Ohio’s Operating Budget Brings Tax Cuts, Workforce and Economic Development Opportunities

State Spending and Tax Policy in General. Continuing past tax trends, the Ohio General Assembly once again took a major swipe at reducing Ohio’s income tax. The $3 Billion in tax cuts leave Ohio with just two tax brackets down from the current four brackets. Ohioans now will pay a max of 3.5% of their income to the state with most Ohio taxpayers will either paying nothing or 2.75%

Included in the budget, but ultimately vetoed by Governor DeWine were two additional tax reductions the legislature had prioritized. The first was an extended August Sales Tax Holiday helping Ohio’s save on the cost of back-to-school necessities. The extended holiday would have taken effect in August 2024. Although the new provision was struck from the bill the current sales tax break will still be there for August 2023.

Also included was a proposal to reduces Ohio’s Commercial Activities Tax paid by businesses in the state. The new reduction phased in over the next two-years a new $6 million exemption that would eliminate the tax for 90% of current payers.

The actions by Governor DeWine will leave a unappropriated amount of expected state tax revenue as we begin the next fiscal year and is likely to be a topic of debate when the legislature returns this fall.

State Changes Key Economic Development Infrastructure Tools. Included in the budget were a few changes to the state’s Tax Increment Financing (TIF) tool. A TIF allows local governments the ability to invest and finance public infrastructure projects up-front by capturing the growth in tax revenue on new development within a designated area, or district. TIFs are important tools to help support the development and redevelopment of communities throughout the state when making investments in infrastructure to improve the quality of life in a community, attract jobs, or address safety. The enacted changes in the budget include the ability for a municipality to extend the life of a TIF by an additional 15 years for any TIF that was established prior to 2006 as long as proper notice and agreement is met with the applicable school boards and notice is provided to the county, and allows for the removal of a parcel from one TIF to another so as long as no payment in lieu of taxes as not been paid by the owner to the first district. The bill also makes changes related to the previously adopted 30-year TIF extension language a previous generally assembly related to the payment thresholds needed to qualify for an extension of a specific TIF district.

Another change in the enacted budget is the ability for a board of township trustees to form a new community authority or remove territory from and existing district, if the new community authority is comprised of unincorporated territory and located entirely within a township with at leases 5,000 people and in a county with a population of at leases 200,000 and not more than 400,000. The expansion of tools and modifying their application and uses is important to allow for the state to continue to grow and invest in public infrastructure and uses.

K-12 Education Changes. Major changes were enacted by the Ohio General Assembly around education. House Bill 33 created a new cabinet-agency to head up education policy in the state. The Ohio Department of Education was renamed the Department of Education & Workforce with the Director now appointed by the Governor with the advice and consent of the Ohio Senate. The existing Ohio State Board of Education will remain, but with a limited mission.

On the funding side, an additional $1.5 Billion in new funding was provided for education in Ohio. The General Assembly continued the phase-in of the Cupp-Patterson school funding formula created in the last GA. The final version of the operating budget also expanded families who are eligible for Ohio’s EdChoice voucher program, allowing those families choices on which school their child attends. The new eligibility for the Ohio EdChoice program increases from 250% to 400% of the federal poverty level income eligibility threshold making more Ohio families eligible for the program. The Governor and legislature also invested additional support to Ohio’s public community schools. Increased funding for the “High Quality Community School Program” was included in the final version of the bill, which goes towards supporting those public community schools that are deemed high performing. Additionally, new funding support was included through the community school supplement program, which will provide an additional $650 per pupil to help Ohio’s community schools with key needs including retaining and attracting high quality teachers.   

Higher Education Changes. Another area of focus for the Governor and legislature was investment in Ohio’s higher education institutions, including four-year universities, two-year community colleges, and Ohio’s technical colleges. Increases for Ohio’s main higher education support through additional funding in the State Share of Instruction line item was included in the budget. Funding for Ohio’s “Super Rapids” grant program was included to help support the higher education and business partnerships supporting the needs of growing job centers. Increases in Ohio’s College Opportunity Grant program was included as well providing additional tuition support for Ohio’s families who choose to attend an Ohio four-year university.

One of the biggest additions to the higher education budget was the creation of a new scholarship program for Ohioans who choose to go to a four-year university in the state. The Governor’s Merit Scholarship will provide a $5,000 scholarship in each academic year to students who finish in the top 5% of their graduating class. The new program is aimed at retaining the state’s best and brightest students by supporting their continuing education at the university level.

At the two-year community college level, the Ohio Work Ready Grant program was created to help support programs and students who are seeking to expand their skills and knowledge in Ohio’s in-demand jobs. The additional $20 million in new funding will help support Ohio’s community colleges with program support for those students who are non-credit and non-degree seeking. The program will be a key tool in the state’s effort to support businesses through workforce development and through training and re-skilling Ohio’s workers.