Archive for The Lobby

Ohio House Makes Dramatic Changes to Kasich Budget

The first movement in Governor Kasich’s $69B state operating budget came from leaders of the Ohio House of Representatives and the movement was a substantial.  Responding to the agreement to cut spending substantially as well as to address challenges with the Kasich budget, the Ohio House of Representatives passed House Bill 49 without Governor Kasich’s proposed tax plan and his income tax cut, made several changes impacting economic development, rolled back the proposed Medicaid expansion, made major improvements to higher education and added funding to K-12 education.

As expected, Governor Kasich’s tax plan was the first budget item to go.  The House adopted a completely new tax plan.  The House removed the proposed tax reform plan, including proposed changes to the following taxes: income, sales, severance, commercial activity, tobacco and vapor, and alcohol.  They also struck the centralized collection proposal that would have mandated municipal income tax be collected by the state of Ohio but allowed a business to file a single annual or estimated return through the Ohio Business Gateway which a business may report and pay the total tax due to all the municipalities in which the business earned net profits.  Changes to the Ohio Local Government Fund were also scrapped.

Substantial changes impacting economic development were made to House Bill 49.  The House authorized the job creation tax credit to count employees who work from home in the job creation totals, made changes to the motion picture tax credit to require that a project must have 50% of financing secured to be eligible, priority be given to television or miniseries projects, and the Director of the Development Services Agency to charge an application fee equal to 1% of the estimated credit or $10,000 whichever is less.  The House revised the current data call center sales and use tax exemption to allow the capital expenditure to occur over 6 years instead of 5, retained funding for the Incumbent Workforce Training program at $1.25 M per year, and increased spending for the Defense Development Assistance and Ohio Edison Centers.  The House also authorized a county or municipal government to extend a pre-1994 CRA without triggering the laws enacted in 1994, and elevated the threshold for competitive bidding for port authorities to $250,000.  The House changed House Bill 49 to permits local workforce investment boards to conduct meetings by video and teleconference, and continue the ability for a county or municipality to enter into an enterprise zone agreement after October 15, 2017.  The House extended through July 1, 2019 the ability to apply the state historic preservation tax credit to the commercial activities tax, and eliminates the requirement that a new community district be over 1000 acres.  Finally, the House directed the Governor’s Executive Workforce Board to include an analysis of jobs that pay 125% of the federal minimum wage in the methodology for in-demand jobs.

The House also made major changes to the state’s Medicaid program.  They created legislative guardrails around Group VII Medicaid spending by requiring the Kasich Administration to seek Controlling Board approval on a regular basis for the Medicaid expansion, increased nursing home spending, and limited total Medicaid spending on hospitals to $6.9 B per year, and removed the non-contracting language and requires rates in effect on January 1, 2017 to continue over the biennium.

The Ohio House made several substantive changes to the higher education portion of the budget including:

  • Flat funds the State Share of Instruction and Ohio College Opportunity Grant line items;
  • Removed the proposal on textbook costs and replaces it with a textbook study requirement for public universities and community colleges;
  • Continued funding for the Federal Research Network at $3.5 M per year;
  • Provided $5 M in FY’19 for financial assistance to obtain short-term certificates;
  • Permitted a Community College to increase tuition by $10 per credit hour;
  • Clarified that tuition caps do not apply to tuition guarantee programs and removes the restrictions on increases between cohorts;
  • Exempted health insurance, auxiliary goods and services, non-instructional program fees, licensure costs, fines, travel costs and elective service charges from the tuition freeze;
  • Allowed a Community College to offer an applied bachelor’s degree if the degree is not offered by a public or private university within 30 miles and defines “applied bachelors”;
  • Required the Chancellor to investigate fees charged by institutions, prohibits the charging of any fee and permits the Controlling Board may approve the fee;
  • Required that faculty who assign textbooks must file a financial disclosure statement;
  • Reduced all clinical teaching lines by 10% in FY’18 and collapses them into one line in FY’19; and
  • Provided $750,000 for Co-op/Internship programs and provides earmarks for the 9 university programs traditionally funded through this line for their public policy schools.

The House made substantial changes to the Governor’s K-12 education plan.  They actually increased spending by $80 M—making K-12 one of the few financial winners from the House version of the budget.  They also removed Kasich’s controversial proposals to require teachers to have a private sector internships and placing non-voting business leaders on local school boards.  While the House did add K-12 school funding, Governor Kasich’s revisions to the school funding guarantee that attempts to limit paying public school districts for students they do not have survived.

House Bill 49 now moves on to the Ohio Senate who has raised questions about many of the House changes and is likely to enact additional spending cuts and policy changes to the bill with passage expected to meet the July 1, 2017 fiscal year deadline.

Montrose 1st Quarter 2017 Economic Snapshot Illustrates Mixed Results

The 1st Quarter 2017 economic data illustrates mixed results for the nation and targeted states.

Demographic data is a strong indicator of the potential for economic success and regions demographic and economic indicators vary widely.

Personal income increased $57.7 B (0.4 %) in February, 2017, disposable personal income increased $44.6 B (0.3 %) and personal consumption expenditures increased $7.4 B (0.1 %).

Unemployment rates were lower in March, 2017 in 17 states and stable in 33 states and the District of Columbia and the national unemployment rate declined by 0.2 % to 4.5 %.

Foreign Direct Investment (FDI) in the U.S. continues to increase.  FDI in the U.S. grew to $420.7 B in 2015, an increase of 68 percent from 2014.

Total domestic energy production fell for the first time in years driven by low oil and natural gas prices according to the U.S. Department of Energy.  However, the United States remains on the road to energy independent driven by increases in natural gas production.

Trump Tax Reform Focused on Economic Growth

President Donald Trump shifted the focus of Washington into Republican friendly territory- tax reform.  The goals for Trump’s Tax Reform Plan is to grow the economy and create millions of jobs, simplify the tax code, provide middle class tax relief, and lower the business tax rate.

The Trump Tax Plan reduces the 7 tax brackets to 3 tax brackets for 10%, 25% and 35% but the plan also doubles the standard deduction, keeps tax relief for families with child and dependent care expenses, 401K savings, home ownership and charitable gift tax deductions.  To pay for the general tax reduction, President Trump proposes to reduce or eliminate deductions by steepening the curve of the Personal Exemption Phaseout, the Pease Limitation on itemized deductions, eliminating all tax deductions on individual tax return, except the deduction for home mortgages and charitable gifts, such as the deduction on medical and dental expenses, real estate taxes, casualty and theft losses, expenses related to tax preparation fees, expenses relating to job hunts, a deduction for the amount that individuals pay for state and local income taxes and the value-based portion of car registration fees, phasing out the tax exemption on life insurance interest for high-income earners, and ends the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital.

To foster job creation, the Trump Tax Plan proposes to repeal the Alternative Minimum Tax, Estate Tax, the 3.8% Obamacare tax that hits small businesses and investment income, shift down to a 15% business tax rate down from 35% and shifting to a territorial tax process that taxes only the income earned by a company within a country—thus eliminating double taxation in an effort to promote more corporate headquarters to locate in the U.S.. A one-time 10% tax on the estimated $2.5 Trillion in corporate revenue brought back into the U.S. from global markets would be levied to promote U.S. investment.

Lobbying on the Trump Tax Plan will be aggressive but this plan is clearly a centerpiece to Republican efforts to address the economy.

Four Critical Zoning Steps that Impact on Economic Development

Land use regulation includes traditional zoning, mixed- use, and Houston or no-zoning.  All three approaches to land use regulation impact economic development. Traditional zoning is the regulation of land use based upon a separation of uses. Highly localized, it developed in the early 20th Century and is now widely utilized in communities throughout the United States. Local governments typically play a role in regulating the use of land as part of the real estate development process.

Cities and townships predominantly use the traditional “Euclidian Zoning” approach. Planned Unit Development is a form of traditional zoning that regulates the use of a larger parcel of land in urban, suburban, and rural communities. Mixed-use zoning is used selectively in targeted urban neighborhoods to revitalize a commercial strip often through the creation of an Urban Overlay zoning strategy. Transit-Oriented Development is a form of mixed-use zoning that regulates land use and promotes development at prime transit stations. Houston, Texas is the only major city in the United States that does not have a zoning code, but the economic success of this city makes their zoning approach worthy of review.

The zoning process is an interaction with neighbors, local government staff and elected officials, and the developer, all with the hope of achieving agreement on what use is permitted on a specific piece of property. Many successful zoning applications start with an aggressive pre-application approach that begins with meeting the local government zoning staff and impacted community. Early completion of a traffic and engineering studies pay big dividends later. Next, those seeking zoning changes obtain written service commitments for public sewer and water services, engineering approval of the legal description, and outline an of the economic model and time constraint for the project.

The project may then be prepared to actually file a zoning application. The zoning application includes a statement of compliance to the comprehensive plan applicable to the area, detailed legal descriptions of all site plans, elevations, and construction materials palette. Project drawings illustrate how the proposed development “fits in.” Also, the zoning applicants provide certification of financial capability to execute the project if approved and a vicinity map showing names of neighbors.

Notice is then provided to all persons mandated by the zoning ordinance/resolution, mailed to the tax mailing or street addresses, through publication in a newspaper of general circulation or posting a sign(s) on the property. Once the zoning application is received by the zoning official, the staff reviews for accuracy and completeness and hearing is held before a regional planning commission. A written recommendation to the jurisdictions planning commission is then created, and ultimately a vote is taken on the zoning by the city council. However, in many jurisdictions the citizens still retain the right to place a referendum on the ballot to overturn the zoning action by city council or a township trustee.

Successful zoning campaigns are part art and part science and involve four critical steps.

  1. Follow the statutory outline. It is critically important to follow the statutory process generally outlined by state law but implemented at the local government level. Statutory outlines provide for not just mundane procedural steps such as how to provide notice of the zoning change but major issues such as who actually decides whether the zoning is approved, what is the basis for this decision and who hears the appeal if the zoning request is denied.
  2. Recognize agility as well as the law matters. However, agility is required to win approval of controversial projects.  Turning a corn field into a factory or fulfillment center makes perfect sense to an economic development official but will look like the end of Western Civilization to the neighboring property owners.  It often makes sense to hold private listening sessions with area residents to get some perspective on what they would like to see from a project design standpoint.
  3. Get your homework done. Winning a zoning campaign like doing well in school requires study and preparation.  Hearing questions during a zoning hearing that have never been thought of before is not what you want.  Surviving public meetings happens through proper preparation to ensure that all the required studies and utility service agreements are in place.  Completion of these reports is a critical homework assignment that is a key to success.
  4. Find third party advocates. Finally, zoning campaigns are won through the help of friends.  Surviving zoning public meetings demand that local economic development officials take part and communicate the value for the community of job creation and capital investment.  Local government leaders need to support the project request in person at public meetings—a tough request that is sometimes necessary to success.  Neighbors who gain design and land use concessions through negotiations or have their property purchased need to find ways to support the project.

Zoning sounds easy but is often the most complicated part of preparing a site for a large scale industrial, residential or commercial project.

Smart Transportation at the Centerpiece of Governor’s ODOT Budget Line Item Veto

Ohio House Bill 26, the Ohio Department of Transportation’s bi-annual budget bill was passed by both houses of the General Assembly and signed into law by Governor John Kasich.  Under the Ohio Constitution, the Governor has the authority to “Line Item Veto” individual provisions from state appropriations legislation.  House Bill 26 is the product of a joint House-Senate Conference Committee. Several controversial provisions were vetoed by Governor Kasich that included language that would have created a Smart Transportation Action Advisory Team that would have provide advice to ODOT and JobsOhio on the development of smart transportation initiatives.  Kasich’s veto message stated the provision was “well intentioned” but would create a “bureaucratic barrier” and harm efforts to implement future smart transportation projects.  Senator Matt Dolan from Cleveland lead the charge on the insertion of the Smart Transportation Action Advisory Team in what appears to be some concern related to state spending on these type of high-tech, transportation projections.  Kasich also vetoed provisions that would have changed the frequency of local bridge inspections, required the Ohio Department of Transportation to install interchanges on limited access highways every four miles in certain urban areas; and a requirement for a second observer on ski boats.

HB 26 highlights include:

  • Permitting pilot programs that will allow the ODOT director to vary speed limits during peak traffic times on Interstate 670 in Columbus, I-90 in Cleveland and I-275 in Cincinnati;
  • Funding an additional $10 M for public transit over each year of the biennium – bringing the total to $33 M;
  • Increasing the portion of a district public works integrating committee’s allocation that can be used for grants from 85% to 90% freeing up $7.85 M for infrastructure projects across the state;
  • Permitting the proceeds of the sale of timber from national parks to be distributed to county from which it is derived, 50% of which must be used for maintaining roads and bridges;
  • Requiring that the Registrar establish by rule the service fee that is paid to a deputy registrar;
  • Creating a six-county pilot program to lower commercial vehicle registration fees from $30 to $15;
  • Funding an additional $1 million in funding each year earmarked for Transportation Improvement Districts;
  • Increasing the current limit for a natural gas company infrastructure development rider for economic development projects from $3 per calendar year to $1.50 per month; and
  • Granting townships and municipalities the authority to enter into an agreement to jointly provide for the maintenance, repair, and improvement of township and municipal roads.

HB 26 is an important source of infrastructure funding for roads, highways, bridges, airports and mass transit but it lacks true and substantial direction on promoting Ohio as a leader in the autonomous vehicle marketplace.  That leadership will come through other planned legislation.

 

Kasich Health Care Budget Dominates State Spending, But Changes Under Attack

The provision of health care remains the largest priority for the state of Ohio under Governor Kasich’s proposed budget through the Ohio Medicaid Program that provides health insurance for children up to 200 percent of the federal poverty level, parents up to 150 percent, childless adults up to 138 percent, and individuals who are aged, blind or disabled (ABD) up to 75 percent, with some exceptions under House Bill 49.

The Ohio Department of Medicaid sees a 6.1% increase in funding in FY 2018 to $25 B and a 2.8% increase in FY 2019 to $25.7 B driven by federal funding but with over half the total funding from the state GRF. Over 82 % of the Medicaid population is served by a managed care plan, and 62% of Medicaid long-term care spending has been directed to home and community-based services.  However, due to the federal government paying a declining share of the Medicaid expansion under the federal Affordable Care Act and the loss of a tax on Medicaid managed care companies, Ohio has a billion dollar Medicaid funding gap to address.

Kasich Medicaid Program budget trims provider fees and raises health plan taxes to meet budget challenge.  HB 49 provides substantial changes to the Ohio Medicaid program, including:

  • Requires the Department of Medicaid (ODM) to revise, by December 31, 2018, the system by which government and private entities become and remain Medicaid providers.
  • From a Medicaid managed care organization standpoint, requires almost all remaining Medicaid populations be integrated into the state’s Medicaid managed care program, including Long Term Care and Behavior Health patients, assess premium payments for certain adults in population ($52M in revenue), and replaces MCO tax with a tax on all health plans operating in Ohio
  • From a hospital perspective, maintains current coverage rules but requires any hospital that does not contract with a managed care plan will get paid 100% FFS (saving $87M), creates a new Medicaid Peer Group and imposes a cut to hospital peer groups ($175 M cut), and imposes ICD-10 coding system for billing (saving $75M)
  • Requires cost effectiveness be used as a factor for developing Medicaid program’s preferred drug list.
  • Modifies a nursing facility’s per Medicaid day payment rate for direct care costs by reducing each peer group’s cost per case-mix unit by 7% during fiscal years 2018 and 2019.
  • Repeals a provision excluding low resource utilization residents from a nursing facility’s quarterly case-mix score determination.
  • Provides for the determination of the total per Medicaid day payment rate for nursing facility services provided to residents with specialized health care needs under the alternative purchasing model to be made pursuant to rules ODM adopts.
  • Eliminates a provision under which Medicaid payments for services generally cannot exceed the payment limits for the same services under Medicare.
  • Increases to 5% (from 2%) the maximum amount of Medicaid MCO premium payments that may be withheld by ODM for purposes of the Managed Care Performance Payment Program.
  • Permits, rather than requires, ODM to retain or collect a portion of the federal financial participation obtained for administering a component of the Medicaid program federally approved by 1/1/2002.
  • Requires a liable third party to respond to an ODM request for payment of a claim within 90 business days of receiving written proof of the claim.
  • Authorizes ODM, when it has assigned its right of recovery to a Medicaid managed care organization, to recoup from a liable third party the amount the organization has not collected.
  • Repeals the law requiring a medical services provider to provide a health services cost estimate before performing any nonemergency service or procedure.
  • Continues the Hospital Care Assurance Program and the franchise permit fee imposed on hospitals under the Medicaid program.
  • Authorizes ODM to reduce dispensing fees for a terminal distributor of dangerous drugs if the distributor fails to participate in the Department’s biennial survey of the cost of dispensing drugs.
  • Permits the Medicaid Director to establish dispensing fees that vary by terminal distributor.
  • Provides civil immunity for a Medicaid managed care organization that furnished information to ODM regarding potential fraud, waste, and abuse in the Medicaid program.
  • Permits ODM to participate in the Bureau of Criminal Identification and Investigation’s Retained Applicant Fingerprint Database system to receive notices about the arrests, convictions, and guilty pleas of independent Medicaid providers of home and community-based services.
  • Eliminates a requirement that such an independent provider annually undergo a Bureau-conducted criminal records check if ODM participates in the system.
  • Requires that fines imposed by the federal government against home health agencies for failure to comply with Medicaid participation requirements be deposited into the Residents Protection Fund when dispersed to ODM on or after July 1, 2017.
  • Provides for the continued deposit into the Refunds and Reconciliation Fund refunds and reconciliations for which ODM does not initially know the appropriate fund or that are to go to another government entity.
  • Abolishes the Health Care Services Administration Fund and provides for money that would otherwise be deposited into that fund to be deposited instead into the Health Care/Medicaid Support and Recoveries Fund.
  • Provide performance payments to Medicaid managed care organizations that provide care to participants of the Integrated Care Delivery System, and requires ODM to withhold a percentage of the premium payments made to the organizations for the purpose of providing the performance payments.

Kasich’s proposed expansion of Medicaid Managed Care into the ABD population is under attack from the influential nursing home industry and the upcoming budget changes planned by the House as they work to pass HB 49 the first week of May may weaken these provisions as they send the budget bill to the Ohio Senate.

Capital Connections: Making the Most of Your Association’s Legislative Day Event

One of the most important services any association provides to its members is building a bridge with government.  And one proven tactic in the government relations toolkit is to host a Legislative Day event.

Legislative Days, sometimes called Advocacy Days, provide a venue for industry members and advocates to directly connect with legislators and other key government officials. Recently, the Montrose Group had the opportunity to support the Ohio Soft Drink Association’s annual Ohio Non-Alcoholic Beverage Day at the Statehouse. This long-time event is well-received by members and legislators alike.

As we reflect on the OSDA event, we’d like to share a few tips to help make your Legislative Day a success, too:

  • Find the right fit for your industry. Many industry legislative events involve highly-produced luncheons or dinners, workshops and keynote speakers. These formats are quite popular, but they may not work for everyone. And legislators will rarely attend. OSDA found that its members wanted less pageantry– and more one-on-one contact with officials. They adapted their agenda to address their members’ requests.
  • Aim high. Legislative aides play an integral role in the government relations process. But for the purpose of your Legislative Day event, strive to set meetings with legislators, rather than their aides, if possible. Those direct connections are invaluable.
  • Divide and conquer. In Ohio, we have 99 Representatives and 33 Senators. That leaves a lot of ground to cover on Legislative Day. Divide your participants into small teams by geography, and set meetings with the legislators from their respective districts. This will allow your group to cover more ground, but it also gives legislators the chance to forge relationships with the businesses they directly represent.
  • Prepare the team. It can be intimidating to meet with legislators. The best way to help your member participants overcome any jitters and enable them to best represent your industry is to ensure they are prepared. In the case of OSDA, participants attended a pre-event webinar to review the day’s goals, key messages, and logistical details. Other associations host in-person training on the day of the event. Whatever the method, don’t skip this step.
  • Two for one. How often do you have this many industry representatives in one place? Take advantage of the event by using it to create association marketing materials, such photos or videos. For example, it can be a perfect opportunity to record brief video testimonials or interviews with industry thought leaders.
  • Make a resolution. Your industry creates an economic impact on the state. The legislature or Governor might recognize that importance through an official resolution. Reach out and ask. Be prepared to provide details about your industry’s impact, such as the number of jobs provided. OSDA was grateful to receive a resolution from Gov. John Kasich and Lt. Gov. Mary Taylor.
  • Get social. Engage your participants, legislators, and industry members on social media. To facilitate this, create a hashtag for your day, and provide details and recommendations to members in advance of the event. We suggest communicating these requests directly with the members’ social media managers for best results.
  • You likely created new content for Legislative Day. Make the most of it by repurposing it for your marketing efforts, including your blog, publications and social media.
  • Make a splash. A Legislative Day event is not news on its own, but look for other ways to create media interest. Is there an industry announcement that can coincide with the event? (Also, see below.)
  • Think outside the Statehouse. Your day can extend beyond Capitol Square. Consider ways to engage members and their communities across the state. This might include a series of member-hosted facility tours for local officials, workshops for school students, or even donations to local non-profits.

Plans are already underway for Ohio Non-Alcoholic Beverage Day in 2018. We’d love to be a part of your Legislative Day, as well. Contact us to learn how we can help.