Ohio’s process for a biennial spending bill that sets the state FY2020 – 2021 budget has concluded. The GCP Public Policy Agenda, based on feedback from the NE Ohio business community, focuses on three leading areas to allow for and advance growth and innovation in Northeast Ohio: An Adaptable Government & Public Sector; A Sustainable & Predictable Tax & Regulatory Environment; Talent Development & Retention to Advance Business Growth. Below is a summary of a few of the headline policy issues that are of importance to GCP members – many of which, the GCP advocacy team have been deeply engaged in – and how these issues were addressed in Ohio’s new budget.
Business Income Deduction (BID) / Taxes
Since its inception a few years ago, GCP members have maintained that preserving Ohio’s small business tax deduction on the first $250,000 in business income allows entrepreneurs greater ability to plan and invest in their companies and workforce.
The future of the BID was in jeopardy as state budget talks progressed, but in the end the deal kept the first $250,000 of income for limited liability corporations and other business entities tax-free and maintained an existing 3% flat rate on income above that. Language was included that make lawyers and lobbyists ineligible for the BID; this change was supposedly meant to guard against individuals who utilize the BID and form businesses without hiring any employees.
Over the years and consistently throughout the budget process, GCP members continued to provide examples of the importance of the BID and urged against shifting the tax burden from one group of taxpayers to another. GCP applauds elected leaders for their support of the business community on this key issue.
The new budget also mirrored other GCP tax priorities by maintaining today’s sales tax base, the current commercial activity tax (CAT) rate, and upholding today’s CAT exemption level.
The bill effectively eliminated taxes for people in Ohio’s lowest two tax brackets and cut other tax rates by 4%.
Lastly, the legislation set a threshold of $100,000 in Ohio sales or 200-plus transactions in Ohio for sales tax collection by online sellers, as proposed by the House, while adopting Senate changes to the conditions under which a "marketplace facilitator" must collect sales taxes.
Ohio’s signed budget includes provisions that would require state agencies to review and repeal regulatory restrictions over the course of the next four years. GCP submitted testimony numerous times, on behalf of our members, in support of this effort over the course of the last two years. Congruent with the GCP Public Policy Agenda, our members believe regulatory restrictions should continually be evaluated and focus on consistency and predictability – especially for small or middle-market businesses that may struggle to comply.
Qualified Energy Project Exemption
The state budget extends, by two years from December 31, 2020 to December 31, 2022, the deadline by which the owner or lessee of a qualified renewable energy project may apply for a property tax exemption. And, it clarifies the calculation of payments-in-lieu-of taxes, paid by solar energy projects that receive the exemption.
A GCP Board member serves on the Ohio Medical Marijuana Advisory Committee, continually looking out for the interests of employers. Ohio’s budget requires the Ohio State Highway Patrol to purchase drug testing equipment for the purpose of determining the level of THC in marijuana or hemp.
Governor DeWine vetoed a minimum per-student funding guarantee for all school districts, which would have set the minimum at the amount of $1,300 per student. The final bill appropriated $275 million in FY 2020 and $400 million in FY 2021 for wraparound student wellness and success services.
The final bill creates an Opportunity Zone Investment tax credit equal to 10% of an individual’s investment in Ohio Opportunity Zone investment funds, up to $1 million per biennium. GCP supported an amendment—to create an Opportunity Zone Study Committee to study impact investment strategies that support more highly distressed rural and urban communities—that was not included in the final bill.
House Bill 6 Talks Expected to Continue This Week
GCP has continued to encourage policies that provide incentives for utilities to offer businesses opportunities that leverage energy efficiency programming. GCP members did not take a formal position on all provisions within controversial legislation, House Bill 6 (HB 6), that would keep Ohio’s two nuclear power plants running. GCP recognizes it is important utilities are provided a level of elasticity needed to meet state mandated energy benchmarks, but we also strongly encourage the continuation of those benchmarks to spur growth and economic development.
While the legislative process is not yet complete, the Ohio Senate passed HB 6. The Ohio House adjourned without taking up a vote, but the next scheduled voting session is July 23.
GCP businesses weighed-in on this initiative throughout the year and advocacy staff has worked with high-level state officials to reinforce or position. Click here to read more on GCP’s consistent, pragmatic statement on the issue from last year.
Key Education Reforms will take effect for Ohio Schools
The biennial state operating budget contained several successes in education reform which GCP has long supported. The budget reformed Ohio’s high school graduation requirements—which have proven controversial for years—by eliminating most test score requirements. The state currently requires students to have strong scores on a variety of tests. Under the new plan, students will need strong scores only on one English and one math test, in addition to earning at least two of twelve diploma “seals” offered by the state, showing advanced skills in areas like the arts or technology.
This work would not have been possible without the support of Ohio Excels, an organization that provides an informed business perspective to help improve and transform Ohio’s education system. Ohio Excels—which is chaired by GCP—developed the proposal for new graduation requirements that was ultimately adopted by state lawmakers as part of the biennial budget.
The state budget also sets a 1-year moratorium on “Academic Distress Commissions,” state-operated commissions that took away control from elected school board of struggling districts. Since the law was passed in 2015, it has been controversial for local school districts like Youngstown, Lorain, and East Cleveland, which each saw state intervention. The 1-year moratorium prevents Academic Distress Commissions from taking control of any more districts until at least the fall of 2020.
GCP has remained committed to focusing its resources—through efforts like Ohio Excels—to create an environment that will improve educational outcomes in our city, region, and state. Consistent with GCP’s recommendation, the biennial state operating budget contained several education reforms that support efforts to revitalize public education in Cleveland.