Testimony of Hannah Halbert, Policy Liaison, Policy Matters Ohio
before the House Ways & Means Committee on HB 98, March 30, 2011

Chairman Beck, Ranking Member Letson and members of the Ways & Means Committee, thank you for the opportunity to testify today. Policy Matters Ohio is a nonprofit, nonpartisan organization conducting research on issues facing working families in Ohio.

Full Report

Sharing the pain:
State seizes Local Government Fund and tax replacement funds
Wendy Patton
3/29/2011

The Executive Budget Proposal for state fiscal years 2012 and 2013 garners approximately $2 billion over the biennium by elimination of revenue sharing and tax replacement for local government, libraries and schools (Table 1). The biggest loss to local government comes from a tiered reduction of half of the Local Government Fund. The state anticipates gaining more than $555 million for the General Revenue Fund from this recapture of funds that had been earmarked for the Local Government Fund.

Full Report

Overall, the state budget proposed for fiscal years 2012 and 2013 by the Kasich administration relies on cuts to make ends meet, rather than considering ways to raise new revenue. Nowhere is the risk to Ohio’s future more evident than in the administration’s plans for K-12 education.

In this brief, Policy Matters examines the impact of the Kasich K-12 budget and finds that the governor would decrease education funding in Ohio by $2.3 billion over the biennium when compared to the FY2010-11 budget. At the same time, the administration proposes a significant expansion of charters and school vouchers. Our analysis finds that, over the past decade, state funding for schools has remained flat or dropped when amounts are adjusted for inflation; the same period saw deductions from district funds to pay for charters and vouchers soar, outstripping any annual increases in overall school funding.

Rather than depending on unproven reforms and relying on cuts to balance the budget, the governor and Ohio legislature should work to strengthen to public system that educates 90 percent of Ohio’s children.

Press Release

Budget Brief

An Analysis of Education Funding Proposed by the Kasich Administration

Overall, the state budget proposed for fiscal years 2012 and 2013 by the Kasich administration relies on cuts to make ends meet, rather than considering ways to raise new revenue. Nowhere is the risk to Ohio’s future more evident than in the administration’s plans for K-12 education.

In this brief, Policy Matters examines the impact of the Kasich K-12 budget and finds that the governor would decrease education funding in Ohio by $2.3 billion over the biennium when compared to the FY2010-11 budget. At the same time, the administration proposes a significant expansion of charters and school vouchers. Our analysis finds that, over the past decade, state funding for schools has remained flat or dropped when amounts are adjusted for inflation; the same period saw deductions from district funds to pay for charters and vouchers soar, outstripping any annual increases in overall school funding.

Rather than depending on unproven reforms and relying on cuts to balance the budget, the governor and Ohio legislature should work to strengthen to public system that educates 90 percent of Ohio’s children.

Press Release

Budget Brief

Ohio’s tax expenditure report examines credits, deductions and exemptions in the tax code that reduce the amount of revenue the state would otherwise receive. This year’s report, prepared by the Ohio Department of Taxation, estimated that in both Fiscal Years 2012 and 2013, 128 such exemptions and credits will amount to more than $7 billion in foregone revenue to the state’s General Revenue Fund. Remarkably, Gov. John Kasich’s proposed budget would not limit or eliminate any tax expenditures, though it calls for huge reductions in aid to local governments and proposed cutbacks to public education and higher education spending, programs for children, and many other important items. The Ohio General Assembly should closely examine the report, and limit or eliminate unnecessary credits and exemptions.

Policy Matters Ohio presents some highlights of the report in this March 2011 brief. Earlier Policy Matters reports provide additional information on tax breaks in Ohio and how to limit them.

Press Release

Executive Summary

Full Report

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The FY 2012-13 Tax Expenditure Report (Click on Book Two, Tax Expenditure Report)

Spending by Another Name: The 2009 Ohio Tax Expenditure Report

This report, the second in a three-part series, investigates investment in Ohio’s workforce development system from Department of Labor sources.

Press Release

Executive Summary

Full Report

Gov. John Kasich’s proposed budget shortchanges key investments that Ohio needs to be
making. It cuts funding to public schools by more than $2 billion compared to the current biennium, while reducing support for higher education. Important human services – Federally Qualified Health Centers, kinship care that helps keep children out of foster care, subsidies for boards for developmental disabilities, eligibility for child-care subsidies – all are to be reduced. …

Full Statement

by Zach Schiller, in The Cleveland Plain Dealer

 The debate over Ohio’s state operating budget gets under way for real today when Gov. John Kasich’s two-year budget proposal is revealed. 

As the General Assembly considers the budget proposal, here’s something that deserves close attention: the $7 billion in exemptions, credits and deductions from state taxes that otherwise would be paid each year.

This means that more than $1 in every $4 that the state would collect instead is not due. These exemptions and loopholes, known as “tax expenditures” because they amount to state spending through the tax code, include:

• Special breaks for special industries, such as a credit for brewers and beer importers for paying beer and malt-beverage taxes early, and a sales-tax cap for affluent buyers of time shares in jet aircraft. Under this tax cap, a buyer who otherwise might pay $8,000 or $10,000 in state sales tax pays just $100.

• A tax break for banks that is much greater than the entire corporate franchise tax they pay (this exemption, for good will, appreciation and abandoned property, amounts to an estimated $186.8 million this fiscal year, compared to $132.4 million estimated for tax to be paid).

• The $1.7 billion sales-tax exemption for manufacturers on purchases of machinery, equipment, supplies and fuel, which amounts to more than the tax revenue generated by each penny of the state’s sales tax. This exemption has not been examined since it was last overhauled in 1990. While most states with sales tax have such an exemption, is it sensible to leave this so long without a review?

• A credit for previous operating losses against the Commercial Activity Tax — available only to companies that had $50 million in losses before that tax was established. Lose a little, and the state can’t help you. Lose a bundle, and you qualify.

These are just some of the tax expenditures that are a permanent part of the tax code, with no regular review. Altogether, the Ohio Department of Taxation totaled up 122 of them — a number that probably will increase in a new report due today.

The number actually would be greater if you included services that aren’t taxed, such as lobbying.

It doesn’t include the Dealers in Intangibles Tax, which allows mortgage brokers and payday lenders to pay a lower tax rate than banks do. The last two major studies of the Ohio tax system each recommended the elimination of this tax.

Nor does the report include state subsidies of local property taxes that go to all property owners, regardless of income. These added up to almost $1.7 billion last fiscal year. As governors, George Voinovich and Bob Taft both attempted to cap these subsidies so they would be available only up to a certain home value. In 2007, Jon Husted, the speaker of the Ohio House, similarly wanted to means-test the homestead exemption for seniors. All failed, regrettably.

Other states, such as Arizona and Washington, have been conducting regular reviews of their tax expenditures. Oklahoma, Colorado, Iowa and Kansas have reduced tax credits. The Ohio Manufacturers’ Association has said the sales tax is “riddled with exemptions, carve-outs and credits” and called for a comprehensive review.

Ohio’s state support for early childhood education, mental health programs, libraries and other services all came under the knife as revenues fell. If you want to appeal your home’s tax valuation beyond the Board of Revision, you’re now looking at a two-year wait for a hearing because the legislature couldn’t find another $1 million to support the Board of Tax Appeals.

Even without the revenue shortfall Ohio is experiencing, the General Assembly should periodically review these tax expenditures. Before making major cuts in crucial services such as public education, slashing local aid and forcing layoffs of police and firefighters, and further shredding our safety net, tax exemptions, credits and deductions should be fair game.

Schiller is research director of Policy Matters Ohio, a nonprofit, nonpartisan research institute based in Cleveland.

Testimony of Amy Hanauer, Executive Director, Policy Matters Ohio
Prepared for delivery on March 10, 2011, to the House Committee on Commerce and Labor
 
Good public services with decently-compensated, secure employees are a necessary, indeed key, ingredient to a thriving state economy.
Policy Matters has grave concerns that Senate Bill 5 will result in lower-quality public services, less flexibility for employees and managers to solve problems in the public sector, fewer smart voices being able to contribute to creating good public workplaces, and an economy that works less well. …

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