- Associated Press - Monday, February 2, 2015

COLUMBUS, Ohio (AP) - Larger businesses would see tax hikes and wealthier school districts would see less state aid under a proposed state budget that Gov. John Kasich described Monday as his most ambitious yet.

The Republican governor’s $72.3 billion, two-year spending blueprint takes on the tobacco lobby with proposed tax increases on cigarettes, while directing record spending toward K-12 and higher education, development disabilities and mental health.

“At the end of the day, we want everybody to have a chance to rise,” Kasich said at a news conference.

Kasich cautioned that added funding comes with the personal responsibility for Ohioans that he talked about in his inaugural address last month.

“It should be pretty clear that we expect something from you when we reach out our hand to help you,” he said.

Budget Director Tim Keen said the budget continues to fund an expansion of the Medicaid health program approved last legislative session.

The administration extended Medicaid eligibility in 2013 to cover thousands more low-income residents, as allowed under the federal health care law. Kasich needs legislative approval to continue to fund it after June.

Kasich also proposes capping tuition increases in 2016 at 2 percent and freezing tuition rates in 2017. The budget also creates a $120 million fund aimed at reducing accumulated student debt.

A new task force would be charged with analyzing what’s contributing to the high cost of college and working to drive down costs, the governor said.

The budget also encourages high schools to add more classes that allow students to earn college credit and encourages college credit for expertise gained outside the classroom. The budget also allows community colleges to offer bachelor’s degrees in areas where training isn’t available at a traditional four-year institution.

Kasich said the administration proposes an adjustment to Ohio’s school funding formula that accounts for a district’s income level and directs more resources to districts with less ability to pay. Additionally, districts would see their state funding guarantee reduced by 1 percent.

The budget cuts the income-tax rate by 23 percent over the next two years.

The plan also raises the rate on Ohio’s decade-old commercial activity tax for businesses for the first time - from 0.26 percent to 0.32 percent. Kasich said the increase would be used to pay for eliminating income taxes on all small businesses with annual gross receipts of $2 million or less.

It also increases the sales tax by a half-cent and attaches it to more items - including cable TV subscriptions, parking and travel packages. Tax Commissioner Joe Testa said the broadened sales tax, which would raise $1.5 billion over two years, is far less than what was proposed in the last budget.

Senate Democratic Leader Joe Schiavoni said Ohioans don’t need an expanded sales tax. “Instead of raising taxes on everyone to benefit a few, the governor should have proposed meaningful investments in education and local communities,” he said.

The second-term governor’s tax increase on cigarettes - up from $1.25 to $2.25 a pack - comes in tandem with a series of initiatives to reduce smoking statewide. Those include banning cigarettes and tobacco in primary and secondary schools and requiring public colleges and universities to go tobacco-free.


Associated Press writer Ann Sanner contributed to this report.

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