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Automotive Service Association of Ohio Legislative Activities Report March 2015

This past month was highlighted by Governor Kasich unveiling his biennial budget bill (HB 64). The focus of the Ohio General Assembly has shifted to the various policy proposals included in the governor’s two-year spending plan. HB 64 includes some sweeping reforms to several major policy areas including taxes, healthcare and education. Debate over HB 64 will begin in the House of Representatives and will last until the end of April. The measure will then be sent to the Senate for further deliberation before entering a conference committee where members of both chambers will sort out the differences among the various versions of the bill. The biennial budget bill must be passed by June 30th.

Likely the most controversial provision of Governor Kasich’s budget is his tax reform package. The governor has always advocated for shifting Ohio’s tax policy away from personal income taxes and towards a consumption-based tax system. The tax reforms included in HB 64 reflect a significant step toward this goal. HB 64 proposes a 23% reduction in personal income taxes. The tax cut would be phased in at 15% the first year and another 8% in the second year of the biennium. The tax cut would reduce Ohio’s top rate from 5.333% to 4.106% in 2016. HB 64 also calls for a tax cut for small businesses with annual gross receipts of $2 million or less. According to Ohio Tax Commissioner Joe Testa, this cut would impact about 98% of the approximately one million businesses structured as sole proprietorships or pass-through entities. The governor’s tax proposal also calls for higher tax exemptions for low income earners. Workers earning less than $40,000 annually would receive a personal income tax exemption increase from $2,200 to $4,000 and those earning $40,000-$80,000 annually will see an increase from $1,950 to $2,850. The governor’s tax proposal as a whole would cost nearly $5.7 billion over the biennium.

To pay for these tax reductions the governor attempts to retry certain tax increases that were defeated in his previous budget proposal. Kasich’s plan calls for a hike in the sales tax rate from the current 5.75% to 6.25%, which the administration estimates would bring in around $1.6 billion. The plan would also broaden the sales tax base to include additional services, which would add another estimated $928 million for the biennium. Another proposal revisited in this budget is the governor’s plan to raise the severance tax for oil and gas produced in Ohio. Under the most recent proposal, the severance tax would be fixed at 6.5% for oil and gas produced at the wellhead, with a lower rate of 4.5% for natural gas and natural gas liquids taken downstream. Overall, the proposed severance tax increase would raise an estimated $325 million over the biennium. Governor Kasich is also proposing substantial increases on tobacco taxes as well as other “adjustments” to bring in revenue. Overall, the governor’s proposal will bring in an estimated $5.2 billion in new revenue. 

The governor’s tax plan has been questioned by some, especially those in the business community. During testimony before the House Ways and Means Committee groups including grocers, auto dealers, accountants, newspapers, manufacturers and lawyers all testified in opposition of the plan. While most agree that an income tax cut is a good idea, they have concerns about the proposed CAT and sales tax hikes. Many criticized the plan to broaden the sales tax so that it would apply to more services, including management consulting and lobbying. Those in opposition of the plan say these services are poorly defined and will result in businesses paying more taxes for a variety of contracted services.

Another budget proposal attracting quite a bit of attention is the governor’s school funding proposal. While Kasich’s budget increases school funding over two years, it is estimated roughly half the school districts in the state stand to lose operating money. According to the Kasich Administration, the school funding formula proposed in HB 64 would effectively drive money to districts with less capacity to raise money. The proposal calculates that capacity by measuring a district’s property value per pupil and its median income against the state average. The proposal allows a school district to be cut by up to 1% for the total amount of state and local funding it receives. It also would cap any increase at a 10% gain each year. A number of legislators, especially those in rural areas, are concerned that the proposed funding formula would cut funding to many school districts in agricultural areas, while at the same time increase funding to wealthy districts. Some legislators are concerned that the proposal could shift more of the burden to local homeowners in some districts.

Somewhat surprisingly, the debate over providing funding to cover the expanded Medicaid population has not received as much pushback as it has in previous years. Governor Kasich included funding in his budget proposal to maintain the current expansion population. Instead of opposing his plan as they have in the past, many in the legislature are looking at ways to help individuals, who are capable, get off Medicaid and other public assistance programs. Office of Health Transformation Director Greg Moody said during his testimony on the budget that despite larger than expected signups among newly eligible individuals, overall enrollment is below estimates. A general consensus from most involved in the debate is that the best way to get individuals off of public assistance is improving the economy and providing them with jobs.

Governor Kasich scheduled his State of the State address just weeks after the biennial budget was introduced, allowing him to direct his comments to the policy proposals being debated in the legislature. Kasich continued the tradition of taking the speech on the road and selected Wilmington, Ohio. Wilmington was hit especially hard by the recession and has started to recover. It is also in the district of newly elected House Speaker Cliff Rosenberger. Governor Kasich highlighted the accomplishments his administration has had since taking office, including erasing an $8 billion deficit and creating a $1.5 billion surplus. Kasich focused much of his speech on the tax reforms offered in his biennial budget package. He defended his tax plan and said it was a shift to taxes that will “have the least negative impact on the private economy.” The governor said his proposals would help both the poor and rich. He referenced the large number of wealthy Ohioans moving to Naples, Florida to avoid taxes. He continued to say that Ohio’s high income tax drive people out. He praised a consumption tax model by saying it gives control back to Ohioans because they would pay taxes on the purchases they choose to make. He also urged legislators to support the other components of his tax package saying they will help lift Ohio and help diversify the economy. He also praised the efforts being taken to address infant mortality as well as the administration’s work to improve care for the mentally ill. As he has in previous State of the State addresses, the governor announced the recipients of his Courage Awards. Those awards went to: Jackie Fletcher, a nurse with the Knox County Health Department; Shane and Brittney Robinson, who saved two people from a car accident as the vehicle was on fire; and Lauren Hill, a student suffering from brain cancer who fulfilled her dream of playing college basketball and has helped raise nearly $1.5 million through the Cure Starts Now Foundation. 

In other news, former Governor Ted Strickland officially announced his candidacy for the U.S. Senate, joining Cincinnati Councilman P.G. Sittenfeld as hopefuls for the Democratic nomination in the 2016 race against incumbent Rob Portman. “I’m running for the United States Senate in 2016 because I am determined to restore the American Dream for working people in this country. I believe in the American Dream because I lived it,” Mr. Strickland said in the announcement.

We have also been closely monitoring efforts to address Ohio’s federal unemployment compensation debt. Rep. Barbara Sears, who chaired the House Unemployment Compensation Debt Study Committee, said she is preparing a package of about five bills that would look at how to stabilize and improve the long-term financial success of Ohio’s unemployment compensation system. The proposals will focus on three areas: revenue, benefits and governance, the sponsor said. Ohio borrowed $3.4 billion from the federal government to pay benefits in the most recent recession, according to the Department of Job and Family Services. The state still owed over a billion dollars when the department testified this summer. Rep. Sears said during an interview that the state needs to “…alter the way that we’re handling the revenue stream so that we make sure when the debt is paid off we don’t immediately put ourselves back into debt.”

ASA Ohio has also met with legislative leaders regarding legislation that would create a workforce training grant program to help address the workforce shortage in the industry. Sponsored by Rep. Kirk Schuring (R-Canton) and Rep. Nathan Manning (R-North Ridgeville), HB 1 would reward students pursing education in in-demand fields, which includes the automotive repair profession. If passed, we hope this legislation will help motivate students to pursue jobs in the automotive services industry, as well as encourage technical schools and community colleges to work alongside automotive repair businesses to better train future technicians. The proposal would provide up to $5,000 per student for those pursuing coursework in an in-demand job field. To earn funding, a student must also spend three months in a workplace setting that is similar to the job they are seeking. If students complete their education and get a job in that in-demand field, they would be eligible for a 25% annual tax credit on what they pay on student loans. The bill will also require grant recipients to receive “soft skill” training that would cover things such as interpersonal skills and work ethic.

 ASA Ohio has also been heavily involved in the development of SB 37, which was recently introduced by Senator Joe Uecker (R-Miami Township). This legislation is similar to SB 232 from last session, which would register mechanical repair facilities with the Motor Vehicle Repair Board. Last session SB 232 was passed by the Senate with overwhelming support and was reported by the House Commerce and Labor committee before the end of session. SB 37 builds upon this momentum and ASA Ohio hopes to have this important legislation enacted this session. The Motor Vehicle Repair Board has been registering the collision repair industry for over 15 years. Since this time the collision side has made great strides in improving the image of the industry and encouraging fair competition. SB 37 would have a similar impact on the mechanical repair industry by ensuring that all facilities are operating under the same standards. The Board will also serve as a resource for mechanical repair shops that register. The Board constantly monitors state and federal laws and will notify businesses of changes that will impact the industry. Additionally, the Board will serve as a resource to customers who will be able to work with the Board to resolve disputes and identify legitimate repair operators. “I have received feedback from many business owners and consumers who want to see standards brought to an industry that impacts all Ohioans,” said Senator Uecker. “I want facilities to see the Motor Vehicle Repair Board as a valuable resource in understanding their industry and as a way to offer transparency to their customers.” 

We have been tracking the following legislation that has been introduced in the 131st General Assembly:

 

HB1

WORKFORCE GRANT PROGRAM (SCHURING K, MANNING N) To establish the Workforce Grant Program, to authorize an income tax credit equal to 25% of the student loan payments a grant recipient makes per year, and to make an appropriation.

 

Current Status:   

3/4/2015

House Economic and Workforce Development Committee

Fourth Hearing

 

HB53

TRANSPORTATION BUDGET (GROSSMAN C) To make appropriations for programs related to transportation and public safety for the biennium beginning July 1, 2015, and ending June 30, 2017, and to provide authorization and conditions for the operation of those programs.

 

Current Status:   

3/4/2015

Senate Transportation, Commerce and Labor Committee

Third Hearing

 

HB64

OPERATING BUDGET (SMITH R) To make operating appropriations for the biennium beginning July 1, 2015, and ending June 30, 2017, and to provide authorization and conditions for the operation of state programs.

 

Current Status:   

3/5/2015

House Finance Subcommittee on Higher Education Committee

Seventh Hearing

 

SB37

MOTOR VEHICLE REPAIR BOARD JURISDICTION (UECKER J) To extend the jurisdiction of the Motor Vehicle Repair Board to persons who perform motor vehicle mechanical repairs.

 

Current Status:   

2/11/2015

Referred to the Senate Transportation, Commerce and Labor Committee

 

 

 
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