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The House Finance Committee continued hearings on Gov. Kasich's budget proposal this week. House Bill 64, a nearly 3,000 page bill, includes details on the governor’s spending proposal for fiscal years 2016 and 2017.

Education

Department of Education Superintendent Dick Ross testified before the committee on Feb. 10, outlining the primary and secondary education proposals contained in the bill. Among the proposals highlighted, Ross told the committee the bill would increase the current competitive bidding threshold for schools from $25,000 to $50,000 to be consistent with other local government entities. Additionally, the bill would permit schools to contract with a hospital or other licensed healthcare program to provide healthcare to students.

The bill also provides regulatory relief to high-performing teachers and schools. Under the proposal, those teachers that are consistently high-performing would be exempt from a requirement to complete additional coursework for purposes of licensure renewal. High-performing schools may elect to be exempt from teacher credential qualification requirements for third grade students who require reading intervention and remediation under the Third Grade Reading Guarantee, minimum or maximum class size requirements, and requirements to consult with an educational service center to provide services to children with disabilities.

The education proposal in House Bill 64 includes charter school reform. The budget proposes to require all community school sponsors to be subject to Ohio Department of Education approval. Every sponsor will be subject to a sponsorship agreement with the department that will govern each sponsor’s scope and authority to sponsor community schools. Ross said the administration seeks to hold Ohio’s community schools more accountable while "putting teeth" into the new community school sponsor evaluation system that took effect Jan. 1, 2015.

Finally, the bill includes an expansion of the EdChoice Scholarship Program, which was created to provide students in underperforming public schools the opportunity to attend participating private schools. The program was expanded in recent years to phase-in students whose family income is at, or below, 200 percent of the Federal Poverty Guidelines for participation. The bill extends the program to economically disadvantaged students in second and third grades.

Medicaid

Ohio Medicaid Director John McCarthy testified on Feb. 11 regarding initiatives to move individuals up and out of poverty and exit the program. He said the administration’s budget proposes to assess premiums for adults above 100 percent of poverty. Noting that premiums are the norm for private insurance and coverage on the federal marketplace exchange, McCarthy said they should also be the norm for Medicaid participants. The department estimates nearly 100,000 Medicaid enrollees (less than three percent of the total monthly enrollment) would be assessed a premium of approximately $20 per month for individuals in this income range, capped to not exceed two percent of household income.

In an effort to speed up the transition off Medicaid, the budget proposal would require quarterly reporting for anyone whose income increases above the allowable threshold, and as long as the income remains below 185 percent of poverty, they will be provided 12 months of continued Medicaid eligibility. Currently in Ohio, when the earned income of a parent's or caretaker's relative increases above the eligibility threshold for the group (206 percent of poverty for children and 90 percent of poverty for parents and caretakers), a 12-month Transitional Medical Assistance (TMA) span is approved without requiring individuals to complete quarterly reporting of their income. McCarthy said the six- to 12-month transitional assistance would provide time for the individual to seek subsidized coverage on the exchange or other private insurance.

Tax

Department of Tax Commissioner Joe Testa outlined the governor’s tax reform proposal included in the bill. Considered the most contentious proposal included in the expansive piece of legislation, the bill would increase the Commercial Activities Tax (CAT) from 0.26 percent to 0.32 percent, the cigarette tax by $1, the state sales tax from 5.75 percent to 6.25 percent, and the severance tax on oil and natural gas to 6.5 percent and 4.5 percent, respectively. The tax increases would fund a 23 percent income tax reduction for all Ohioans.

Legislators questioned whether the shift to a consumption-based system of taxation was a wise policy, with many Democrat members telling Testa that the changes would disproportionately affect low-income Ohioans. In response, Testa said the administration feels that the income tax is the most harmful from an economic development perspective and a shift towards a consumption-based tax system would encourage more businesses to locate in the state.

Also of concern to many legislators is the impact the CAT increase would have on businesses in the state. Rep. Cheryl Grossman (R-Grove City) asked whether the administration had spoken with businesses to determine the impact such an increase would have on their ability to grow. Testa said that while businesses weren’t likely to support the increase, they would see reductions in other tax liabilities that would help to ease the impact of the increase.

Additional hearings are scheduled on the legislation next week. The House is expected to make changes to the budget bill prior to voting on the measure towards the end of March.

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