The Ohio State Budget for the Next Two Years

TheOhio State Budget for the Next Two Years

TheOhio State bi-annual budget for the financial year 2015/16 and2016/17 is larger than the previous budget for several reasons. TheOhio state reduced some aspects that it had previously offered tolocal governments, libraries and public education institutions. Thistogether with the radicals tax changes included in the budget willbring $1.3billion to the GRF (Reese, 2015, p.1). The new bi-annualbudget totals $68.5 billion for the financial year 2016, which is a2% increase from the previous financial year, and $70.2 billion inthe financial year 2017, projected to be a 2.5% increase over the2015 financial year (Reese, 2015, p.1). The biggest group of statemain general revenue fund expenditure is k-12, which will account for33.4%, the Medicaid which will account for 26.5%, education (10.6%)and public protection and justice which will account for 9.0%(Pelzer, 2015, p. 1). Under the new budget, the projected generalfund revenue is estimated to rise by 5% in the coming year. Totalrevenue is estimated to rise by 5.3% in the financial year 2017(Levintova, 2015, p.1). The main areas addressed by the budget andthat have received priority include the middle and small business,higher education, providing more support to districts with limitedability and capacity to pull together local revenues (Pelzer, 2015).The main goal of tax changes in the budget is meant to assist Ohioansto eradicate poverty by reducing income tax and helping creates jobopportunities by restructuring and implementing reforms in a range ofstate assistance programs (Levintova, 2015, p.1). The new budget alsointroduces a range of tax reforms, including freeing small enterprisefrom paying income taxes, significantly reducing the rates ofpersonal income tax, and raising the tobacco and sales tax.

Sourcesof Revenue

PropertyTax

Propertytax remains the largest source of state and local revenue in Ohio.This encompasses residential and commercial real estate and otherforms of taxes derived from boats and automobiles. Just like in otherstates, commercial and residential taxes from part of the revenuesource for the local government, while personal property taxes isoften a source of revenue to the state government. Property taxaccount for about 30% of Ohio revenue streams (Ohio Budget Watch,2015, p.1). The diagram below shows the sources of revenue in thestate of Ohio

Localand State Revenue (Ohio)

&nbsp

Fed

Gov.

State

Local

Total

&nbsp

Xfer

&nbsp

&nbsp

&nbsp

Income Taxes

&nbsp0.0

&nbsp0.0

&nbsp9.9

&nbsp4.9

&nbsp14.7

Social Insurance Taxes

&nbsp0.0

&nbsp0.0

&nbsp23.1

&nbsp0.5

&nbsp23.6

Ad valorem Taxes

&nbsp0.0

&nbsp0.0

&nbsp20.2

&nbsp16.1

&nbsp36.3

Fees and Charges

&nbsp0.0

&nbsp0.0

&nbsp8.4

&nbsp8.2

&nbsp16.6

Business and Other Revenue

&nbsp0.0

&nbsp0.0

&nbsp5.6

&nbsp5.4

&nbsp11.0

Balance

&nbsp0.0

&nbsp0.0

&nbsp0.0

&nbsp0.0

&nbsp-0.0

Total Direct Revenue:&nbsp Start chart

&nbsp0.0

&nbsp0.0

&nbsp67.1

&nbsp35.1

&nbsp102.2

Federal Deficit

&nbsp0.0

&nbsp0.0

&nbsp0.0

&nbsp0.0

&nbsp0.0

Gross Public Debt

&nbsp0.0

&nbsp0.0

&nbsp34.4

&nbsp48.8

&nbsp83.2

(Chantrill,2015, p. 1)

Salesand gross receipts taxes32.5

Thisform of taxation is currently the largest source of revenue for thestate of Ohio. Sales and gross receipts taxes encompass both generaland selective sales taxes. General taxes are those imposed on allkinds of commodities and services, although this form of tax issubject to particular exemptions, while selective sales taxes arethose mainly collected from tobacco products, alcoholic beverages,insurance and public utilities (Ohio Budget Watch, 2015, p.1).

IndividualIncome Tax

Individualincome is expected to account for about 27.7% of the revenue streamin the current budget (Chantrill, 2015, p.1). Ohio is still dependson individual income tax to support some of its agendas, and thereductions in income tax in the current budget, combined with tax cutfor small business, is expected to reduce the level of revenuegenerated by the state by more than 5%.

Corporateincome taxes

Corporatetax accounts for a negligible proportion of the revenue collected inthe state of Ohio. In the financial year 2015/16 and 2016/17 itprojected to only account for about 0.6% of the total revenuecollected (Chantrill, 2015, p.1). Most notably, Ohio is the state inthe United States that depend the least on corporate tax for localand state tax revenue streams

Othertaxes such as tax on automobile license, natural resources andvarious types of licenses account for about 9.1 % of the totalrevenue expected in the bi-annual budget(Ohio Budget Watch, 2015). .

Expenditure

HumanServices

Thebudget for the health and human service program was increased from$1,291.1 billion in the financial year 2014/15 to $1,339.9 billion infinancial year 2016 (Reese,2015, p.1).The budget for the financial year 2017 will be $1,343.5 billion. Thisshows the state government is still committed to provide essentialservices to the low income earners and the poor in the state(Levintova,2015, p.1).

Throughthe new budget the state government of Ohio wishes to continueproviding services for poor individual and needy families in thewithin the state. Apart from providing health services, the stategovernment will increase safeguards that will encompass protectingand food to vulnerable individuals, such as disabled, the elderly andchildren (Levintova,2015, p.1).The state has also increased funding to transition and trainingassistance from Ohioans who lose their employment, nutrition help forinfant young children and women and funding for food pantries. It isimportant to note that the bigger proportion of the public service inthe state, just like in majority of other states in the UnitedStates, is mainly financed by the federal government (StateGovernment of Ohio, 2015).The share of the Ohio state (only GRF funding for human services as aproportion of the total budget has reduced in the last four decades.In the June budget, this funding will account for 8% of the statebudget (Reese,2015, p.1).

Thenew budget has set $500,000 every year in every county for thesupport of adult protective program. In the new budget the oldformula of allocating funds which saw every county receive a flat$30,000 was disregarded (Pelzer,2015). There was an increase in every county save for three counties. Thisincreased funding is designed to help counties achieve the minimumrequirement for the adult protective services by the end of financialyear 2016 (Levintova,2015, p.1).

Ohiostate revenue has continued to gradually improve over the last fewyears, with the state and federal gross revenue fund appropriationexpected to stand at $34.88 billion in the SFY 2016 and $36.34billion in the financial year 2017 (StateGovernment of Ohio, 2015). This will represent 11.2% and 4.2% increases respectively. Theincrease has been pushed by the inclusion in the GRF of Medicaidfunding for the newly qualified persons (Pelzer,2015)..In a move mean to combat the rising cases of cigarette smoking in thestate, the budget earmarks $10 million over the next two years to theODH cessation, prevention and enforcement (Reese,2015, p.1).

(Reese,2015, p.1)

TheHouse funding level was earmarked as $2.05 million over the next twoyears. This is by far a lower amount in relation to the $411 raisedthat will be collected from the 40 cent increases in every packet(Reese,2015, p.1).

Disability

Oneof the main gainers in the human service funding was the departmentof development of disabilities. The department received a remarkableinvestment of the GFT revenue (Levintova,2015, p.1).The projected spending in the department is $112 million above thecurrent level in the financial year 2015.The budget will encompassnew Medicaid waivers and inclusion of nursing to the IndividualOptions Waiver (Britton&amp Bird, 2015, p. 2).

Joband family service

Thebudget earmarked $5 million in the financial year 2016 and $6.5million in the financial year 2017 to the Healthier Buckeye GrantProgram (StateGovernment of Ohio, 2015, p. 1).This is another area in the human service program whose funding willcontinue to increase under the new budget passed in June 2015. Inaddition the budget earmarked $17.25 million per annum in TANFendowment (Britton&amp Bird, 2015, p.3). Out of the $17.25 million for the program, $200,000 (per annum) wasearmarked for the expansion of the food bank program in Cleveland andLogan cities. Other extra endowment for the food program includes $500,000 coming from the Special Revenue Fund and $2 million from theTitle XX (Britton&amp Bird, 2015, p.3).

Mentalhealth and addiction

TheJune budget also earmarks $ 500,000 to support and improve the accessof counties to naloxone that is mainly used as an antidote to theoverdose of opiate (Britton&amp Bird, 2015, pp. 3-4).This money will be delivered to the health department in the countiesthrough a grant program to emergency personnel, and local lawenforcement. MHAS apportions $2.5 million for Recovery Housing everyyear to sustain access to safe and stable housing and enable localboards dealing with drug addiction, control of alcohol and mentalhealth to run smoothly (StateGovernment of Ohio, 2015).

Fundingto the Community Behavioral Health Program 507 line item wasterminated by the budget committee, but through Senate interventionthe program was restored, and the 177 housing and crisis programs arestill operation, though funding has been significantly reduced (StateGovernment of Ohio, 2015).In the same vein, the budget also earmarked $400,000 for theoperations of the Chardon Pilot program in the financial year 2016. This will be reduced to $350,000 in the following financial year.$1.5 million was also earmarked for the Prevention and Wellnessprogram (Britton&amp Bird, 2015, p.4).

Thenew budget serves to exhibit Governor Kasich’s devotion to smallbusiness enterprises as the main drivers of economic growth and wellbeing in the state and job creation (Reese, 2015, p.1). Small andmedium enterprise have been the key drivers of the Ohio economy,constituting about 80 percent of the state’s businesses andproviding job opportunities to more than half of private sectorworkforce in Ohio (StateGovernment of Ohio, 2015). Since assuming office in 2010 GovernorKasich has enacted $5billion tax cuts for individuals working in thestate. This has included slashing the state income tax by more than16%, removing estate tax, and designing significant tax deductionsfor small enterprises and tax reliefs for the low income earners(Britton&amp Bird, 2015, p.4).

Justlike in the previous budgets the main beneficiaries in the budgetwere the middle and small business, as well as how it will affect thelow income families. Under the new budget middle and small businesswill benefit from whopping $1.9 billion in new tax cuts in the nexttwo years (Britton&amp Bird, 2015, p.1). In the next two years all income tax on smallenterprises will be totally removed. Just like in the previousbudgets since governor Kasich came to office, the new budget willcontinue the existing 75% tax cut for the small business operating inthe state and that earn less than $250,000 in income (Reese, 2015,p.1). This process will be gradual with a total elimination of theincome by the end of financial year.

Forthe middle and small enterprise that earn more than $250,000, thestate will create a new low rate tax of 3%. It is expected that thisreduction will help build more than $950 million in new capital forthe businesses in the state that will go a long way in helpingleverage the growing economic recovery, and provide more jobopportunities by making new investments. The new budget alsointroduces a 6% income tax cut for all individual taxpayers in thestate (Pelzer, 2015, p.1).

Gainersand Losers

Theexpenditure on the human services programs is meant to benefit lowincome Ohioans and help the unemployed secure work. The reduction intaxes for small business enterprises and high income earners givesthe taxpayers the value that they need and the poor and low incomeearners the future they need (StateGovernment of Ohio, 2015). It is evident the main demographic groupthat will reap immense benefits from the June bi-annual budget arethe teens and youths in the state. The framework created under thebudget plus the funding will provided important collection servicesaround individuals based on their needs and better support them tomove out of poverty (Britton&amp Bird, 2015, p.3)..

Basedon the an analysis conducted by the Institute of Taxation and EconomyPolicy, Ohioans in the lowest poverty percentile (the poorest fifthof Ohioans) who earn an average of $18,000 per annum will see theirtax increase by $12 after the tax changes (Reese, 2015, p.1). Thisincrease will be caused by the increase in the sales tax (Levintova,2015, p.1). The Middle fifth of the Ohioans tax payers who earn anaverage of $33,000 and $51,000 per annum will witness a tax cut of$9.S In the same vein, the top 1 percent who generate an average of$335,000 per annum will see a tax cut of $6,083 (Reese, 2015, p.1).This means that even though the human service programs are mean topull the poor and low income earners from poverty, small businessowners will reap more benefits than any other group in the state.

Conclusion

TheOhio State budget for the next two years is designed to preserve thegrowth that Ohio has made since Governor Kasich assumed office, paveway for more growth and business success and help all Ohioanssucceed. The key priority is to preserve the economic growth that hasbeen made possible by austerity measures executed by Kasich. In thislight, the June budget has eliminated taxes on small enterprises.Small business with a total annual income f less than $250,000 willcontinue to pay 75 cents in tax in financial year 2016, and this willbe eliminated in 2017. Anew tax will be put in place for businessearning more than $250,000. The budget cuts personal income tax by6.3%. The total net tax cut in the 2016 budget will be 1.9 billion.The revenue collected will be used to provide support to K-12education, which has been increased significantly. The budget freezesall tuition to make college education more affordable to Ohioans.

Thebudget for the health and human service program was increased from$1,291.1 billion in the financial year 2014/15 to $1,339.9 billion infinancial year 2016 (Reese,2015, p.1).The budget for the financial year 2017 will be $1,343.5 billion. Thebudget earmarks $286 million for the support of individuals withdisabilities. This historic investment will be put into home andcommunity based services. The budget also enhances maternal servicesto prevent infant mortality in the state through Medicaid healthplans. It also earmarks $ 500,000 to support and improve the accessof counties to naloxone that is mainly used as an antidote to theoverdose of opiate and $5 million in the financial year 2016 and $6.5million in the financial year 2017 to the Healthier Buckeye GrantProgram. The Ohio’s June budget is likely to create a friendlybusiness environment, conducive for job creators and a blueprint forfuture success that lifts more people from poverty and creates a wayfor them to play a part in the economic revivification of the state.

References

Britton,T. and Bird, M. (2015). of Human Service Provisions in House Bill64: Financial Year 2016-2017State Budget.The Center for Community Solutions: Retrieved from:http://www.communitysolutions.com/assets/docs/Public_Policy_incl_testimony/state%20budget%20highlights07062015.pdf

Chantrill,C. (2015). GovernmentRevenue Details. Retrievedfrom: http://www.usgovernmentrevenue.com/ohio_state_taxes.html

Levintova,H. (2015). JohnKasich Was Against Poor People Before He Was for Them.Mother Jones and the Foundation for National Progress. Retrievedfrom:http://www.motherjones.com/politics/2015/09/kasich-tax-policies-help-the-poor-not-so-much

OhioBudget Watch (2015).RevenueSources.WordPress.Retrieved from:http://ohiobudgetwatch.com/budget-basics/revenue-sources/

Pelzer,J. (2015). OhioSenate`s budget plan includes income tax cuts, tobacco tax hike.Northeast Ohio Media Group. Retrieved from:http://www.cleveland.com/open/index.ssf/2015/06/ohio_senates_budget_plan_inclu.html

Reese,M. (2015). Kasich signs $71.2 billion, two-year state budget. Ohio`sCountry Journal.Retrieved from:http://ocj.com/2015/07/kasich-signs-71-2-billion-two-year-state-budget/

StateGovernment of Ohio (2015). TransformingOhio for Growth.

Yano,M.J. (2015). H.B.64: Ohio budget overview.Bricker &amp Eckler LLP.

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