Volume 9, Number 3
The Center for Community Solutions
June, 2013
Senate Prioritizes Small Business Tax Cuts and Education Funding
By Terry Thomas, Jon Honeck, Ph.D., and Tara Dolansky
June 14, 2013
Highlights
•
The Senate significantly boosts aid for primary and secondary education foundation
formula funding, including the Third Grade Reading Guarantee, Early Childhood
Education, and the Straight A Fund. The formula focuses on providing a more equitable
distribution of funds across districts rather than on providing adequate funding to
support the cost of a child’s education. While the Senate plan does provide greater
funding equity, it is limited by the fact that nearly two-thirds of all districts are either on
a guarantee that funding not be less than FY 2013 levels or are subject to caps on annual
funding increases.
•
The Senate retains the new higher education funding formula emphasizing course and
degree completions with only limited new funding. The new formula will be
significantly more dynamic than the one proposed for primary and secondary
education.
•
The Senate maintained increased funding for mental health and addiction services of $50
million per year, which was added by the House. The Senate proposed that part of this
funding be used for a pilot program that addresses addiction treatment by drug courts.
•
The Senate did not add the Medicaid expansion back into the budget. Additionally, the
Senate made changes to coverage for the optional Medicaid eligibility categories starting
in 2014. Separate legislation has been introduced in the House and Senate that may offer
a way forward to achieve a bipartisan compromise on Medicaid expansion.
1
•
The Medicaid department is authorized to seek a state plan amendment for a health
home program for the developmentally disabled population. Health home services are
eligible for a 90 percent federal match for eight calendar quarters.
•
Policy changes made by the Senate in the Department of Health budget will affect the
timeline and standards for public health accreditation of local health departments. The
Senate retained the House-added provision that prioritizes funding for family planning
services and added regulations for ambulatory surgical facilities.
•
The Senate replaced the 7 percent across-the-board income tax cut with the
administration’s proposal of a 50 percent small business income tax cut, reducing
revenue by $682 million in FY 2014 and $721 million in FY 2015. The Senate also
created a new Motor Fuel Receipts Tax to replace the Commercial Activity Tax on
suppliers of that product.
•
The Senate version maintains the $30 million nursing home bonus, removed the nursing
home quality initiative, and made it easier to refuse a consumer on the grounds that the
consumer is or might become Medicaid-eligible.
Ohio Department of Education
Senate Prioritizes Primary and Secondary Education
The Senate makes several significant policy changes and provides corresponding funding
support to primary and secondary education. The Senate adds $273.9 million over the
biennium to primary and secondary education from the General Revenue Fund (GRF) and
Lottery Profits Education Fund proceeds, much of it ($220.9 million) in FY 2015 (Table 1).
Funding from these sources for primary and secondary education is increased by 6.6 percent in
FY 2014 and an additional 6.5 percent in FY 2015. If only GRF funds are considered, the
increases are somewhat less, $173.9 million over the biennium or 4.6 percent in FY 2014 and 5.5
percent in FY 2015. Much of the new funding by the Senate is targeted for Foundation Funding,
including $147.3 million in FY 2015. The Senate reduces Foundation Funding slightly, by $2.7
million, in FY 2014. This includes $3.8 million in additional resources to implement the Third
Grade Reading Guarantee in FY 2014 and $46 million in FY 2015. Other major additions are
$100 million for the Straight A Fund and $20 million for Early Childhood Education. The
Straight A Fund is supported by Lottery Profits.
The additional funding for the Straight A Fund is supported by an increase in the Lottery
Profits Education Fund. It is unclear if the funding comes from an anticipated balance in the
fund or a small Lottery Profits Education Reserve Fund that could be tapped in part for this
purpose. Regardless, this spending level may not be sustainable given the still uncertain impact
that recently opened casinos and “racinos” (video lottery terminals, or VLTs, at race tracks) will
have on lottery revenues.
2
Table 1. Primary and Secondary Education Spending: H.B. 59 House vs. Senate
(in millions)
H.B. 59- House
H.B. 59- Senate
Difference from
House to Senate
% Change from
House to Senate
GRF
FY 2015
GRF +
Lottery
FY 2015
GRF
FY 2014
GRF + Lottery
FY 2014
$7,982
$7,985
$8,823
$8,876
$8,254
$8,425
$9,229
$9,450
$3
$53
$171
$221
0.01%
0.60%
2.07%
2.39%
Source: LSC Budget in Detail, As Passed by the Senate.
Base funding provided through the primary and secondary education formula has not changed
since 2009, when it was set at $5,732 per pupil. The Senate proposes marginal changes in per
pupil funding and maintains a guarantee as in other versions of the bill. That is, no school
district will receive less funding in FY 2014 or FY 2015 than in FY 2013. The Senate formula
includes per pupil funding of $5,745 in FY 2014 and $5,800 in FY 2015. This is nearly identical to
the base funding support ($5,732 in FY 2014 and $5,789 in FY 2015) that the House version
provides. Accordingly, the number of schools on the guarantee, 176 in FY 2015, is likewise
similar to the House version. It is less than half of the number in Governor John Kasich’s
budget proposal, however, which provides only $5,000 in per pupil support.
Importantly, the Senate replaces a 6 percent cap or ceiling on a district’s annual funding growth
in the House version with a 6.25 percent cap in FY 2014 and a 10.5 percent cap in FY 2015.
While there will still be 242 districts affected by the cap in FY 2015, this number is fewer than in
the House version, and with a significantly higher cap the formula is better able to work as
intended. As the key driver of the formula is a district’s three-year average property valuation
compared to elsewhere in the state, the higher cap allows the state to better equalize funding
across districts. 1 Nonetheless, less than 200 districts, only 36 percent of all districts, will actually
receive the funding level recommended in the formula if there were neither a guarantee nor a
cap present.
Economically Disadvantaged Students
Nearly half of all new money provided above the current funding level for primary and
secondary education is allocated by the Senate for economically disadvantaged students. The
Senate requires that this Foundation Funding be spent for one of six purposes: extended school
day and school year, reading improvement and intervention, instructional technology or
blended learning, professional development in reading instruction for teachers of students in
kindergarten through third grade, dropout prevention, and school safety and security.
3
Moving towards Equity without Adequacy
A formula is not working as intended when it operates fully for only a little more than one third
of all school districts. However, a larger problem may be that the Senate-recommended
formula, like its predecessors in the Executive Budget and House, focuses only on the issue of
equity and ignores the matter of adequacy entirely. Simply put, the base funding amounts are
not based on empirical evidence and bear little relation to the cost of educating a child. A more
sound approach aimed at solving Ohio’s Constitutional mandate to provide an adequate and
equitable education would be to determine the cost of an education and to fully fund it as
resources permit, although this may take several biennia depending on economic conditions.
Such an approach was recommended by former Governor Ted Strickland in his “EvidenceBased” model. A current and growing problem working against the state’s ability to fully fund
the model is the growing amount of resources dedicated to community and nonpublic
chartered schools, many of which have not performed despite being freed up from many state
regulations faced by traditional school districts. 2
Straight A Fund
The Senate restores $50 million in each year from Lottery Profits funds to the Straight A Fund
for creative and transformational instruction practices, a key element of Governor Kasich’s
“Achievement Everywhere” primary and secondary education plan. It also includes several
program earmarks.
Early Childhood Education
The Senate adds $20 million, $5 million in FY 2014 and $15 million in FY 2015, for Early
Childhood education. It also eliminates a House-created item, Ready to Learn, and moves this
funding into the Early Childhood Education appropriation, bringing the total increase for the
program to $30.1 million, $10.05 million in FY 2014 and $20.05 million in FY 2015.
The Senate modifies the program to qualify licensed child care providers for funding and
requires programs that are highly rated under the Step Up to Quality program to comply with
the requirements of the existing program. The Early Childhood Advisory Council is charged
with issuing recommendations regarding an early childhood voucher program.
Other Appropriations Changes
The Senate made the following additional GRF appropriation increases: $286,737 in FY 2014 and
$714,237 for Educator Preparation in FY 2015; $3.3 million for Auxiliary Services in FY 2015 (and
a small reduction of $48,338 in FY 2014); $1.5 million for Nonpublic Administrative Cost
Reimbursement in FY 2015 (and a small reduction of $21,836 in FY 2014); $300,000 per year for
Career-Technical Education Enhancements; and $150,000 per year for Literacy Improvements.
Post-Secondary Enrollment Options (PSEO)
The Senate revises the requirement that student participation in the PSEO program be based
solely on the college or university’s admission standards, and instead requires that it be based
on the institution’s established placement standards for credit-bearing, college-level courses.
4
The Senate also prohibits the Department of Education from reimbursing institutions of higher
education for college remedial courses.
The Senate requires the Department of Education to compile a list of all higher education
institutions that are currently participating in the PSEO or other dual enrollment programs by
December 31 of each year and to distribute this information to all school districts, community
schools, chartered nonpublic schools, and STEM schools. These schools are required to provide
this information to interested students and their parents or guardians, as part of their
counseling services required prior to a student’s participation in PSEO.
Finally, the Senate requires the Chancellor to report by December 31, 2013, on recommendations
to establish the College Credit Plus program for high school students to earn credits through
Ohio institutions of higher education in consultation with the higher education community and
the Superintendent of Public Instruction. This program was created in the Executive Budget to
replace PSEO and other dual enrollment programs through a standardized funding mechanism.
Straight A Fund support totaling $5.0 million in FY 2015 is earmarked for implementation of the
College Credit Plus program.
Physical Education Requirement
The Senate exempts children with disabilities from the physical education requirement for high
school graduation. It also exempts such students from the physical activity pilot project and
school body mass screenings. Students with disabilities are not to be counted in the measure
established by the State Board of Education to gauge student success in meeting various
physical education benchmarks.
Teacher Evaluation
The Senate adds language prescribing that the student academic growth factor under the
standards-based state framework for teacher evaluation, currently 50 percent in law, account for
only 35 percent of each evaluation. However, a school district may attribute an additional
percentage to the student academic growth factor up to 15 percent at its discretion. The Senate
also excludes from the student academic growth calculation students with 30 or more excused
or unexcused absences rather than the current 60 days.
The Senate also restores to current law the teacher and nonteaching minimum salary schedules.
Community Schools
The Senate guarantees a community school that was declared to be excellent or higher on one of
its last three annual local report cards to receive at least the same amount of payments as in FY
2013. A community school is a public, nonprofit, nonsectarian school that operates
independently of a school district but under a contract with a sponsoring entity. 3
The Senate also exempts community schools primarily serving students with disabilities from
the requirements that each teacher teaching a core subject area take all written examinations of
5
content knowledge, if the school is ranked in the lowest 10 percent on the performance index
score of all public school buildings.
Community Schools Could Share Levy Funds in Columbus
The Senate removed language in the budget that would have allowed the Superintendent of
Public Instruction to create an academic stress commission for any school district that
knowingly manipulated student data with the intent to increase state subsidy payments in lieu
of separate legislation (House Bill 167) affecting only the state’s largest school district,
Columbus City Schools.
H.B. 167 puts two issues on the ballot in the Columbus City School District and alters the way in
which some community schools would be funded. Specifically, it allows for an independent
auditor to be established within the district. It also allows the district to sponsor a community
school or give approval for a partnership, and allows the community school to share levy
dollars distributed by the district. This would establish an important precedent, as currently
community schools are funded only by state dollars. 4
Chartered and Non-chartered Nonpublic Schools
The Senate phases out Educational Choice (EdChoice) Scholarship vouchers for low-income
students whose family income subsequently increases above the initial qualifying threshold of
200 percent of the Federal Poverty Level (FPL). The House version allowed students to continue
to receive a full voucher regardless of income. Under the Senate version, no scholarships will
be provided for those with incomes in excess of 400 percent of the poverty level.
The income-based component of the EdChoice program begins for Kindergarteners in FY 2014
and for first graders in FY 2015. A scholarship program based on family income rather than
exclusively on the school district or building quality that the student would otherwise attend
represents a major departure and expansion from the original intent of the program.
The Senate broadens the definition of students eligible for an EdChoice Scholarship to include
those students enrolling in school in Ohio for the first time (instead of being “eligible to enroll in
Kindergarten”) and the school they would otherwise attend qualifies for scholarships. Students
moving to Ohio from another state who were previously home schooled will be eligible for
scholarships.
School boards are authorized by the Senate to require students enrolled in chartered nonpublic
schools, as well as non-chartered, nonpublic school and home schooled students, who are
participating in an extracurricular activity to enroll in at least one academic course as a
condition of participating in that activity as space allows.
The Senate requires chartered nonpublic schools to administer state achievement assessments to
students if 35 percent or more of its enrollment participates in the EdChoice Program, the
Autism Scholarship Program, the Jon Peterson Special Needs Scholarship Program, or the
6
(Cleveland) Pilot Project Scholarship Program. However, the Senate exempts students of
chartered nonpublic schools accredited by the Independent School Association of the Central
States from the end-of-course examinations as a prerequisite for high school graduation.
In addition, the Senate also increases the maximum reimbursement for chartered nonpublic
school administrative costs from $325 to $360 per pupil.
Finally, the Senate exempts preschool programs operated by non-chartered, non-tax-supported
schools from childcare regulations provided certain conditions are met.
STEM Schools
The Senate provides STEM schools, as well as community schools, with $100 per pupil to
support facility improvements.
The Senate also provides STEM schools with authority to contract as may be necessary for the
operation of the school.
Safety and Security Tax
The Senate authorizes school districts to levy a property tax exclusively for school safety and
security purposes.
Ohio Board of Regents
Senate Adopts New Higher Education Model
At the request of Governor Kasich, a panel was convened by Ohio State University President E.
Gordon Gee in late 2012 to devise a new higher education formula emphasizing course and
degree completions rather than enrollments. The new formula was included by Governor
Kasich in the FY 2014-2015 Executive Budget Request. (See State Budgeting Matters Volume 9,
Number 1 for a description of the formula changes for public university and community college
funding.) The formula was largely adopted by both houses of the General Assembly with the
addition of $8.0 million in bridge funding in fiscal year 2014 to ease transition to the new
system. Once the transition is complete, by FY 2015, the higher education formula will be very
dynamic, especially when juxtaposed with the various primary and secondary education
formulas which contain both a floor, or guarantee, and a ceiling on growth.
The Senate makes one significant substantive change to the formula, however. It entirely
eliminates the doctoral set-aside percentage based on quality measures (12.5 percent in FY 2014
and 15 percent in FY 2015) and correspondingly increases the percentage based on historical
doctoral FTEs (to 62.5 percent and 55 percent). The balance of the doctoral set-aside is based on
the number of degrees awarded weighted by the cost of the discipline.
The Senate also requires that each institution-specific strategic completion plan to boost the
number of degrees and certificates awarded align with the state’s workforce development
priorities.
7
Higher Education Funding Virtually Unchanged
In comparison to the significant increases given primary and secondary education, the Senate
raises total GRF funding for higher education by a meager 1.1 percent in FY 2014 over FY 2013
with an additional 2.0 percent increase in FY 2015. The Senate adds $1.2 million per year for
College Readiness and Access to support early college high school initiatives. If funding is
sufficient, the chancellor is required to distribute grants equal to $2,000 per student to each
institution of higher education supporting an early college high school.
The Senate also adds $1.2 million in Ohio College Opportunity Grants (OCOG), the state’s needbased financial aid program, for students of proprietary schools and colleges. This is in
addition to moneys that the House added to OCOG for this same population.
In addition, the Senate makes the following funding additions: $600,000 per year for General
Technology Operations, $500,000 per year for Post-Secondary Adult Career-Technical
Education, $130,000 per year for Long-term Care Research, and $200,000 in FY 2014 for the
Wright State Lake Campus Agricultural Program.
The Senate removes a $250,000 annual increase that had been proposed for Adult Basic and
Literacy Education.
The Senate also reprioritized funding for workforce development, eliminating an $8 million
GRF earmark for the Workforce Training Pilot Program for the Economically Disadvantaged
(ODJFS budget). The Senate used non-GRF funding to add a $4.0 million per year earmark for
the Defense/Aerospace Workforce Development Initiative, the same level as current funding.
The funds, which require an industry match, are to be provided to institutions of higher
education and the aerospace industry in order to strengthen Ohio’s workforce in the industry.
The Senate also creates a Manufacturing Workforce Development Initiative and funds it at $2.0
million in FY 2014. It eliminates a House appropriation for the Ohio Strategic Training Center
of $950,000 in FY 2014. This appropriation was for the purchase of portable welding stations at
the Point Industrial Park in South Point. The Senate replaces it with an earmark of $1.0 million
for the same purpose. The new appropriation includes a second $1.0 million earmark to
purchase portable welding stations made from large shipping containers and high-level
advanced training equipment for use by Lorain County Community College.
The Senate eliminates $491,573 annually in Broadcast Media funding, as part of the renaming
and reconstitution of the eTech Commission as the Broadcast Educational Media Commission.
Finally, the Senate adds language for the chancellor to consider in determining Co-Op
Internship awards, which would tie the program to the workforce policies and priorities of the
Governor’s Office of Workforce Transformation. It also earmarks a number of specific projects.
Senate Tweaks Undergraduate Tuition Guarantee Program
The new Undergraduate Tuition Guarantee Program allows universities to guarantee a cohort
of students a set rate for general and instructional fees for four years. The Senate adds language
8
that would also allow a one-time increase of general and instructional fees equaling the sum of
the five-year rate of inflation, plus the tuition cap, if any, for each subsequent cohort. It would
also permit university boards of trustees to request from the chancellor an increase in the
cohort’s percentage charge, if the university’s fees fall significantly below those of other state
universities.
College Credit for Post-Secondary Adult Career-Technical Education
The Senate requires the chancellor to report to the General Assembly with recommendations by
June 30, 2014, concerning a process to award proportional technical credit hours for students
receiving an industry-recognized credential from Ohio Technical Centers (Post-Secondary
Adult Career-Technical Education Centers). It allows the chancellor to determine what
credentials are recognized for credit to ensure that degree quality is not diminished and that
program accreditation is not jeopardized.
Controversial Voter Registration Proposal Removed
With agreement both within the higher education community and among state policymakers
regarding the new formula and overall funding support, the FY 2014-2015 higher education
budget will likely go down as the least controversial in years. One provision that has drawn a
great deal of attention and no small degree of controversy, however, is House language that
specifies that students receiving utility bills from a state university as proof of residency for
voting purposes be given residency status for in-state tuition. If enacted, this item would likely
dissuade universities from continuing the practice of helping students become eligible to vote,
so as not to risk the loss of hundreds of millions of dollars of out-of-state tuition revenue. The
Senate budget removes this item.
Lake Erie and Inland Lakes
The Senate increases funding for the Healthy Lake Erie Fund by $300,000 per year to $650,000 in
FY 2014 and $500,000 in FY 2015. Funding is for soil testing and other research and establishing
pilot projects related to the goal of reducing algae blooms in Lake Erie.
Inland lake cleanup takes on a higher priority in the Senate budget, given the recent problems
with harmful algal blooms in Grand Lake St. Marys. The Senate provides $2.1 million for the
construction or acquisition of a treatment train process at an Ohio inland lake, and an additional
$900,000 for the purchase of a sweeper dredge for use at Ohio inland lakes.
Campaign Finance
Under current law, state political parties may accept direct corporate or union contributions to
pay for office expenses, provided that they are “not used solely for the purpose of influencing
the election of an individual candidate.” The Senate extends this language to include legislative
campaigns. It also adds operating costs of an office, an item prohibited under current law. 5
9
Local Government
As in other versions of the bill, the Senate does not restore the significant cuts made to Ohio’s
local governments during the previous biennium. In addition, the Senate makes reductions in a
couple of programs of interest to local government.
Local Government Innovation Program Cut
The Local Government Innovation program was launched during the FY 2012-2013 biennium to
make awards to political subdivisions for eligible innovative projects. The Senate removes
House funding additions of $3.0 million in FY 2014 and $4.0 million in FY 2015, restoring the
program to the levels originally recommended in the Executive Budget. Language that would
prohibit the use of program funds by schools is also removed by the Senate.
Local Government Information Exchange Eliminated
The Senate removes $3.5 million in funding for the Local Government Information Exchange,
which was to encourage local governments to publish information on the Internet to reduce
costs and increase transparency.
Open Meeting Law Exemption
The Senate creates an exemption to the Open Meetings Law to allow local governing bodies to
hold executive sessions to discuss proprietary information of businesses seeking tax relief or
other financial assistance.
Long-term Care
Health Homes for the Developmentally Disabled
The Senate version also permits the Medicaid department, in consultation with the Department
of Developmental Disabilities and interested parties, to develop a health home program for
individuals with mental retardation or other developmental disabilities. Currently, the
Medicaid program only uses the health home approach in the mental health system, and
providers are not yet available in all counties.
The goal of the program in developmental disabilities is to improve the integration of long-term
care services, supportive services, and acute care. Under the ACA, a health home program uses
a team approach among medical and other professionals to treat the “whole person.” 6
Individuals are eligible for a health home if they have two or more chronic conditions, have one
chronic condition and are at risk of developing a third, or have a serious and persistent mental
health condition. Health home services are eligible for a 90 percent federal match for the first
eight quarters of the state’s participation in the program. These services include:
• Comprehensive care management;
• Care coordination;
• Health promotion;
• Comprehensive transitional care/follow-up;
• Patient and family support; and
• Referral to community and social support services.
10
Ohio Department of Aging (ODA)
The Senate made only two changes to the ODA budget. The first was the removal of funding
for the renamed and expanded Board of Executives of Long-Term Services and Supports, which
the Senate decided should stay in the Ohio Department of Health. The Senate agreed with the
revised scope and purpose of the board, which will have expanded membership that includes
representatives from nursing homes, home and community-based care providers, the
Department of Health, the ODA Ombudsman, and a consumer. The other cut of $700,000 in the
ombudsman support line item was also related to the decision to keep the technical assistance
program for nursing homes in the Ohio Department of Health. This funding was replaced in
the ODH budget because the program will stay there.
Medicaid Direct Care Worker Certification Study Group
The executive version proposed a major change in policy that that would require certification
requirements for health care workers providing home- and community-based services who
were not already subject to licensure or certification requirements. The Ohio Department of
Health was to have led an interagency group to develop certification standards. This would
have affected caregivers in the state’s Medicaid long-term care waiver programs for all age
groups as well as Intermediate Care Facilities (ICFs) and other facilities. The Senate removed
the requirement and created a workgroup comprised of state agencies, legislators, and
association representatives to make recommendations to the General Assembly by the end of
2013 about the scope of the certification requirements and their content. Assuming the group
can agree on recommendations, the bill’s language expresses the intent of the General Assembly
to enact legislation that would charge ODH with implementing a certification program by
October 1, 2014. Medicaid payments to non-compliant providers (including via managed care
organizations) would be prohibited after October 1, 2015.
Nursing Homes – Exclusion of Prospective Residents and Portions of Facilities
The Senate retained the $30 million annual quality bonus added by the House. Other changes
will make it easier for nursing homes to exclude parts of their facilities from the Medicaid
provider agreement and to exclude potential residents who may eventually use Medicaid as
their payment source. Under the Senate version, a nursing home that obtained its license after
January 1, 2008, and is located in a county with excess beds can exclude a portion of its facility
from the Medicaid provider agreement with proper notice to the department.
With respect to individual residents, current law does not allow the facility to refuse an
individual unless at least 80 percent of its residents currently use Medicaid. The Senate version
would allow this threshold to fall to 25 percent, allowing more facilities to exclude potential
Medicaid residents.
Nursing Home “Person-centered Care” Quality Improvement Project
The Senate removed an administration initiative that required the Ohio Department of Aging
to implement a nursing home quality initiative with the assistance of the state long-term care
ombudsman and in consultation with the nursing home industry. Under the plan, ODA would
11
publish a list of acceptable projects and each nursing home would be required to participate in
at least one. Related provisions would have required nursing homes to participate in advance
care planning with all of their residents and to stop the use of overhead paging systems except
in limited circumstances by July 1, 2015.
Nursing Home – Plan of Correction
When a nursing home receives a statement of deficiencies, current law requires the facility to
submit a plan of correction to the Ohio Department of Health. The executive version revised
the requirements of a plan of correction to include detailed descriptions of actions taken to
protect residents and descriptions of ongoing monitoring and improvement processes to
prevent a reoccurrence. Additional requirements applied if a resident was harmed or in
immediate jeopardy. The Senate lessened the statement’s required level of detail and delayed
additional requirements related to actual resident harm so that they would not apply until one
year after federal authorities have written standards under the Quality Assurance and
Performance Improvement Program. This program will be at the pilot program stage at the
federal level until the end of 2013 with regulations to follow later.
Nursing Homes – Termination of Provider Agreement
House Bill 59 contains a new provision that would allow the Medicaid Department to terminate
the provider agreement of a facility that is placed on the federal government’s special facility
focus list and fails to improve. The Senate version would give nursing homes more time to
comply, and makes the decision subject to a formal administrative appeals process, which
would also add more time. In each scenario, the Senate added six months to the timeline:
• Facilities that are newly added to the list or are on the list of those that have not
improved when the law becomes effective would have 18 months instead of 12;
• Facilities that fail to graduate from the list would have 30 months instead of 24;
• Facilities that are new to list would have 18 months instead of 12 in order to show
improvement.
Expansion of PACE
The Senate refused to go along with the expansion of PACE (Program of All-inclusive Care for
the Elderly), a long-term care pilot program in which the care manager assumes full risk and is
paid by Medicare and Medicaid on a capitated basis. Currently, the program is only available
in Greater Cincinnati and Cleveland. About 800 consumers participate. The expansion was
conditioned on agreement with CMS to share any resulting Medicare savings with the state.
Adult Protective Services
The adult protective services line item in the Job and Family Services Department received an
increase of $133,997 per year, bringing the total appropriation to $500,000 annually. County Job
and Family Service departments will have to continue to rely on declining federal Social Service
Block Grant funding to try to meet their obligations in this program, which continues to be
haphazard and in need of reform.
12
ODODD -- Intermediate Care Facilities
Following continued discussions among interested parties, the Senate is taking a more
aggressive approach to the conversion of Intermediate Care Facilities (ICFs) for the
developmentally disabled to home and community-based Medicaid programs. The bill directs
the Ohio Department of Developmental Disabilities (ODODD) to downsize by at least 500 but
not more than 600 beds from ICFs that have at least 16 beds, and the same number from smaller
ICFs by July 1, 2018. The department is required to work with interested parties to develop a
methodology to compensate operators who convert beds. In return, ICF operators received
improvements to rate-setting methodologies for direct, indirect, and capital costs, including
increased maximum costs per case-mix units for both large and small operators. In addition,
the administration’s proposal to create a flat payment rate for low-resource utilization ICF
residents was removed from the bill. The Senate added $2 million in GRF funds to the ODODD
budget for waiver services in FY 2015.
Tax Provisions – A New Motor Fuel Tax and Small Business Deduction Restored
The Senate rejected the House’s 7 percent across-the-board income tax cut, opting instead to
restore the governor’s concept of a 50 percent income tax deduction for business income. The
two proposals are nearly equivalent in their effect on revenues. The Legislative Service
Commission (LSC) projects that the rate cut will cost $727 million in FY 2015, $6 million more
than the business deduction. It may be possible that higher OBM revenue estimates will allow
the conference committee to take elements of both proposals, but the choice presents a stark
choice in political dynamics: whether to opt for a narrowly targeted, deeper cut to a core
constituency or a wider tax cut for taxpayers.
Even at this late hour in the budget process, the administration has not prepared any estimates
of the economic impact of the proposal.
About 717,000 (or 14 percent) of income tax filers have some form of business income. 7 The
small business deduction actually reduces tax liability by more than 50 percent because the
remaining taxable income falls into lower brackets and is taxed at lower rates. Table 2
compares the results for two groups of representative taxpayers, who have either all salary
income or all business income. A taxpayer with $60,000 in business income would pay $1,164
less than a taxpayer with the same level of salary income.
The 7 percent across-the-board cut would reduce the liability of a taxpayer with $100,000 in
taxable income by about $251. A person with income at the $40,000 level would see a reduction
of about $72, yet, as noted above, the cost to the state treasury is substantial.
13
Table 2. Comparison of Income Tax Liability for Representative Taxpayers, All Salary vs. All Business Income
Taxable
Income
Level
$100,000
$80,000
$60,000
$50,000
$40,000
Tax Liability
$
$
$
$
$
Salary
Income
3,594
2,674
1,852
1,441
1,041
Business
Income
$
1,441
$
1,041
$
688
$
512
$
342
Reduction in Tax Liability
for Business Taxpayer
Amount
Percentage
$
$
$
$
$
(2,152)
(1,634)
(1,164)
(929)
(699)
-59.9%
-61.1%
-62.8%
-64.5%
-67.2%
Note: Calculations by the author rounded to nearest dollar. Chart uses 2012 rates and brackets.
Motor Fuel Receipts Tax
In December, 2012, the Ohio Supreme Court ruled that the state constitution required that
revenues received from the application of the Commercial Activity Tax (CAT) to motor fuels
had to be used for highway purposes. 8 The CAT is a gross receipts tax levied at 0.26 percent of
a company’s Ohio sales. Although the court’s ruling was not retroactive, it was a major
disruption to the budgetary uses of CAT revenue, which had been shared over the years among
the state, schools, and local governments. The administration’s plan for dealing with the new
restriction was to use CAT revenue to issue bonds related to transportation. These revenues
would replace other GRF taxes. Separately, however, motor fuel wholesalers had expressed
concerns about the application of a gross receipts tax to a low margin business in which the
product could be sold several times before reaching the final consumer. They also alleged that
the tax gave an advantage to integrated companies that provided fuel to captive gas stations.
The Senate decided to deal with industry concerns and the court’s ruling by creating a new
Motor Fuels Receipts Tax that would be levied only once, at the initial point of sale in Ohio, but
at a higher rate of 0.65 percent. Receipts from the new tax are devoted exclusively to road
construction and maintenance. The LSC could not estimate whether the tax would be an overall
revenue gain or loss for the state.
Other Tax Changes
The Senate retained the House provision to extend “click through” nexus to internet retailers,
with a one-million-dollar exclusion for small sellers. Otherwise, the seemingly inexorable
march of tax expenditures continued in the Senate, both through the modification of several
existing tax breaks and the addition of new ones.
The new breaks include the following:
• A sales tax exemption for data center equipment used by multiple businesses offered as
part of an incentive package approved by the Ohio Tax Credit Authority; the provision
lowers the required investment amount from $5 million to $1.5 million and gives the
business two years to meet the payroll requirement;
• A sales tax exemption for equipment used in aerospace vehicle R&D;
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•
A sales tax exemption for a nonprofit organization that leases the facility for the Toledo
Mudhens minor league baseball team.
Modified tax expenditures include:
• An extended sunset for a county to enter into an impact facility agreement with a retailer
to remit up to 75 percent of the sales tax to the retail establishment in return for meeting
certain goals; other changes include a lower investment requirement and a prohibition
against relocating jobs within Ohio.
• Looser requirements for the refundable Job Retention Tax Credit so that a company does
not need to have its principal place of business in the same political subdivision as the
project site;
• Decouples the new markets tax credit from the federal awards process and removes the
15 percent maximum threshold for receiving income from the sale or rental of real estate;
• Allows the refundable historic preservation tax credit to be taken against the CAT, while
leaving in place the $60 million annual cap;
• Increases the allowable income limits for a veteran’s organization to claim a local
property tax exemption.
On the other hand, casinos did not fare as well in the Senate, which removed a proposed
exclusion from the CAT tax for bad debts. The Senate also added the tax commissioner and
OBM to a legislative review committee to study the CAT and issue a report by October 31, 2013.
Ohio Department of Health (ODH)
While General Revenue Funding in the Department of Health (ODH) remains flat from the
House to the Senate budgets, several policy changes were included in the Senate version. The
House and Senate each made changes to the provisions of the budget dealing with the results
from the Public Health Futures Legislative Committee. The committee’s recommendations
were designed to promote collaboration and integration among Ohio’s 125 public health
districts and the services they provide. ODH was authorized to require local health districts to
become accredited by the Public Health Accreditation Board (PHAB) by 2018 in the governor’s
budget and the House budget as a condition for receiving funding. Instead of PHAB standards,
the Senate budget requires that local health districts apply for accreditation by 2018 and achieve
it by 2020 from an accreditation body selected by the ODH director (Table 3). Additionally,
ODH must evaluate a health district’s preparation for accreditation by 2016, including an
evaluation of public health quality indicators. While PHAB standards are nationally
recognized, this allows ODH to select an accreditation body that may adhere to different
standards. In addition to changes in accreditation, the Senate budget requires ODH to make
available easily adaptable model contracts and memorandums of understanding (MOUs) for
health districts to utilize when they share services.
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Table 3: Local Health District Accreditation Timelines
HB 59- As
Introduced
2016
N/A
HB 59- As
Passed by
House
N/A
HB 59- As
Passed by
Senate
ODH must evaluate
health districts
accreditation
preparedness
2018
ODH authorized to
require PHAB
accreditation of health
districts
ODH authorized to
require PHAB
accreditation of health
districts
Health districts must
apply for accreditation
2020
N/A
N/A
Health districts achieve
accreditation from ODHselected accreditation body
Source: LSC Comparison Document House Bill 59, As Introduced, As Passed by the House, As Passed by the
Senate
The Senate budget maintains the House’s reduction in continuing education requirements for
health district board members, and makes additional specifications about the continuing
education topics (ethics, responsibilities, and public health principles). There was a provision
added by the House that prohibited distribution of federal funds to local health districts on a
regional basis. ODH Director, Dr. Ted Wymyslo, shared in his Senate testimony that ODH
currently uses this method to distribute more than 77 percent of its subgrant dollars that are
awarded each year, equaling $113.1 million. 9 The Senate version of the budget removes this
House-added provision.
The Senate added language that prohibits an ambulatory surgical facility (ASF) that provides
abortions from having a written transfer agreement with a public hospital and/or from entering
into a contract with a physician who has privileges at a public hospital. The Senate maintains
the House-added provision that changes the distribution of funding for family planning
services from competitive application to prioritizing public health entities and facilities that also
provide primary care. Facilities that primarily provide family planning services (e.g., Planned
Parenthood) would be last in receiving funding.
The Senate version contains additional dollars in the ODH budget when compared to the House
version, namely $700,000 in State Special Revenue funds, for the Nursing Facility Technical
Assistance Program. This program provides technical assistance to and conducts on-site visits
of nursing homes to improve resident outcomes. In the governor’s budget, this program was
moved from ODH to the Department of Aging. While the House maintained this move, the
Senate disagreed and moved this program back to ODH.
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Ohio Department of Medicaid
Discussions around Medicaid expansion are continuing, but there is no expansion of Medicaid
in the Senate-passed budget, thus the GRF amounts (federal and state) for Medicaid, $14.2
billion in 2014 and $14.8 billion in 2015, are virtually the same as the House-passed version. The
Senate retained the changes made by the House that remove Medicaid expansion from the
budget. Additionally, the Senate version removes the amendment from the House that “left
open the door” for Medicaid expansion. This amendment was added on the House floor,
sponsored by Representative Barbara Sears (R), and required that legislation be introduced in
the fall of 2013 to reform Medicaid. (See State Budgeting Matters Volume 9, Number 2 for
additional information.) Separate legislation has been introduced in the House, also by Rep.
Sears, which resembles the governor’s original plan to expand Medicaid (discussed in further
detail below), so work and discussions around this major reform are ongoing.
The as-introduced budget included a Medicaid expansion to cover adults ages 19 to 64 with
incomes below 138 percent of the FPL. Because of this expansion of Medicaid and other
expanded coverage options starting in 2014 due to the Affordable Care Act (ACA), namely
through health insurance exchanges, the director of the department of Medicaid was permitted
to terminate current Ohio Medicaid coverage of some optional eligibility categories for people
over 138 percent of the FPL. This included individuals who received Medicaid coverage for
family planning services only, breast and cervical cancer treatment, transitional Medicaid,
Medicaid Buy-In for Workers with Disabilities (MBIWD) program, and some low-income
parents. The House-passed budget included a provision that required Medicaid coverage be
maintained for all of these groups except for the MBIWD program. The Senate-passed budget
maintains eligibility only for the MBIWD program, while coverage for individuals in the other
optional eligibility categories over 138 percent of FPL can be terminated. These differences will
be worked out in conference committee.
The Senate maintained the Joint Legislative Committee on the Affordable Care Act that was
established by the House, to review any potential effect of the ACA. The Senate also assigned
this committee the task of assessing the impact of the ACA on the income of college students
who are employed by their institution of higher education.
The Senate made changes concerning the establishment of two work groups that are in the
Department of Medicaid budget. It eliminated the House-added Hospital Readmissions
Program Advisory Workgroup and added the Telemedicine Policy Workgroup to study policies
related to technology, practice, and reimbursement of telemedicine services.
Separate Legislation on Medicaid Reform
Representative Barbara Sears introduced House Bill 176 in May, 2013. This legislation
resembles the governor’s original plan to expand Medicaid (see State Budgeting Matters, Volume
9, Number 1 for a detailed description of this plan) and integrates reforms to the program.
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These reforms include:
• improving the health of Medicaid recipients while reducing health care costs and
limiting expenditure growth;
• enrolling Medicaid recipients in managed care or group health plans,
• requiring enrollees to take on greater financial and personal responsibility;
• ensuring access to treatment for enrollees with substance abuse;
• linking Medicaid and employment-related services and job training to lower caseloads
and assist enrollees to enter the workforce;
• increasing efficiency in the administration of the Medicaid program and preventing
Medicaid fraud and abuse;
• using the Medicaid program's purchasing power to support payment innovations in the
private sector.
On June 13, Senators Dave Burke (R) and Capri Cafaro (D) introduced Senate Bill 145, and
Representatives Ron Amstutz (R) and Vernon Sykes (D) introduced its companion in the House
(House Bill 208), which requires the directors of the departments of Medicaid and Job and
Family Services to implement reforms and creates the Joint Medicaid Oversight Committee.
This committee will review proposed changes relating to the Medicaid program and to
workforce development activities. The Joint Committee will release reports recommending
certain changes to these programs. The proposed reforms to these programs reflect many of the
same principles that are included in Rep. Sears’ proposed legislation, but the bills do not
include an expansion of Medicaid.
Department of Mental Health and Addiction Services
The Senate made changes to two key GRF line items in the Mental Health and Addiction
Services (MHAS) budget. The Continuum of Care Services line item is used to distribute state
funding to local boards to address mental health and addiction issues. The Senate added
$254,250 to this line item in 2014, bringing the total to $77.3 million in 2014 and added $654,250
in 2015, bringing the line item total to $77.7 million. Three policy changes were made to this
line item. The Senate removed the House-added earmark of $665,000 for STAR House at The
Ohio State University, which provides services to homeless youth. The Senate added two
earmarks to this line item. The Chardon Pilot Program will receive $669,446 in 2014 and
$569,446 in 2015. These funds will be distributed to the Chardon school district and to the
Geauga County Board of Mental Health and Recovery Services to address the after effects of the
school shooting that occurred at Chardon High School in February, 2012. A component of this
earmark requires MHAS to provide a report on this pilot program to the General Assembly by
September, 2015. The second earmark is designated for the Human Trafficking Center at The
Ohio State University in the amounts of $250,000 in 2014 and $750,000 in 2015.
In the House-passed budget, $50 million was added in each fiscal year for mental health and
addiction in a House-added line item, Community Behavioral Health, with $30 million
designated for mental health and $20 million designated for addiction. This line item and
funding was retained in the Senate version of the budget, although the Senate removed the
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provision that the funds had to be distributed using the same formula used to distribute funds
to local mental health and addiction boards. The legislation states that instead, MHAS will
develop a distribution method. There is a $2.5 million reduction in this line item in each fiscal
year, specifically taken from the $20 million designated for addiction services, but these funds
will still be used to address addiction issues through a Supreme Court pilot project.
The Senate created the Addiction Treatment Pilot Program by Drug Courts in the
Judiciary/Supreme Court budget. The Supreme Court is tasked with creating a pilot program in
five counties with certified drug courts (Crawford, Franklin, Hardin, Mercer, and Scioto). Drug
courts handle cases of nonviolent drug offenders and provide treatment to help individuals
achieve recovery. This pilot program will serve offenders who are addicted to opioids, alcohol,
or both. The Supreme Court will select a criminal justice research institute to evaluate the plan
and report on it no more than six months after the conclusion of the pilot program. This
program is funded at $5 million in 2014 and is not funded in 2015. Funding for this program
was taken from the part of the Community Behavioral Health line item that was designated for
addiction services in the Mental Health and Addiction Services budget (Table 4).
Table 4: Changes (in GRF) from House to Senate Budget, Mental Health and Addiction-Related Spending
MHAS- Continuum
of Care Services
MHAS- Community
Behavioral Health
Supreme CourtOperating Expenses
(increase is for
Addiction Pilot
Program in 2014)
FY 2014- House
$ 77.1 million
FY 2014- Senate
$ 77.3 million
FY 2015- House
$ 77.1 million
FY 2015- Senate
$ 77.7 million
$ 50 million
$ 47.5 million
$ 50 million
$ 47.5 million
$ 141.6 million
$ 146.6 million
$143.8 million
$ 143.8 million
Source: LSC Budget in Detail, House Bill 59 As Passed by the Senate
Conclusion
Despite the endorsement of numerous advocacy groups, business organizations, and leading
health care institutions, the Senate accepted the House decision to take Medicaid expansion out
of the budget. There is some expectation that the issue can be dealt with in separate bills, but
these would move on a different timeline that might stretch into the autumn, if indeed they
reach a successful conclusion on expansion. It is not clear how such legislation would differ
from the compromises already offered by the administration, namely, to put individuals from
100 to 138 percent of the poverty line in the exchanges (where they might access the same
managed care organizations they would have in the regular program!). The state can apply for
a federal waiver, but Medicaid is not a workforce development program, and the state cannot
restrict eligibility through time limits or other criteria that are not permitted under federal law.
Fundamentally, the decision to expand Medicaid rests on recognition that coverage through
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employer-based insurance has vanished for large segments of the state’s low-income workforce,
including many who work in the health care field.
OBM’s revenue estimates for the conference committee will shape the final act in the budget
debate. If they show an even larger FY 2013 surplus or higher FY 2014-2015 revenues than
anticipated, they may leave room for the two chambers to compromise on their tax plans, add to
the Rainy Day Fund, or increase program appropriations. With efforts to link Medicaid and
workforce development, advocates should have an opportunity to push for reforms to Ohio’s
workforce system, and to stress the importance of human service programs in providing
supports that enable people to keep jobs. Ohio’s Workforce Investment Act allocation from the
federal government will be the lowest it has ever been, and the Ohio Works First system is
reaching fewer adults than ever, so there is ample room for a new approach.
Jim Siegel, “Ohio Senate Ups Education Funding in Budget, The Columbus Dispatch, May 31, 2013.
Matthew Kent, “Think Tank Fellow Blasts Education Funding, Chillicothe Gazette, May 31, 2013.
3 Ohio Legislative Service Commission, “Education Laws and Community Schools,” Members Only, Volume 129,
Issue 6, November 20, 2012.
4 Steve Wainfor, “3 Recommendations for CCS Would Mean Changing State Law,” The Columbus Dispatch, May 28,
2013; updated May 29, 2013.
5 Jim Siegel, “Senate Eases Giving to Campaigns, The Columbus Dispatch, June 5, 2013.
6 Center for Medicare and Medicaid Services, “Health Homes (Section 2703) Frequently Asked Questions,”
http://www.medicaid.gov/State-Resource-Center/Medicaid-State-Technical-Assistance/Health-Homes-TechnicalAssistance/Downloads/Health-Homes-FAQ-5-3-12_2.pdf
7 Testimony of Tax Commissioner Joe Testa to the Ohio House Finance and Appropriations Committee, 2-12-2013.
The percentage is calculated by the author based on approximately 5.2 million filers.
8 Beaver Excavating Co. v. Testa, Slip Opinion No. 2012-Ohio-5776.
9 Testimony of Dr. Theodore Wymyslo, Director, Ohio Department of Health, Senate Medicaid Finance
Subcommittee, April 24, 2013
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2
Jon Honeck, Ph.D., is director of public policy and advocacy at The Center for Community Solutions;
Tara Dolansky is public policy associate; Terry Thomas is a public policy consultant.
State Budgeting Matters is published by The Center for Community Solutions.
Copyright 2013 by The Center for Community Solutions. All rights reserved.
Comments and questions about this edition may be sent to [email protected].
1501 Euclid Ave., Ste. 310, Cleveland, OH 44115
37 W. Broad St., Ste. 350, Columbus, OH 43215
P: 216-781-2944 // F: 216-781-2988 // www.CommunitySolutions.com
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