OLC HB 64 - State Budget Analysis

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1 OLC HB 64 - State Budget Analysis FY 2015 GRF Ending Balance Section: Description: Requires the Director of OBM to allocate cash from the FY 2015 surplus GRF revenue (year ending) that would otherwise be transferred to the Budget Stabilization Fund or the Income Tax Reduction Fund as follows: Reserves up to $393,000,000 cash in the GRF to support personal income tax reductions. Transfers up to $425,500,000 cash to the Budget Stabilization Fund to increase the balance of that fund to an amount equal to 5% of estimated FY 2017 GRF revenue. Transfers up to $42,250,000 cash to the Straight A Fund. Transfers up to $40,000,000 cash to the Unemployment Compensation Interest Contingency Fund for payment to the U.S. Secretary of the Treasury of accrued interest costs related to federal unemployment account borrowing. Transfers up to $20,000,000 cash to the Disaster Services Fund. Transfers up to $7,500,000 cash to the Systems Transformation Support Fund. Transfers up to $12,000,000 cash to the Natural Resources Special Purposes Fund. Transfers up to $10,000,000 cash to the Local Government Innovation Fund. Transfers up to $31,250,000 cash to the Workforce and Higher Education Programs Fund. Transfers up to $50,000,000 cash to the Health and Human Services Fund. Transfers $12,750,000 cash to the Electronic Pollbook Fund. Transfers $1,250,000 cash to the Absent Voter's Ballot Fund. Transfers $11,500,000 cash to the Healthier Buckeye Fund. Transfers $350,000 to the Mentor Stormwater Project Fund. Transfers $500,000 to the ODM Maternal and Child Health Fund. Transfers $5,000,000 to the Ohio Military Facilities Fund. Transfers $4,000,000 to the Community Police Relations Fund. Transfers $20,000,000 to the Local Government Safety Capital Grant Fund. Transfers $250,000 to the Local Public Enhancement Fund.

2 Public Library Fund Section: Description: Increases the percent of GRF tax revenues transferred to the Public Library Fund from 1.66% under permanent law to 1.70% in FY 2016 and FY The Legislative Service Commission estimates that this increases transfers from the GRF to the PLF by about $10 million in each of the next two fiscal years. Ohio Public Library Information Network (OPLIN) Section: Description: Requires that OPLIN technology funds be used for an information telecommunications network linking public libraries in the state. Permits the OPLIN Board of Trustees to make decisions regarding the use of the appropriation. Requires the OPLIN Board to research and assist local libraries with regard to emerging technologies and methods of controlling access to obscene and illegal materials. Requires the OPLIN director to provide written reports upon request. Requires OPLIN, INFOhio, and OhioLINK to coordinate their purchases of electronic databases. Requires the OBM Director to transfer $3,689,788 cash in each fiscal year from the Public Library Fund to the OPLIN Technology Fund. Library for the Blind Section: Description: Requires that appropriations to the Library for the Blind Fund be used for the statewide Talking Book Program. Requires the OBM Director to transfer $1,274,194 cash in each fiscal year from the Public Library Fund to the Library for the Blind Fund. Special Elections Sections: , Description: Eliminates special elections in February and requires a political , , subdivision that submits an item for placement on the ballot at a special election , to prepay 65% of the estimated cost of the election. Straight A Program Section: Description: Creates the Straight A Program to provide grants to school districts, JVSDs, ESCs, community schools, STEM schools, college preparatory boarding schools, individual school buildings, education consortia, institutions of higher education, and private or governmental entities (including public libraries) partnering with one or more of those educational entities for projects that aim to achieve significant advancement in the following:

3 1) increased student achievement, (2) spending reduction in the five year fiscal forecast, (3) utilization of a greater share of classroom resources, and (4) use of shared service delivery models. Establishes a nine-member governing board to award the grants. Requires ODE to provide administrative support to the board. Requires the board to select advisors with fiscal and education expertise to evaluate grant proposals. Requires the board to issue an annual report concerning the program. Specifies the required components for each grant application and agreement as well as procedures and certain criteria to be used by the board in awarding the grants. Adult Basic and Literacy Education Section: Description: Earmarks $100,000 in FY 2016 and $70,000 in FY 2017 from the Adult Basic and Literacy Education line item to provide a grant for an Ohio public library that provides remedial coursework instruction for postsecondary students. Ohio 2020 Tax Study Commission Section: Description: Creates a commission to review Ohio's tax structure and policies and make recommendations to the General Assembly on how to maximize Ohio's competiveness by the year Specifically, it requires the Commission to make recommendations on how to transition Ohio's personal income tax to a 3.5% or 3.75% flat tax by tax year 2018 and how to reform Ohio's severance tax. It also requires the Commission to review state tax credits and to study the effectiveness of the historic building rehabilitation tax credit, including whether to make the credit refundable or to create a grant program. The Commission will include three members of the House of Representatives and three from the Senate; the Director of Budget and Management and an appointee of the Governor. Specifies that the chairs of the Ways and Means Committees of the two houses are to co-chair the Commission. Requires the Commission to publish its findings and recommendations and to submit a report to the General Assembly. It specifically requires a report on the severance tax by October 1, 2015, and a report on the historic building rehabilitation tax credit by October 31, The Commission will cease to exist after all three reports are completed. Cigarette Tax Increase Sections: , Description: Increases the rate of the cigarette tax from the current $1.25 per pack to $1.60 per pack beginning July 1, 2015.

4 The Legislative Service Commission estimates that this will increase cigarette tax receipts by $208.6 million in FY 2016 and $170.3 million in FY Cigarette tax receipts are deposited in the GRF. Income Tax Rate Reduction Section: Description: Reduces income tax rates for all brackets by 6.3% for taxable years beginning in 2015 or thereafter. The Legislative Service Commission estimates that the proposed rate reduction decreases the personal income tax liability by an estimated $617.8 million for TY 2015 and $645.8 million for TY 2016 on an all-funds basis. The GRF, LGF and PLF shares of the revenue decreases during the next biennium are 96.64%, 1.66% and 1.70%, respectively. (The distribution of GRF revenue to the PLF is to increase to 1.70% temporarily, up from 1.66% in current law, under another provision of the bill). Depending on the timing and magnitude of withholding rate changes, additional revenue loss in millions of dollars related to withholding changes could occur in either FY 2016 or FY Small Business Income Tax Deduction Sections: Description: Revises the small business income tax deduction and allows , , business owners a 75% income tax reduction on their first $250,000 of net , , income for the 2015 tax year. In tax year 2016, they will pay no state income tax , , at all on their first $250,000 of income. Any income beyond $250,000 will be taxed at a flat rate of 3%. The Legislative Service Commission estimates that this reduces personal income tax revenue by $303 million in FY 2016 and $490 million in FY Transfers to the LGF and PLF would be reduced by about $8 million in each fiscal year. Amounts retained by the GRF would be reduced by $452 million in FY 2016 and by $474 million in FY These estimates assume that taxpayers do not respond to the policy change by paying themselves less in salary and wages and taking more income in the form of business income. Property Tax Replacement Payments (TPP and PUTPP) to Local Taxing Units Sections: , Description: Beginning in FY 2016, resumes the phase-out of business and , , utility tangible personal property (TPP and PUTPP) reimbursement payments for , , local taxing units (including impacted libraries) based on each unit s combined business and utility TPP/PUTPP reimbursement payments received in FY This impacts 40 public libraries. Specifies that replacement payments for current expense levies be phased-out according to the ratio of a taxing unit's FY 2015 payment amount to its total operating revenue from state and local sources ("total sources"). Specifies that the replacement payment will only be made in FY 2016 if the unit's FY 2015 payment represents more than 2% of its total resources; increases the percentage threshold to 4% in FY 2017 and by 2 percentage points each year

5 thereafter. (Under current law, local taxing units receive annual payments equal to the amounts by which their CY 2010 payments exceed 6% of their total resources or the reimbursement amounts for TY 2013.) Requires each county auditor, by July 31, 2015, to certify to the Tax Commissioner the amount of money distributed from the County Public Library Fund in 2014 to each public library system that received a TPP reimbursement in 2014, for purposes of computing a library system's total resources used in TPP reimbursement determinations. This reduces the reimbursements to counties, townships, municipal corporations, other local taxing units, and public libraries. The bill appropriates $65.9 million in FY 2016 and $40.2 million in FY 2017 from the Property Tax Replacement Phase Out - Local Government Fund for reimbursement payments to local governments. In FY 2015, TPP reimbursement payments to local governments totaled $127.6 million. Together, the 40 public libraries impacted will lose $6.7 million in funding. Appeal of TPP Reimbursement Computation Section: Description: Authorizes school districts and other local taxing units (including public libraries) affected by the bill's TPP reimbursement changes to contest how the Tax Commissioner has classified a levy or calculated its total resources for the purpose of computing the reimbursement payments. Specifies that the Tax Commissioner's decision on appeal is final and that no adjustments be made after June 30, Tangible Personal Property Tax Section: Description: Allows the Director of OBM, during FY 2016 and 2017, to transfer from the GRF to the Local Government Tangible Property Tax Replacement Fund and the School District Tangible Property Tax Replacement Fund, amounts necessary to reimburse local taxing units and school districts under O.R.C. Sections and Allows the Director of OBM, during FY 2016 and 2017, to make temporary transfers from the GRF to ensure sufficient balances in the Local Government Tangible Property Tax Replacement Fund and the School District Tangible Property Tax Replacement Fund, and to replenish the GRF for such transfers. CAT Revenue Allocation Changes Sections: Description: Increases the share of commercial activity tax (CAT) revenue , credited to the GRF from 50% to 75%, reduces from 35% to 20% the share credited to the School District Tangible Property Tax Replacement Fund and decreases from 15% to 5% the share credited to the Local Government Tangible Property Tax Replacement Fund, beginning July 1, While the allocation change increases the amount of CAT receipts directly credited to the GRF, it reduces "excess" CAT receipts that are transferred back

6 to the GRF. Under current law, CAT receipts deposited into the School District Tangible Property Tax Replacement Fund and the Local Government Tangible Property Tax Replacement Fund are used to make reimbursement payments to school districts and other local taxing units, respectively, for the phase-out of property taxes on general business tangible personal property. Any "excess" receipts that are not needed for making such payments are transferred back to the GRF.