Policy Matters issued this initial statement today on key elements of Gov. Kasich’s budget proposal. We will continue to monitor the budget process, praising the smart solutions and suggesting other ways that the state budget can ensure that Ohio is creating an economy that works for everyone.

 

A budget that works

Medicaid

We congratulate the Kasich administration for embracing Medicaid expansion, recognizing that the revenues it brings into the state provide greater benefit than costs. Additional federal money could be brought in through new federal programs like the Balancing Incentives Payment Program or the Community First Choice Option: it is not clear from the budget documents we received today that these additional sources of federal funding are being pursued to enhance services and funding for Ohio.

Taxes

Gov. Kasich’s tax proposals will take Ohio in wrong direction by shifting a greater share of taxes onto lower- and middle-income Ohioans, while reducing the revenue needed to support vital public services. Ohio tried cutting income-tax rates 21 percent eight years ago, and it didn’t work; we have seen worse job, income and output performance over that time than the country as a whole. Why would we want to double down on a bet that hasn’t worked?

Cutting taxes on business income also is a poorly targeted move that is unlikely to do much for Ohio’s economy, and will create new avenues for tax avoidance. Extending the sales tax to services is good tax policy, as the services make up a growing part of the economy. However, it will need to be closely studied, as it contains restrictions on counties and other elements that don’t make sense. The proposal underlines further the need for a refundable Earned Income Tax Credit for low- and moderate-income wage earners, which would at least partly offset a sales-tax expansion.

Education

The Kasich administration is moving in the right direction as it proposes to boost state funding for Ohio schools over the next biennium, rather than cutting as it did during the current budget cycle. But the proposed increase falls well short of making up for previous cuts; even with a stated priority of providing resources for all Ohio’s children, it’s not clear that the administration’s approach will be more successful than past attempts to create a strong and equitable system. Among other concerns is the short-term nature of at least $1.2 billion in proposed school funding – $300 million for the Straight A fund, a one-time pot of money geared toward innovation and efficiency, and $880 million the administration identifies as “guarantee” money that must be phased out.

At the same time, the administration would continue increasing funding for vouchers and charters faster than enrollment in those private options is rising, even as funding for school districts drops. Until policymakers take seriously their charge to create a public education system that works for everyone, Ohio’s future, and the well-being of its most vulnerable residents, will be shortchanged. As mentioned above, cutting taxes for Ohio’s more affluent residents and businesses will undermine our future, in part by forcing cuts in key areas such as education.

Policy Matters will continue to monitor the budget process, praising the smart solutions and suggesting other ways that the state budget can ensure that Ohio is creating an economy that works for everyone.

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