Ohio Senate Eliminates Historic Shortfall Without Raising Taxes

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Columbus – The Ohio Senate gave final approval today to a balanced, two-year state budget that reduces spending and eliminates an initial $8 billion shortfall without raising taxes.

"This is a budget that's focused on three priorities: recovery, relief and reform," said Senate President Tom Niehaus (R-New Richmond).  "We stabilized the most dramatic financial shortfall in state history, while allowing Ohioans to keep more of their hard-earned money in this tough economy.  At the same time, we reduced overall spending and adopted long-overdue reforms to everything from high-cost Medicaid programs to prison operations."

Leading Ohio's Recovery

Lawmakers began the session facing the threat of a projected and historic $8 billion structural imbalance in the budget, created in part by an over-reliance on one-time federal funds.  The Ohio Department of Taxation found that eliminating the projected shortfall simply by increasing revenue would require Ohio families to pay as much as 56 percent higher income taxes.

"In this economy, with high-priced gas, 9 percent unemployment and one of the highest tax burdens in the country, higher taxes simply are not an option," said Senator Chris Widener (R-Springfield), chair of the Senate Finance Committee.  "We fundamentally believe that the key to Ohio’s economic recovery is to reduce Ohio's tax burden on families and small businesses and to provide incentives that generate job creation.  This budget is structured around those priorities."

Providing Critical Relief

• The budget keeps the final installment of a 21 percent, across-the-board income tax cut approved in 2005 for every taxpayer.  The reduction is estimated to put more than $800 million back into the wallets of Ohio families at a time when they need it most.  
   
• The budget provides historic levels of Property Tax relief, $1.7 billion annually over the biennium, for every Ohio homeowner.
   
• The budget eliminates by 2013 Ohio’s job-killing "Death Tax," which drives entrepreneurs out of our state and destroys small businesses and family farms.  
   
• The budget includes tax credits to encourage community revitalization, job retention for major employers and economic development.
   
• The budget features an innovative new tax incentive to encourage capital investment in Ohio companies, an effort to create jobs and inject needed financial resources into small businesses. 

Advancing Historic Reforms

"This is a budget that makes difficult but necessary reductions in spending," said Senator Shannon Jones (R-Springboro), vice chair of the Senate Finance Committee.  "The previous administration chose to artificially prop up the last two-year budget with billions of dollars in one-time federal stimulus funds.  Those dollars, which temporarily supported everything from Medicaid to public education, are now gone.   The only alternative to replace them would be a massive tax increase in the face of a daunting recession, and that's a burden Ohioans cannot afford to carry.  Instead, we made difficult but necessary decisions to get spending under control through responsible reform, restructuring state revenue streams and enacting long-overdue improvements to high-cost programs, such as Medicaid, education, prison operations and economic development."

• Education: The budget guarantees that every district will receive at least their current level of basic state aid (excluding federal stimulus funding) over the next two years.  We provided millions of dollars in supplemental incentives for the highest-performing schools to encourage excellence.  We tasked the Ohio Department of Education with developing a new teacher evaluation system, designed to reward and retain the best and brightest in our schools.  By investing in students rather than bureaucracy, expanding accountable school choice, supporting successful schools and closing failing ones, and rewarding superior teachers with new evaluation standards, student learning and, therefore, our workforce will improve and help Ohio be more competitive.  
   
• Community Schools: The budget adopts new quality and operational controls for community schools, including more stringent closure criteria for failing schools and new requirements that make performance the basis for opening new schools.

Other significant reforms include:

• Medicaid:  Ohio’s Medicaid program, which accounts for 30 percent of the state budget, is fragmented and lacks coordination.  The budget includes a package of transformational changes that will improve the coordination of care for people on Medicaid, allow more seniors to live at home instead of in nursing homes, help prevent illness, and reduce costly emergency room visits.  This common-sense approach will improve the quality of health care for Ohio’s most vulnerable citizens and reduce costs for taxpayers.  The budget increases spending on community-based alternatives to nursing homes, including the PASSPORT program, by more than $143 million (10.3 percent) over the biennium.   All told, the budget makes it possible for an additional 12,890 Ohioans to receive Medicaid home- and community-based services instead of being admitted to an institution.
   
• JobsOhio:  The budget provides full support to an innovative new public-private effort to generate job growth and economic development.
   
• InvestOhio: The budget helps generate immediate capital investment in for Ohio's small businesses. which employ nearly half of all Ohioans.  The InvestOhio program allows Ohioans making an investment in a small business (of up to $10 million in a business with less than $50 million in assets or $10 million in annual sales) to receive a tax credit of 10 percent if they keep the investment for at least two years. 
   
• Prison Operations: The budget allows Ohio to replace bureaucratic management with private sector expertise and innovations, particularly in the state's fiscally unsustainable, over-crowded and increasingly dangerous corrections system.  Privately-run prisons have been proven to have lower rates of violence, and the new policy requires them save the state at least five percent.  

"This budget makes an emphatic statement that Senate Republicans are willing to make tough decisions and embrace bold reforms," said President Niehaus.  "Ohioans expect us to lead this state in a new direction, and that will take time, patience and courage.  This is only the beginning, but I'm confident that we're finally headed down a new path to job creation and prosperity in this state once again."