Budget reports take Kasich to task on tax plans

To those not dazzled by the governmental footwork of John R. Kasich, elected Ohio governor in 2010 by a slim two-point margin, he's a 60-year old relic of the Reagan Revolution of the 1980s when supply side economics was in vogue.

To others who want him to bring even more changes to the public sector, Gov. Kasich , who has geared up for re-election in 2014, he's still the Wizard of Westerville, barnstorm the Statehouse halls in Columbus as he did in Congress for 18 years with one reform after another that would force government to subserve itself to the needs of the private sector.

As a GOP soldier who went to Washington representing a reliably Republican district in central Ohio, Gov. Kasich followed every other Republican at the time by voting against Bill Clinton's tax hike. When Congressman Kasich, a dutiful lieutenant of the Gingrich revolution that wrested control of the people's house from Democratic hands to Republican, got promoted to Chairman of the House Budget Committee, he took credit then as he is today for the balanced budgets made possible by the Clinton-era economic policies that he largely opposed.

Coming to national attention in 2010 when the burgeoning Tea Party movement burst on the scene and elevated to state executive offices long-time establishment Republican politicos like Kasich, who was savvy enough to bond with an army of liberty loving patriots the media became enamored with at the time, the clamor was as much a hostile response to the persona of President Barack Obama and his progressive agenda during the mid-term elections two years ago as they was to an electorate who thought signing-on to a Tea Party agenda focused on freedom from government in general and government from Washington in particular was doing right by the constitution, no matter who got hurt in the process.

Gov. Kasich took Capital Square by storm following the low-turnout election that enabled him to defeat incumbent Democratic Governor Ted Strickland by just two percentage points. Ohio's new CEO-style governor promised to revamp or reform anything within his political reach.

While Mr. Kasich has basked in the glow of the political aura that wins by kindred spirit governors like Scott Walker in Wisconsin, Rick Scott in Florida, Rick Snyder in Michigan, LePage in Maine and Tom Corbett in Pennsylvania produced, his job approval ratings among Ohioans during his first two years have suffered as his numbers barely break north of the mid-40s.

Despite Gov. Kasich's first-term razzle dazzle—privatizing economic development, retaining billions in funds that flowed to local governments and school districts, an ill-fated attempt to radically alter long-standing collective bargaining rights for public employees that lost at the ballot box by a nearly 2-1 vote—one of the nation's best political handicappers sees his chances of re-election as a toss-up race even though Democrats have yet to select an opponent.

Kasich showed he couldn't offer any coattail help to Republican presidential hopeful Mitt Romney over the course of months last year during which he championed the former Massachusetts governor who ran on his mastery of private equity as a central reason voters disappointed with a slow recovery from an economic downturn that was the worse event since the Great Depression should make him Commander-in-chief, a sales point Kasich endorsed heartily but voters rejected. President Obama won Ohio, for a second time, even though then-candidate Kasich told voters electing him would be a firewall to a second term for the president.

Debates in Columbus and around the state have escalated from the first day Gov. Kasich introduced his next two-year budget in early February.

Among Kasich's budget highlights:

• Big tax reforms, including a decrease in the sales tax rate from 5.5 to 5 percent while applying it to many more services, a 20 percent income tax cut and a 50 percent deduction for small business, and a severance tax increase on gas and oil drilling.

• An expansion of Medicaid coverage to adults with incomes under 138 percent of the federal poverty line. About 275,000 people are expected to qualify for coverage.

• A new K-12 school funding formula designed to equalize per pupil funding across the state. Higher education formulas would focus more on degree and course completion than on enrollments.

• Merging the Departments of Mental Health and Alcohol and Drug Addiction Services into the Department of Mental Health and Addiction Services, the creation of a single state Medicaid agency, and continuing efforts to rebalance long term care.

Community Solutions

In a report released this Monday by The Center for Community Solutions titled "Sea of Changes: Kasich’s 2014-2015 Executive Budget Proposal (H.B. 59)," authored by Jon Honeck, Ph.D., Terry Thomas and Tara Dolansky, Gov. Kasich was taken to task on the tax portion of his budget while enjoying some applause on its approach to human service policy.

Despite and expansion of Medicaid, the report said "the budget is austere for most programs because the tax cuts will remove almost $700 million from the GRF baseline in FY 2015." With the economy in recovery, the authors wrote that revenues have improved significantly and the legislature will be faced with demands from many groups to rectify years of cuts or flat-lined budgets that have led to a loss of real, inflation-adjusted purchasing power for many programs. The General Assembly, it said, will need to choose between tax cuts and restoring some funding for key areas.

From a human service policy perspective, CCS said there is much to commend in the budget while simultaneously saying more can be done. "From the perspective of human services, some programs, such as child and adult protective services, remain woefully underfunded. Provider rates for most home- and community-based services are low, making efforts to improve quality and outcomes difficult with a high-turnover, low-paid workforce."

The lack of any economic impact estimates for a sweeping tax overhaul plan is disappointing, to say the least, the report authors said. "The long-term revenue impacts of the plan are unclear as well, and are worrisome given that there is no pretense of revenue neutrality." In FY 2016, the revenue impact appears to lessen only because of an assumption about the growth of the severance tax, a new and unproven source of revenue. "The large deduction for business partnerships is costly and should be examined critically with clear metrics in mind—as should any tax expenditure. What is clear is that a number of fundamental questions remain to be asked about the tax plan’s impact on the budget and Ohio residents."

Policy Matters Ohio

A second critical report, this one from the progressive economic think tank based in Ohio called Policy Matters Ohio, took several shots at Gov. Kasich's $63.3 billion biennial budget proposal.

"It may be obvious by now, but in case you needed a reminder, here it is – Ohio communities shouldn’t look to the Kasich administration for relief," it said. "Our preliminary analysis shows that cuts to local governments would continue under the governor’s budget proposal, leaving cities, counties and other local entities with about half the funding they got in 2010 and 2011.

One bright note came with applause for the governor's decision to expand Medicaid, as eight Republican governors who said they wouldn't do it have now done.

Cutting personal income taxes, according to PMO report author Amy Hanauer, is about shrinking government, not about helping small business. A recent analysis by the Center on Budget and Policy Priorities finds that fewer than 3 percent of those who pay personal income tax are small business owners, only 11 percent of taxpayers reporting business income run a company with employees other than the owner, and small businesses hire based on product demand, not tax rates.

Commenting on a top ex-state budget, PMO estimates that the so-called "sequester," scheduled for March 1, would cut some $300 million in federal funding for Ohio, including much-needed money for K-12 and higher education and other essential needs. "We’ve already cut too much, and we’re suffering because of it. It’s time to restore some balance – new revenues have to be part of the next round," Hanauer wrote.

More Ohio budget news

In separate news, Ohio Tea Party groups urge Gov. John Kasich in a letter to reconsider his proposal to expand Medicaid. The groups say expanding the government health care program for the poor "flies in the face of everything we, as conservatives, stand for."

Another industry not happy with paying sales taxes on their services are lawyers. The Ohio State Bar Association’s Board of Governors decided Tuesday to oppose the proposal and states its case to the General Assembly, which is considering Kasich’s two-year budget blueprint.

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