- Associated Press - Monday, June 8, 2015

COLUMBUS, Ohio (AP) - Majority Republicans in the Ohio Senate proposed changes to the state budget Monday that would increase taxes on tobacco, freeze tuition at state universities and eliminate state taxes for certain small business income.

A revised bill was still being written, so the full impact and comprehensive details of the GOP’s plans were not yet finalized.

The Senate version of the state’s two-year operating budget spends about $71.3 billion, slightly less than what the House passed.

Senate leaders told reporters at a news conference that their measure increases higher-education funding by $240 million, maintains a 6.3 percent cut to the state income tax and restores Medicaid health coverage for certain pregnant women and women with breast and cervical cancer.

Small businesses would see additional tax relief under the Senate’s proposal. The plan would eliminate taxes on the first $250,000 in business income and cap the tax rate on amounts above $250,000 at around 3 percent.

Senate President Keith Faber said the net tax cut amounts to $1.7 billion, which is roughly $500 million more than the House budget.

“We’re continuing to build on our commitment to fund what matters and return to the taxpayers what’s not essential,” said Faber, a Celina Republican.

Faber did not specify what spending cuts were made in the budget to cover the proposed tax reductions and support the Senate’s policy priorities, telling reporters that some state agencies would see reductions and some new programs were not funded.

“Short answer is, you’re going to have to go line by line because there were a lot of them,” he said.

Majority Republicans in the House removed major elements of Republican Gov. John Kasich’s tax proposal from the spending bill in April, including increases on certain business and sales taxes, cigarettes, and oil and gas drilling. The proposed increases were intended to fund an income tax reduction. Representatives want to create a commission to study such potential tax changes.

Senators stuck with much of the House’s tax changes, but their plan would boost the cigarette tax from $1.25 to $1.65 a pack and increase the tax on other tobacco products at a similar rate. It would not apply to electronic cigarettes.

As expected, the Senate did not restore the proposed tax increase on oil-and-gas extraction that Kasich wanted.

“It’s coming together,” said Sen. Bob Peterson, a Sabina Republican who chairs the Senate’s Ways and Means Committee. “We’re going to have a plan ready for next week.”

Kasich spokesman Rob Nichols said in an email the Senate was making “encouraging progress” on the budget, and the administration would continue to push for a larger income tax cut.

The Senate adjusted Ohio’s K-12 school funding formula to drive additional dollars to low-wealth, low-enrollment districts while ensuring more districts are covered, Faber said.

A spreadsheet distributed by the Senate showed basic state aid to schools falling from more than $1 billion spent by the House to $955 million. State Sen. Chris Widener said the Senate proposal guarantees that no district falls below current funding levels for the next two years and it provides bonuses tied to high school graduation and elementary literacy rates that are outside the formula. He said money for standardized testing was left out as lawmakers continue to debate the issue.

The Senate also kept in place a House provision that puts local government fund payments at risk for cities that collect fines from traffic cameras, following new state restrictions on the devices. Ohio law requires law enforcement officers be present when the cameras are used to catch speeding motorists or red-light runners, though some municipalities are challenging the law.

Faber said his members believed the cities should not be collecting such fines.

Hearings on the Senate changes are scheduled to start Tuesday. The legislation faces a June 30 deadline.

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Associated Press writer Julie Carr Smyth contributed to this report.

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