COLUMBUS — A $75 billion state budget containing a 2% personal income tax cut and an overhaul of the state’s system for funding schools cleared the Ohio House on Wednesday.
The massive spending blueprint lays out spending for state programs for the two years beginning July 1. It must next clear the Ohio Senate, where hearings have already begun.
The income tax cut would cost the state $380 million in tax revenue over the biennium and is on top of $120 million in reduced taxes brought on by recently passed legislation that aligns Ohio tax code with federal law, according to Republicans who control both chambers of the Legislature.
Majority Republicans characterized it as an important benefit for Ohioans economically strapped by the past year’s global pandemic.
“That is a priority for many here today and many across the state,” House Finance Chair Scott Oelslager, a Canton Republican, said on the floor. He called the budget “balanced, responsible and truly meaningful.”
House Speaker Bob Cupp, a Lima Republican, told reporters he’s comfortable with cutting taxes while accepting the federal funding. A state spending panel that includes lawmakers on Monday set up accounts to accept the money once it’s available, and the budget bill includes a provision creating a broader oversight panel that will offer input on how it’s spent.
“What we’ve heard is you can’t fund a tax cut with federal dollars,” Cupp said. “We’ve funded our tax cut with state dollars, and we think as time goes on the federal guidance on that will become clearer, so I am not concerned about that.”
Senate President Matt Huffman, a Lima Republican, told reporters Wednesday that any bill that’s the size of the budget bill is likely to see major changes. He said specifically that he’s concerned about how much spending is in the bill.
“It’s easier to make decisions that can be catastrophic in the long term when at the moment, there’s a lot of money available,” Huffman said. “So we really want to devise a plan that is comprehensive and efficient.”
Huffman didn’t flatly rule out cutting the school-funding overhaul, one of the biggest-ticket items in the bill. The House plan boosts education funding by about $180 million a year, but ramps up to the full $1.8 billion annually in six years.
He noted that the formula, because it lifts funding caps for wealthy, fast-growing districts, could send more state funding to those districts.
The formula also eliminates funding guarantees for poorer districts, while increasing funding generally for areas with more poverty.
“I don’t know that sending more money to these [wealthier] districts is the solution to the problem,” Huffman said. “So I don’t think it’s ‘in or out,’ I think it’s ‘change some things that the Senate is not likely to agree to.’”
Two of the state’s major think tanks were divided on the legislation’s tax provisions.
Wendy Patton, senior policy director for Policy Matters Ohio, said the bill’s tax cut would deliver yet more breaks to the wealthiest Ohioans and could be twice as costly as it appears on paper, at $760 million, because it may trigger rules of the American Rescue Plan Act that require recipients of federal COVID relief dollars to return the amount of any tax cuts to Washington.
Conversely, Robert Alt, president and chief executive officer of The Buckeye Institute, said the House bill “offers Ohioans far too little in the way of tax relief given the state’s robust revenue picture.”
Both groups commended the bill’s attempt to address Ohio’s unconstitutional school funding system, however, which faces an uphill battle in the state Senate.
The nearly $2 billion school-funding plan would eliminate funding caps and guarantees, and take into account a community’s ability to help fund its schools, factoring in not only property values but local income levels. It also would route public charter school funding directly from the state rather than through local districts. The changes would take place over the next six years and no school district will lose funding during the phase-in, under the proposal.
House Democrats largely opposed the budget bill, which passed 70-27, arguing that its funding priorities were misplaced.
House Democratic Leader Emilia Sykes said the budget “fails to make the investments we need to meet the challenges before us: an ongoing public health crisis and an economy that continues to leave too many hardworking people behind.”
Republicans rejected a series of Democratic amendments to the bill, which would have directed more state tax dollars to publicly funded child care, the H20 clean water program, maternal health and college affordability, among other Democratic priorities.