continued conversations with legislators in coming months, and to your continued engagement.
Thanks for your advocacy on tax and revenue issues!