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The
Toledo Blade…
Budget breaks
promises, Democrats say
Schools
to lose part of tax funds
By Jim Province
Blade Columbus Bureau Chief
COLUMBUS -- Democrats Wednesday accused the Kasich administration of
breaking a promise to school districts that they wouldn't suffer
financially because of the state's ambitious tax changes rolled out six
years ago.
The administration, however, countered that schools should have
prepared for the day that state payments to keep their budgets whole
would end.
At issue is the tangible personal property tax, which businesses paid
on machinery, equipment, inventory, and furnishings. The unpopular tax
was phased out as part of a 2005 Republican-backed, tax-reform package
enacted to improve the state's economic competitiveness.
Since a bulk of that unpopular tax's revenue went to schools and to a
lesser extent to local governments, the state agreed to use its
Commercial Activities Tax, a new tax on business gross receipts, to
keep local budgets whole while the transition took place.
Later, legislation was enacted to earmark 70 percent of the CAT for
schools while the local government share was to be phased out.
Democrats contend there was no end date on the promise to schools, but
the Kasich administration contends that all it is doing is accelerating
the rate at which those payments were originally set to expire.
"This appears to be a case of broken promises," Rep. Jay Goyal (D.,
Mansfield) said. "[The state] promised to earmark 70 percent of the
Commercial Activities Tax to local school districts forever. However,
this budget immediately lowers that 70 percent to 52.5 percent."
The $55.5 billion, two-year budget unveiled by Gov. John Kasich Tuesday
would increase basic K-12 school subsidies by 2 percent in the fiscal
year beginning July 1 and 1.4 percent in the second year.
The budget, however, does not replace $457.4 million in one-time
federal stimulus dollars that schools received this year.
Mr. Kasich's office has yet to release a breakdown on how each school
district would fare under his proposal after the dollars are funneled
through a formula that, among other things, steers more money toward
property-poor districts.
"State formula aid to school districts is increasing, which is
factual," Tim Keen, Mr. Kasich's budget director, told the House
Finance Committee. "Federal stimulus dollars are gone. That is a fact.
"We've been quite clear that changes have been made to the tangible
personal property tax and kilowatt-hour tax [on utilities]," he said.
"In the [2005 budget], it was clear that the directive to hold harmless
would expire … I would not characterize a change in the law as breaking
a promise."
The committee's chairman, Rep. Ron Amstutz (R., Wooster), noted that
Mr. Kasich's predecessor, Democratic Gov. Ted Strickland, vetoed a
provision in the last budget that would have earmarked 100 percent of
the CAT to keep schools whole. CAT collections have underperformed
expectations.
"For those of you who are complaining about reductions, what taxes do
you want to raise or what program or line item in the governor's budget
do you want to cut?" Rep. Randy Gardner (R., Bowling Green) asked. "The
governor said all day [Tuesday] that he is proposing a budget that he
assumes will change. … This is an issue we've wrestled with since 2005,
and there's no question that we need reform in this area."
The original schedule in the 2005 law called for the state to make up
the lost revenue from the demise of the Tangible Personal Property Tax
for five years and then to gradually wean districts off the state
replacement revenue over seven years.
Mr. Kasich's proposed budget would accelerate that phase-out period,
but would do so more slowly for districts that rely most heavily on the
replacement revenue to fund their budgets.
He said the budget offers a number of things to help schools as they
deal with reduced funding, including a shift in the burden of paying
for public employee pensions.
In a variation on a bill under consideration in the House, the budget
anticipates an increase in the employee's share of his pension
contributions by 2 percentage points and a corresponding reduction in
the government employer's share. Mr. Keen estimated this would save
governments about $1 billion. Several pension funds already have
volunteered such changes.
"It's disingenuous to market the budget proposal as an increase in
funding for schools when the result is extreme cuts at the end of the
day," said Rep. Matt Szollosi (D., Oregon), the No. 2 Democrat in the
House.
Also, the Ohio House yesterday sent Mr. Kasich a bill, sponsored by Mr.
Gardner, that would roll back many of the mandates enacted under Mr.
Strickland two years ago as part of his "evidence-based model" of K-12
education. Mr. Kasich is expected to sign it.
Among other provisions, the bill removes the mandate that schools
provide all-day kindergarten and restores the authority for schools to
charge tuition on a sliding income-based scale when it chooses to offer
it. Republicans contend the changes would eliminate $205 million in
unfunded mandates on districts from the state.
Read it at the Toledo Blade
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