Kasich Unveils State Budget

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UPDATE 4:04 P.M. Governor John Kasich unveiled his biennium budget Monday, focusing on areas he says will drive job creation in the Buckeye State. 

In an afternoon address to news media, Kasich discussed revisions in K-12 and higher education funding, tax cuts for small businesses and statewide income tax reduction, an expansion of Medicaid and harnessing revenue from Ohio's turnpike.

Most notably, the governor's budget proposes several tax changes. 

The first is a 20 percent income tax cut to be phased in over three years, which would begin with a 7.5 percent cut in 2013, another 7.5 percent in 2014 and a final 5 percent cut in 2015. 

According to Ohio Tax Commissioner Joe Testa, there will also be a reduction in the state sales tax rate from 5.5 percent to 5.0 percent and a shift from a goods-based sales tax structure to a service-based tax structure. 

Certain services, such as health care, education and child care would be exempt from the new, broader tax base. 

Small business owners will also receive a tax rate reduction: small businesses up to $750,000 will have a 50 percent exclusion. 

"The purpose of this is to make sure Ohio remains competitive. We've have too many people leave the state and take their wallets with them," said Kasich.

A final piece to tax reform changes proposed in the new budget makes changes to severance tax.

A new exemption will be created for small-volume gas wells.

Small-volume gas well are defined as those that daily produce less than 10 million cubic feet.

Tax rates for horizontal wells would be 1 percent for natural gas and 4 percent for oil, natural gas liquids and condensate.

Kasich also announced during the presentation that the state will extend Medicaid benefits to low-income Ohioans.

The expansion would take effect in 2014, but would first require state lawmaker approval.

The plan includes performance audits and greater financial responsibility of those on Medicaid, such as a co-pay for emergency room visits.

Kasich told reporters he was working with the federal government for more flexibility in Medicaid in the best interest of the state.

Under a United State Supreme Court ruling in June of 2012, states can choose to extend Medicaid coverage to adults making $15,415 or less per year.

The federal government would pick up the tab of the expansion at 100 percent of the cost for three years, then reduce the aid to 90 percent in 2020 and beyond.

Kasich says Ohio will roll back plans to expand Medicaid if the federal government changes the rules on reimbursing Medicaid costs.

Kasich, last week, presented his proposed changes to the state's education funding formula, which aims to equalize funding for school districts through state aid in addition to increased aid in the form of incentives for innovation and efficient school operations.

He revisited the topic in Monday's address, as well as previously proposed reforms in higher education funding which include basing 50 percent of state-supported universities funding on graduation rates, as well as rewarding schools that train non-traditional students.

Under the branch of the state's transportation plan, Kasich's budget seeks to keep state control of the Ohio Turnpike while aligning the Turnpike Commission and the Ohio Department of Transportation.

The recently-formed Ohio Turnpike and Infrastructure Commission would issue approximately $1 billion in bonds over the next five to six years, backed by future Turnpike revenues.

The bonds would in turn be used by ODOT to fast-track "high-priority projects" throughout the state.

Gov. Kasich, along with Testa, plans to conduct a town hall focusing on the tax cut elements of the budget.

The town hall takes place Monday at 7 p.m. in Columbus, and can be viewed online through the Ohio Government Channel.

Ohio Gov. John Kasich has proposed a sweeping budget that reduces state income and small-business taxes through hikes in other areas, boosts school funding and expands Medicaid.

The Republican governor's plan was unveiled Monday.

The $63.1 billion, two-year budget incorporates a significant rewrite of Ohio's tax code that he says reflects the state's shift from a manufacturing to service economy.

It reduces the tax rate on most small businesses by 50 percent, cuts the income tax rate statewide by 20 percent over three years, and lowers the sales tax rate from 5.5 percent to 5 percent while imposing the tax on more services.

The plan also incorporates the governor's education funding overhaul outlined last week, which delivers $1.2 billion in additional funding to districts over the biennium.

The governor also wants to expand Medicaid under the federal health care law to cover more poor people in the state.

Kasich's decision announced Monday is likely to face opposition within his own party from conservatives against President Barack Obama's health care law.

Kasich has criticized the law as well and its potential long-term costs.

The state thinks 365,000 Ohioans will be eligible for coverage under the expansion right away and expects to get $2.4 billion in federal funds over the next two years for the expansion.

A group of Ohio's doctors and hospitals back the idea.

The U.S. Supreme Court left it up to states last year to decide whether to expand Medicaid.

Kasich now will need to persuade the Republican-controlled state Legislature to go along.