By Joe Vardon
Gov. John Kasich is likely to propose a new tax structure for Ohio’s banks that would provide relief for community banks but close loopholes for larger financial institutions, sources tell The Dispatch.
Kasich also could propose legislation on Wednesday that would allow Cleveland schools to divorce tenure from staffing decisions — a potential steppingstone for changing education policy statewide and a component of the failed Senate Bill 5.
In addition, the Republican governor will officially unveil his plan to cut the state’s income tax and pay for it with new taxes on shale drilling. He’ll also roll out his statewide energy policy — which would regulate shale drilling, expand what’s considered a renewable energy source and set aside $30‚âmillion for clean-coal research.
Kasich’s presentation is being billed as his midbiennium review. State governors typically introduce a re-appropriations bill in the middle of the state’s two-year budget cycle to make minor spending adjustments.
But what Kasich will deliver is another dish of policy-driven initiatives to transform state government, along the lines of those passed with the state’s $55.8‚âbillion budget in June.
Rep. Ron Amstutz, chairman of the House Finance Committee, said some corrections and policy changes will pass before the summer break.
“Lowering the state income tax is something that’s needed,” said Amstutz, R-Wooster. “Though we’ve made improvements, our state continues to be not very competitive in the income-tax area.
“It’s becoming clear that it’s very important for the House to provide robust, deliberative consideration of this legislation,” Amstutz continued.
The Dispatch reported on March 3 that Kasich intends to cut Ohio’s personal income tax using new and higher taxes on shale drilling. The amount of revenue the state collects would determine how big a tax cut would be.
Based on conservative estimates about how much Ohio could collect in shale revenue, the tax cut could begin at 1.6 percent in 2014 and grow to 5.4 percent — worth $500‚âmillion — by 2017.
Kasich initially proposes to tax crude oil and natural-gas liquids from “fracked” wells at 1.5 percent, eventually increasing to 4 percent. The rise would depend on when each company has recovered its start-up capital costs to begin drilling. Dry gas from fracked wells would be taxed at 1 percent.
The frack-tax revenue would go into a fund used to offset the cost to the government of a tax cut.
For banks, Kasich has long hinted at his desire to remove them from the all-but-defunct corporate franchise tax and tax them based on net income. Among the loopholes bigger firms take advantage of that Kasich could move to close is the Dealers in Intangibles Tax, used mostly by mortgage brokers and investment shops as a way to pay less.
During his State of the State address in February, Kasich said he was “counting on Cleveland to deliver the goods” for statewide education reform. Cleveland Mayor Frank Jackson has a plan to overhaul education in his city that includes removing tenure from staffing decisions, addressing low-performing schools in “game-changing ways” and holding charter schools more accountable.
Kasich could propose to give Cleveland City Schools the authority in state law to do those things and others as a test program. Senate Republicans say they need the support of Cleveland- area Democrats before enacting changes aimed solely at that city.
“It’s critically important to have significant political backing from the Cleveland delegation if we’re going to attempt to move it forward,” said Sen. Peggy Lehner, R-Kettering, chairwoman of the Senate Education Committee. “I think that’s more likely to occur if it’s a free-standing bill that’s separate from other aspects” of Kasich’s presentation this week.
The Ohio Federation of Teachers spoke out against the mayor’s plan last week, saying that parts of it resemble provisions rejected by voters last year in Senate Bill 5. Innovation Ohio, a liberal policy-research group, said last week that while it likes parts of the plan, some ideas are “ fatally flawed,” including proposals to allow the transfer of local property taxes to charter schools as well as teacher-compensation changes.
Kasich also may look at other education changes, such as: a reading guarantee, which prevents students who fail a reading test from advancing until they get the help they need; and a new grading system for schools that will reduce state scores for many districts, particularly those currently rated “excellent.”
Lawmakers enacted a fourth-grade reading guarantee in 1997, but before it could fully take effect, they responded to criticism from schools and the public by largely abolishing it in 2001.
Kasich’s statewide energy policy could address energy produced through cogeneration and by capturing waste heat as acceptable renewable-energy sources for meeting the state’s standards set in Senate Bill 221.
“On this one, we support him,” said Amanda Woodrum, an energy-policy researcher for the liberal Policy Matters Ohio. “We have a vast untapped potential for cogeneration, but we are 44th in the nation for actual adoption of the technology.”
Cogeneration is the generation of heat and power through the same process.
“We don’t want this to come at the expense of wind and solar development, but it’s something we need. It’s an important piece of the puzzle.”
Kasich’s energy policy also will have worker-training provisions that include linking veterans and minorities to jobs in the oil and gas industry and regulations on high-pressure pipelines and well heads.
“I am sure there are some environmentalists who would disagree ... but if you looked at our regulatory regimen, it’s pretty strong,” Kasich said in Houston last week. “I mean, it’s very, very, very strong.”