The Ohio Senate will vote today on a $130 billion , two-year budget today that freezes Medicaid enrollment and leaves in place a business tax break that some Republicans and Democrats say is costing too much money.
The Senate Finance Committee on Thursday approved more than 150 amendments Republican leaders wanted added to the budget proposal the committee had earlier approved.
The budget makes cuts to resolve an approximately $1 billion shortfall in revenue over the two fiscal years covered in the 2018-2019 budget.
Democrats have called for the budget hole to be closed by ending a tax cut that allows small businesses to avoid taxes on the first $250,000 of earnings. The tax break also allows those businesses to pay a maximum of 3 percent on additional income, rather than the 4.9 percent other businesses pay. Enacted in 2013 and 2015, the exemption covers businesses that organize as partnerships, sole proprietors or limited liability corporations.
The non-partisan Legislative Service Commission, which analyzes legislative proposals, has said that Ohio would gain $1.1 billion annually if the tax break were not in place.
“It has (some) Ohioans paying absolutely no income tax,” said Sen. Michael Skindell, D-Lakewood, the ranking minority member of the finance committee. “It has blown a hole in our state budget. We are unable to fund vital programs at the state level.”
The Democratic proposal - which the Senate Finance Committee tabled - calls for using the revenue to balance the budget without cuts and spend the remaining additional revenue on schools, local governments, health care, higher education and an additional $200 million to fight the opioid crisis.
“We don’t have to cut our way out of the problem here,” Mike Rowe, communications director of the Senate Democratic Caucus.
Some Republicans support reducing the exemption, including House Majority Floor Leader Bill Seitz, R-Cincinnati, who says it has provided a powerful incentive for people to reorganize their businesses to get the tax break without actually adding jobs or making capital improvements.
“I believe we might have overshot the mark,” Seitz said of the decision to grant the exemption.
As a result, he said, the budget must instead be balanced using “substantial, painful cuts.”
“Essentially just about everybody got cut by upwards of 3 percent,” said Seitz. “That doesn’t sound like much but it adds up to real money.”
State Sen. Peggy Lehner, R-Kettering, said the legislature ought to look to see if the tax break is being abused or being used more than intended or expected. She said there is talk of changing the tax break threshold to $100,000, down from $250,000.
“I happen to think that taking another look at the small business tax would be a very responsible thing to do,” said Lehner, who sits on the Senate Finance Committee.
Seitz said the idea may not be favored by his caucus in the House and a spokesman for Senate Republican leadership also cast doubt on the chances of such a change being approved.
“I’m not sure where you are hearing that from, the Democrats?” said John Fortney, spokesman for Ohio Senate Majority Caucus and Senate President Larry Obhof, R-Medina.“No, we aren’t raising taxes.”
Ohio Gov. John Kasich does not support reducing the tax break.
“No, we don’t want to raise taxes in the state,” Kasich said after an unrelated news conference in Columbus on Monday.
Mike Rowe, communications director of the Senate Democratic Caucus, said updated state revenue projections could change the equation if they exceed the current projections of a revenue shortfall.
“If the numbers show a little larger (revenue shortfall) than what they expected perhaps that would prompt them to do something with this tax cut,” Rowe said.
John Charleton, communications director for the state Office of Budget and Management, said revised revenue figures will be released to the conference committee that will iron out differences between the budget bills passed by the House and expected to be approved today by the Senate.
The Senate Finance Committee agreed to freeze new enrollment in the expanded Medicaid program starting on July 1, 2018.
“I think the amendment reflects a difference between the Republicans and Democrats, where the Republicans want to deny people health care coverage,” said Skindell.
The committee also approved an amendment limiting the state Controlling Board’s ability to authorize a “significant expenditure” that has not been approved by the legislature, a vote apparently related to the way Medicaid was expanded in Ohio.
Kasich sidestepped the legislature in 2013 by using a Controlling Board vote to expand Medicaid, giving coverage to 715,000 low-income Ohioans under the provisions of the federal Affordable Care Act. The change took effect Jan. 1, 2014.
Kasich declined to comment directly on the Senate’s proposed changes to Medicaid and the Controlling Board’s authority.
“We have a long way to go. The Senate has done a very good job in terms of fiscal stability, which I’m most concerned about,” Kasich said on Monday. “The most important thing is that we have fiscal stability because fiscal stability puts us in a position to grow jobs.”
Seitz said the legislature should wait to see what the federal government does with Medicaid expansion before stopping people from enrolling.
“I don’t think denying new enrollment is necessarily a good idea,” Seitz said. “That is still premature.”
State Sen. Robert Hackett, R-London, said he supports Medicaid reform and will vote for the budget even though he hasn’t decided if he supports a freeze.
“You can see we are a very conservative caucus. Some of us wanted to wait until we see what comes down from Washington. Some of us wanted to say we want to send a message to Washington,” Hackett said. “Ohio can’t afford to pay for everybody who is on Medicaid expansion.”
Currently the federal government pays 90 percent of the cost of the expansion but the U.S. House-passed American Health Care Act cuts Medicaid funding. Republican leaders in the U.S. Senate are working on their version of health care reform behind closed doors so it is unknown what their plans are for Medicaid.
Other budget items
Democrats, who are in the minority, submitted about 40 proposed amendments during the finance committee meeting and nearly all of them were tabled as Republicans outnumber Democrats on the committee and in the Senate and House.
Details of the Republican amendments were not available but a summary of them was provided to the committee.
Among the amendments accepted by the finance committee are those that:
- Revise the distance of wind turbine setbacks on wind farms.
- Increase funding for early childhood education by $2.5 million.
- Establish a procedure for the legislature to review the efficiency of administrative agencies.
- Require criminal background checks for employment at medical marijuana related businesses.
- Allow bingo to be played for money by residents of Ohio’s two veterans’ home.
- Require that driver’s education programs include training on the danger of using illegal drugs, prescription medication or alcohol while driving.
- Establish a committee to study the inclusion of nursing facility services and home and community-based waiver services into Medicaid managed care.
- Removes a provision related to maximum Medicaid rates for durable medical equipment.
Thank you for reading the Springfield News-Sun and for supporting local journalism. Subscribers: log in for access to your daily ePaper and premium newsletters.
Thank you for supporting in-depth local journalism with your subscription to the Springfield News-Sun. Get more news when you want it with email newsletters just for subscribers. Sign up here.