By Matt Reese
The Ohio state budget was the hot topic of discussion today at the Ohio Farm Bureau Federation (OFBF) 2013 Ag Day @ the Capitol in Columbus. Two years ago, the state’s budget discussion was very different than today. Going into the last budget, Ohio faced an $8 billion budget shortfall. Now, even with a cut in taxes (including the elimination of Ohio’s estate tax), Ohio enjoys a $1.4 billion budget surplus in the Ohio “rainy day” fund and the state is the top in the Midwest for job creation.
Despite the success, there are budgetary challenges ahead and concerns from many Ohio constituents, including the OFBF, as the next budget moves forward. Governor John Kasich has released a more than 4,000-page two-year biennium budget proposal that will be debated in the House and Senate in the coming weeks.
“In the last week or so you have seen a roll out of our state budget. There is a lot in this budget to digest, but we have several line items we are looking for in the budget,” said Adam Sharp, vice president of public policy for OFBF. “We want to see appropriate funding for the Ohio Department of Agriculture and the Ohio Department of Natural Resources. Those departments have the most programs we are concerned about and those are two critical areas we expect full funding. We also are concerned with funding for our soil and water conservation districts. We have serious concerns about funding for our land grant university, Extension, OARDC and our ag schools. We are concerned about and strongly support our rural schools to be fully funded in this budget. We have serious concerns about those items specifically.”
The budget, as a part of a larger tax reform, addressed the hotly debated issue of severance tax with regard to the state’s energy resources.
“We need a variety of energy resources in Ohio. There is a severance tax increase in the governor’s budget. He makes specific mention that this is part of a larger tax package,” Sharp said. “If there is an increase in severance tax, we want to make sure it is a part of a larger tax reform package. We want to make sure that, as that package moves forward, that resources are made available to deal with the impacts of energy development in our state.”
Merle Madrid, with Governor Kasich’s office, gave an overview of the budget proposal, including the tax overhaul that it includes. There is a change in the severance tax, with an increase in the tax from 20 cents per barrel of oil to a fixed rate of 4% on production for the largest commercial producers of oil and gas, which is fairly competitive with surrounding states. The proposal includes an exemption of severance taxes on small, conventional producers, Madrid said. In addition, oil and gas
companies will still be required to pay an up front local impact fee for every well that is drilled. The companies pay this ad valorem tax up front and it is collected in the community.
The severance tax is part of a larger statewide tax reform that includes a $1.4 billion tax cut package that benefits every Ohioan regardless of income, Madrid said.
“This includes a 50% tax cut on the first $750,000 of earnings for virtually all Ohio small businesses. This is a job creation opportunity that reinvests in business expansion,” Madrid said. “We will also have a cut in state sales tax rate from 5.5% to 5% and we cut income tax. The income tax cut is 7.5% in first year, 15% in the second year and up to 20% for tax year 2015. There are additional cuts for income tax when the rainy day fund hits a certain level, which could happen this year.”
In addition to the decrease, the sales tax proposal makes it more broadly applied to products and services, such as legal fees, that have traditionally not been subject to sales tax in Ohio. OFBF is still digging into these, and other, details of Kasich’s tax
plan to see if the severance tax increases are justified by the tradeoffs. OFBF is also watching closely as the details of the turnpike plan develop and other changes in the state’s business climate unfold in the budgetary debate.
“We appreciate the Governor’s proposal that does not privatize the turnpike. We support the Governor’s goals to improve our transportation infrastructure here in Ohio. We want to make sure the turnpike plan moving forward maintains funding for infrastructure and make sure there is funding for the local communities impacted,” Sharp said. “We also need to make sure we maintain CAUV because it is good for farmers and it is also good policy for our state. We want to make sure Ohio’s taxes are competitive with other states to build a strong economy and create jobs in Ohio.”
AUDIO – The Ohio Ag Net’s Dale Minyo caught up with Ohio Farm Bureau’s Joe Cornely to learn about other aspects of Ag Day at the Capitol.