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Ohio House unveils major changes to state budget

The House Finance Committee is now working from a dramatically different budget bill than what was originally proposed by Governor John Kasich. The House accepted a new version of the bill in committee that effectively gutted the governor’s proposals to expand Medicaid to roughly 275,000 low income adults, increase the severance tax, expand the state sales tax to include services, and significantly altered the school funding proposal.

Roughly 2,000 supporters of Medicaid expansion rallied at the statehouse on April 11 to encourage the legislature to reconsider its decision. Representative Barbara Sears (R- Sylvania) has indicated she is working on a separate piece of legislation that would create a pilot program using federal dollars to fund private insurance coverage for the eligible adult population through the healthcare exchange.

The substitute bill provides a seven percent across the board income tax reduction beginning in 2013. As introduced, the bill would have implemented a 20 percent income tax reduction over three years, funded through a dramatic expansion of services subjected to the state sales tax and an increase to the state’s severance tax on oil and gas. Additionally, the bill rolls back the proposal to provide small businesses income tax relief. Under the governor’s proposal, taxpayers reporting business income on their personal tax return would have seen the state income tax on the first $750,000 of business income reduced by 50 percent. Senate President Keith Faber has expressed an interest in revisiting this provision once the bill moves to the Senate.

The following are among the additional changes to the bill:

  • Provides an additional $30 million per year to counties for mental health services and an additional $20 million per year for drug treatment
  • Increases funding for food banks by $2 million per year
  • Earmarks $500,000 per year for the Jobs for Ohio Graduates program
  • Exempts licensed agricultural commodity handlers from the Commercial Activities Tax
  • Expands the definition of nexus to require internet retailers to collect and remit sales tax
  • Removes the $25,000 horizontal well impact fee
  • Lowers the motor vehicle fuel tax on liquefied natural gas from 44 cents per gallon to 28 cents per gallon
  • Changes the minimum setback requirement for the blades of a wind turbine at an economically significant wind farm from 750 to 1,250 feet
  • Removes the requirement that well owners analyze the radium in technologically-enhanced naturally occurring radioactive material—associated waste streams that are used in or result from the construction, operation or plugging of a horizontal well
  • Transfers $4 million per year to the Local Government Innovation Fund
  • Creates the Local Government Information Exchange to incentivize local governments to share information online and provides $2.5 million for grants in fiscal year 2014

Additional amendments will be accepted on April 16 and the bill is scheduled for a possible vote in committee. Informal hearings will also begin in the Senate that day with presentations provided by the Office of Budget and Management and the Department of Taxation.

Commissioner Porter to lead commerce

Governor Kasich announced this week that Andre T. Porter will leave the Public Utilities Commission to become director of the Ohio Department of Commerce effective April 22. Porter was appointed by Governor Kasich to serve as a commissioner in February 2011. He will replace David Goodman who was named Development Services Agency director last month. Porter’s departure creates a republican vacancy on the commission.

Prior to his current role, Porter was a practicing attorney at Schottenstein Zox and Dunn Co., LPA (now Ice Miller LLP), where he counseled commercial and industrial businesses, municipalities and trade associations on energy and utility regulation, as well as real estate tax issues.

Separately, State Representative Matt Szollosi (D- Oregon) recently announced he would resign his seat to take the role of Executive Director for the Affiliated Construction Trades of Ohio. Szollosi, who currently serves as the Assistant Minority Leader, was elected to his fourth term in November. The House Minority caucus is expected to create a search committee to identify a successor.

Legislation to watch

Captive insurance companies: House Bill 117 was recently introduced by Representative Bob Hackett (R- London). The legislation allows for the operation of captive insurance companies—defined in the bill as an insurer that insures only the risks of its parent or affiliated companies of its parent.

Receivers’ powers: House Bill 9, sponsored by Representative Peter Stautberg (R- Cincinnati) passed the House this week. The bill makes various changes to the powers of a receiver. The legislation provides that a receiver may be appointed to enforce a contractual assignment of rents and leases, and requires that a receiver appointed in specified types of actions be appointed only with respect to the particular property that is the subject of the action.

SharedWork Ohio Program: House Bill 37, sponsored by Representative Mike Duffy (R- Columbus) was approved by the House this week. The bill creates the SharedWork Ohio Program, under which an employer who participates in the program reduces the number of hours worked by the employer's employees in lieu of layoffs.

For more information, please contact:

Michael G. Caputo
(non attorney professional)

Rebecca M. Kuhns
(non attorney professional)

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