COLUMBUS, Ohio (AP) — Gov. John Kasich proposed asweeping budget Monday that
reduces state income and small businesstaxes through increases in other areas, boosts school funding
andexpands Medicaid services with help from the federal government.TheRepublican governor said the $63.1
billion, two-year spending blueprintrepresents "the right mix" of supporting economic development
andhelping the needy."That’s the hallmark of this administration,"he said. "It’s not enough
that some people can do well. Everyone in Ohiomust have the prospect of doing better."He predicted that
thestate will have gone from a $7.7 billion deficit to a surplus of as muchas $1.9 billion by the end of the
budget cycle, triggering an estimated4 percent tax refund from the rainy day fund to all Ohioans. The
growthis being fueled by bonding of the Ohio Turnpike, bonding of the stateliquor operation through Kasich’s
private nonprofit JobsOhio, economicgains, and added revenue from expanded gambling.Kasich’s taxreform
package incorporates a significant rewrite of Ohio’s tax codethat delivers $1.4 billion in tax cuts over
three years. Kasich said itreflects the state’s shift from a manufacturing to service economy. Itreduces the
tax rate on virtually all small businesses by 50 percent,cuts the income tax rate statewide by 20 percent
over three years, andlowers the sales tax rate from 5.5 percent to 5 percent while imposingthe tax on more
services.The income tax would be cut by 7.5 percent this year, by another 7.5 percent in 2014 and by an
additional 5 percent in 2015."There’sgoing to be a hot time in the old town tonight," Kasich said
of what hepredicts will be the positive effects on the economy from the changes."Gov.Kasich’s tax
proposals are welcome, because they address Ohio’s biggestlong-term problem: sluggish growth in job
opportunities and incomes,"Ohio University economics professor Richard Vedder said in a
statementreleased by the administration.The revisions will impose salestaxes on professional services —
including lawyers, lobbyists andaccountants — in a move that is sure to set off a contentious policyfight at
the Statehouse. States that have tried something similar,including Michigan and Florida, have quickly had to
backpedal amidconcerns implementation was unworkable. The Ohio plan continues toexempt from the tax some
widely used daily services, including childcare, housing and medical services.The administration hopes
toease some of the opposition by reducing the overall sales-tax rate whileexpanding the tax to other areas.
Kasich said the time has come torewrite the code to include those services.The budget packagealso
incorporates Kasich’s answer to Ohio’s unconstitutional schoolfunding plan. The overhaul outlined last week
delivers $1.2 billion inadditional funding to districts over the biennium, which the budgetcouples with a
new formula for higher education funding that ties halfof state subsidies for public colleges and
universities to the number ofstudents who graduate, rather than attend, their
institutions.Kasich’s"Achievement Everywhere" education plan would bring all schooldistricts up to
the tax base level of a district with $250,000 inproperty value per student, easing wide disparities in
millage revenuesfrom local property tax levies that have contributed to courts declaringthe current system
unconstitutional.It would establish a $300million fund to pay for competitive innovation and efficiency
grantsamong other proposals, and delivers additional add-ons to districts toaccount for the number of poor,
special-needs, gifted and college-boundstudents.The governor said districts should not be nervous abouttheir
individual state subsidies, because the plan takes into accounttheir ability to pay."There’s no anxiety
to have, you are who youare," Kasich said. "If you’re not 6-foot-tall, you can’t ride on thebig
roller coaster. … It’s an exact science. It’s not a matter ofpolitical opinion."The governor has also
opted to supportexpansion of Medicaid under the federal health care law, providinghealth care coverage to
potentially half a million uninsured Ohioans. Hesaid he still opposes the health care mandate aspect of
PresidentBarack Obama’s Affordable Care Act, but he predicted funding chaosespecially for small-city
hospitals by rejecting the expansion offercontained in the law."It’s an important point to make that
we’rerecapturing something for a very useful purpose that we think in the endwill allow Ohio to move
forward," Kasich said.He called it "the right decision for Ohio," and said it’s important
that the state send money to those most in need."Manyof our mentally ill are in our jails today,
because they received nocare, or living under a bridge," he said. "It’s not acceptable in a
bigstate like Ohio."Kasich campaigned in 2010 on a pledge to reduceOhio’s income tax, and he delivered
on the promise with Monday’sproposal. To fund the cut, he’s resurrecting a proposal to increaseOhio’s
severance tax on large-volume oil and gas drillers in what theadministration says is a "fair, equitable
and competitive" change. Theirplan eliminates the tax altogether on small oil and gas
producers."What this proposal does is it aligns the tax code with the realities of the economy,"
state Tax Commissioner Joe Testa said.TheLegislature failed to act on the oil and gas proposal last
session,after pushback from oil and gas producers, local communities enjoyingthe bounty of the energy
exploration boom, and some tea party groupsopposed on principle to tax increases.___Office of Management and
Budget: http://obm.ohio.govCopyright 2013 The
Associated Press.