Governor John Kasich is a man of action. He has the Ohio General Assembly focused on the state of Ohio Capital Bill and the Mid-Biennium Review (MBR). The former U.S. House Budget Committee Chairman brought his connection to annual budget to the two state budget process with what he calls the MBR.
The MBR includes everything from budget corrections and reappropriation issues to agency regulator changes to major tax reform. The MBR had so many substantive and budget changes the Ohio House decided to divide up the MBR bill into 14 different bills spreading out to a number of different House Committees for study. The topics include taxes, higher education, K-12 education, gaming, workers’ compensation, environment, workforce, human services, veterans and of course revenues.
The Governor’s tax changes are probably the most controversial and the least likely to pass as a complete package before the summer recess. The Governor is working overtime to reduce the state’s top income tax bracket below five percent and to accomplish this tax reduction proposed to raise the state’s corporate tax known as the Commercial Activities Tax, tobacco taxes and of course his favorite the severance tax. While it is not completely clear yet, compromise on the severance tax between the House and oil industry leadership may finally be possible. This compromise would give the oil industry certainty and help fund state government.
The proposal to increase the CAT is probably the most concerning to the Ohio business community. Tax reform several years ago eliminated the existing corporate tax structure and replaced it with a low gross receipts tax aka the CAT. The business community was not in complete agreement on the CAT. It punishes retailers but also made the business leaders nervous that it could be easily raised whenever state government was searching for revenue. The nightmare of the business community has come true and time will tell whether the General Assembly raises the CAT to pay for an income tax cut.
Following a six month long, behind the scenes process, the General Assembly passed Governor Kasich’s state capital bill with few changes. The billion dollar plus capital bill generally happens every other year and provides funding for state agencies, K-12 schools, public works, higher education and arts and economic development community projects. Big winners for the Kasich capital bill include the state parks who are gaining a substantial increase in funding and local organizations happy to see community projects return to the Capital Bill. After a six-year hiatus, local government and business leaders had an opportunity to gain funding for community projects in the Capital Bill. Community projects were at one point about professional baseball, football and basketball stadiums in the 1990s. Then arts and historic sites got in the act. Now broadband, economic development and workforce projects are in the mix.
The General Assembly passed the Capital Bill on April 1 and added session days in early April to move on the MBR at least through the Ohio House.