Budget Overview
Just over a week ago, the 130th Ohio General Assembly and Governor Kasich put the final touches on the $62 billion state operating budget for fiscal years 2014-2015.  As with any budget bill, there was plenty of controversy as the Administration unveiled several major policy initiatives ranging from tax policy overhauls to K-12 education funding, Medicaid expansion and a second attempt at an oil and gas severance tax.

Tax Changes
Between introduction of the budget in February and final enactment in June, many versions of comprehensive tax reform were discussed. All however, shared at least two goals:  (1) cut personal income taxes; and (2) create a more favorable tax environment for businesses.  

After much consideration, Governor Kasich and the legislature delivered a $2.7 billion tax cut to Ohioans.  Personal income tax rates will be permanently reduced by 10% over the next three years for all Ohioans.  Small businesses will receive an income deduction of 50% for the first $250,000 of business income.

The Administration was dogged in pursuing a severance tax increase on the oil and gas industry after failing to gain traction in 2012, but the legislature again balked at this proposal.  Undeterred, the Governor will continue to push a severance tax increase to fund additional reductions in personal income tax rates in the months ahead.

Other notable tax changes include:

• Statewide sales and use tax increases by .25% to 5.75% beginning September 2013.
• Sales and use tax will now be extended to magazine subscriptions and digital goods (i.e. music, book, video downloads).
• Provides an equipment sales and use tax exemption for computer data centers which invest at least $100 million for three years and has payroll of $1.5 million annually.
• Changes the Commercial Activities Tax to effectively eliminate the exclusion beyond the minimum $150 tax for the first $1 million of taxable gross receipts.  CAT taxpayers with less than $150,000 of annual gross receipts will still pay no Commercial Activities Tax.
• Eliminates the Technology Investment Tax Credit.
• Eliminates the personal income tax deduction for gambling losses.
• Authorizes a state Earned Income Credit for taxpayers with income less than $20,000.
• Eliminates the Homestead Exemption for seniors who make over $30,000 annually.
• Phases out the 12.5% Residential Real Property Tax Rollback paid by the state on new and replacement levies.  The state will continue to pay the rollback on existing and renewal of existing levies.

Health and Human Services
Health and Human Services are always at the forefront of budget debates, and this year was no exception.  With this final bill, the legislature preserved Ohio's health care infrastructure for many Ohioans and added 231,000 Ohioans to the Medicaid rolls. The budget also merged the departments of Mental Health and Alcohol and Drug Addiction Services into the new Department of Mental Health and Addiction Services and created a new Department of Medicaid.

Governor Kasich and the legislature have placed a high priority on battling opiate addiction.  Hicks Partners was pleased to work with policymakers to create a pilot program for 500 non-violent offenders to receive medication assisted treatment, drug testing and psychosocial counseling.  The pilot program will study recidivism rates of those enrolled, review outcomes and identify effective treatment options for program participants as they fight to overcome opiate addiction.  

Medicaid Expansion
Governor Kasich's plan to expand Medicaid coverage under the Affordable Care Act undoubtedly generated the most heated debate over the past few months. The Governor pushed hard to move expansion forward but the House ultimately removed the provision before passing the budget.  The Senate followed the lead of the House and refused to include Medicaid expansion in the final budget bill despite impassioned pleas from Democrats, a large coalition of healthcare advocates, business groups and newspaper editorials.

Debate on Medicaid expansion and reform will continue throughout the year.  Action could occur within the next 60 days and healthcare advocates are expected to be out in full force in the coming weeks.

Other Items of Interest
As with any budget, the bill's thousands of pages cover a myriad of issues all over the spectrum.  Below are some quick highlights:

• Education:
  • Education Funding: All districts are guaranteed to receive at least the level of overall foundation funding that they receive in the most recently passed school year.  Of the 612 school districts in Ohio, 421 school districts will receive increased state aid in FY14 and 435 districts are projected to see an increase in FY15.  
  • Early Learning: $33.3 million will be provided in FY14 and $45.3 million in FY15 to support preschool learning for children from low-income families.  In addition, more than $100 million will be available each year through a special education enhancement fund to support preschool special education for children age 3-6 with special learning needs.
  • K3 Literacy - Ohio's revamped Third Grade Learning Guarantee: The budget bill includes $75 million in FY14 and $102 million in FY15 to support reading intervention plans and assistance for struggling readers.

• Standardized Reporting of Health Data:The budget requires the Ohio Health Director to establish a standardized process for all general and city health districts to collect and report information about public health equality indicators.  Additionally the state health department must develop policies and procedures for sharing the reported health data with payers, providers, health districts and public health professionals.

Closing
As the sweeping operating budget demonstrates, activities around the Statehouse directly impact every business and person in Ohio.  If you are interested in these items or any other key legislative initiatives please contact Zach Holzapfel or Tony Brigano to see how Hicks Partners can be of service.

Longtime Hicks Partners client Mission Essential, a national security and technology integration company, unveiled its new website, missionessential.com, last month to showcase the company's talent and unique capabilities. The new, mobile friendly website features easier navigation, stellar art, captivating stories about featured talent, details about solutions and streamlined access for potential employees and business partners.

Mission Essential is coming off its most successful year ever, despite the climate of budget cuts and sequestration.  Mission Essential was recently named # 31 on Washington Technology's annual ranking of top government contractors, up from #37 last year. For nearly a decade, Mission Essential has served customers at the strategic and tactical levels, providing operational solutions to the US Departments of Defense, State and Homeland Security, as well as the Intelligence Community, friendly foreign governments and multinational corporations.