Ohio Senate leaders introduced their version of the new two-year operating budget Tuesday. They expect to vote on the $85.7 billion spending plan next week. Lawmakers have until a constitutionally mandated June 30 deadline to settle any differences and approve the budget.
The Senate proposal reduces existing state income tax brackets from four to two. Like the House version, any income below $26,050 is not subject to tax, and income beyond that mark faces a 2.75% rate. But unlike the House proposal which levies slightly higher rates at about $92,000 and $115,000, the Senate has just one other 3.5% bracket starting at $92,150.
“In Ohio you don’t pay income (tax) up to your first $26,050,” Senate Finance Chair Matt Dolan, R-Chagrin Falls explained. “So we want to make sure that (they) receive money back too and they’ll get that back in sales tax relief.”
That sales tax relief comes in the form of a dramatic expansion of the back-to-school sales tax holiday. Instead of restricting the tax break to school supplies, the Senate wants to apply it to almost any tangible goods with price tags up to $500. Dolan envisions the tax holiday extending for 14 days, and they’ve included language to have additional holidays in the future.
“Once the surplus dollars reach $50 million that will trigger an extended sales tax holiday,” he said. “The length of it will be dependent upon the amount of money.”
In addition, the Senate will reduce the Commercial Activity Tax by 25% over two years. All told, Dolan explained, those tax cuts amount to $2.5 billion.
Perhaps the most notable change in education policy is an expansion of the state’s school voucher program. As Senate President Matt Huffman has said previously, Dolan described the proposed eligibility increases amount to “universal” vouchers.
Families making up to 450% of the federal poverty line — about 3/4 of students according to Dolan — would be eligible for a full scholarship.
“And if you were above 450% of poverty,” Dolan explained, “you will still be eligible for a scholarship for your child, but it will be a means test and a sliding scale to where ultimately it will come down to a minimum of 10%. So everyone in Ohio will be entitled to a 10% scholarship to send his or her child to the school of their choice.”
Of course, that means families already sending their children to private schools will now be able to get a 10% discount. But President Huffman defended the move.
He acknowledged some will use the voucher to keep their children in private schools. But he also argued that decision winds up costing the state less because the voucher they receive doesn’t cover the full cost of tuition.
“The average cost for a public school in the state of Ohio was about $14,000,” Huffman said. “And we can look at a sixth grader and say here’s $6,000 to go to this private school. What’s the better choice for the taxpayer?”
The Senate also rolled a state board of education overhaul into the budget. That proposal, Senate Bill 1, takes significant powers away from the board and hands them to a renamed Education and Workforce department in the governor’s cabinet.
They included it, Huffman explained, because after June 30, lawmakers may not be “back in earnest” for “a considerable period of time.”
Huffman is co-chairing the campaign to raise the constitutional threshold which is slated to go before voters in August.
While the Senate budget spends freely to fund tax cuts and expanded vouchers, they’re wary of spending on Temporary Assistance for Needy Families, or TANF. The program provides cash assistance with a mix of state and federal block grant dollars. The bulk of the funding comes from the federal government.
Nevertheless, Dolan contends they’re facing a “cliff” in the coming years.
“We’ve been saying for a number of years that these dollars that we are spending, we’re going to run out of money, we’re going to deficit spend,” he argued. “And what that means is those families that need food assistance and child care are going to get hurt.”
TANF dollars fund several programs, but Dolan argued the core mission is food and child care assistance.
“Every TANF organization, with the exception of child care and with the exception of food banks and food assistance programs, is only getting funded in TANF for one year,” Dolan said. “Because we have to recognize that those dollars need to be available for food assistance (and) child care, particularly if there’s in fact a recession looming in the future.”
The Senate included several one-time funding provisions in their budget including $1 billion for a site preparation fund the governor pitched earlier this year. The governor wanted more than double that amount.
Gov. Mike DeWine got a mixed bag when it comes to education as well. The Senate plans to fully fund his literacy program — unlike the House. But Dolan and company aren’t taking him up on a $5,000 annual merit scholarship meant to funnel students to Ohio universities.
As for the August election, the Senate has earmarked $15 million to help county boards. That’s $5 million less than what earlier legislation proposed.
This story was republished from the Ohio Capital Journal under a Creative Commons license.