Ohio Legislature Passes Two-Year Budget and Policy Changes; Governor Issues 14 Vetoes

Following months of debate, the state has enacted its new budget for Fiscal Years 2022 and 2023 in Ohio House Bill 110. The bill authorizes more than $160 billion in spending of state and federal funds over the next two years and makes a myriad of policy changes to state law. 

The House of Representatives and Senate spent Monday finalizing the bill before voting that evening. Each chamber voted in a bipartisan manner, with the House voting to approve the report by a vote of 82-13 and the Senate voted 32-1. Governor Mike DeWine signed the bill late last night in time for the new fiscal year. The Governor, who has line item veto authority over spending bills, also vetoed 14 items, down from 25 vetoes during the last budget.

Two major items included in the bill were a new K-12 school funding formula and an across-the-board-income tax reduction. The bill mostly adopted the House’s popular version of a school finance formula that was strongly supported by statewide education groups. The new formula only applies to the Fiscal Year 2022-2023 budget period for now. The bill also retains plans to directly fund community schools, eliminates numerous cost studies, and adopts the Senate’s expansion of the state’s various scholarship programs, including the Jon Peterson, Autism, and EdChoice scholarships.

The income tax reform plan includes a 3% across-the-board personal income tax cut. It also reduces the number of tax brackets from five to four and eliminates the income tax for anyone earning less than $25,000 per year. The tax rate of the new highest bracket is also reduced to 3.99%, which is actually a larger cut than the 3% – if current rates were only reduced by 3%, the rate applicable to that bracket (income greater than $110,650 in 2021) would be 4.281%.

Other important policy changes in House Bill 110 include:

• Provides $250 million in funding for broadband development in underserved areas, with a $2 million earmark to support telehealth projects;
• Restores and revises the Step Up to Quality childcare program and establishes a committee to study ways to improve efficiencies and long-term funding strategies;
• Creates a task force to study public assistance benefit fraud;
• Allows commuters who live in one city but work in another to receive a refund for any income taxes their employers collected while their office sat vacant in tax year 2021;
• Allows community colleges to apply to the Department of Higher Education to implement four-year nursing bachelor’s degree programs;
• Creates a new Job Creation Tax Credit eligibility, extending the credit from 15 years to 30 years, for “mega projects” – those projects paying wages above 300% of the federal poverty level AND either have a $1 billion capital investment or will have an annual payroll of $75 million or more;
• Allocates $350 million to the Brownfield Remediation Program and $150 million to the Building Demolition and Site Revitalization Program for the first time in many years to help create shovel-ready development sites;
• Includes language allowing all public and private university and college student athletes to earn compensation from their name, image, and likeness;
  • An executive order signed by Governor DeWine extends this right to public college student athletes as of Monday, June 28 to cover the period until the new law becomes effective in late September;
• Removes a requirement added by the Senate that would have required the Department of Medicaid to rebid the recently awarded Managed Care Organization contracts;
• Includes a provision that allows doctors, healthcare institutions and insurance companies to refuse medical treatment based on issues of conscience, but such objections cannot override current insurance contracts;
• Reauthorizes the Rural Business Growth tax credit program to promote business investment in rural counties;
• Makes permanent the state law that prohibits local governments from banning plastic bags; and

• Allows alcohol to be served during all charitable bingo sessions and allows current veterans' and fraternal organizations to implement electronic instant bingo.

The Governor’s vetoes appear to be primarily focused on items he believed added bureaucratic layers that would have made it harder for executive agencies to do their work. Other vetoes addressed changes the administration saw as lessening accountability for regulated entities. Among the more substantive policy items vetoed were:

• Provisions that created a right for the General Assembly to intervene in lawsuits by or against the state;
• Provisions that codified Medicaid rates in statute;
• A new Court of Claims process to review Open Meetings Act violations;
• A provision that would have refunded all fines paid by liquor permit holders for violations of COVID 19-related health orders; and
• New provisions restricting the types of companies that can serve as Medicaid managed care organizations.

The full veto message and the boxed text can be found here. 

Governor DeWine conducted a news conference this morning to discuss his thoughts on the bill, noting the bipartisan support of the budget demonstrates that Ohioans have more in common than our differences. He declared House Bill 110 a strong and balanced budget focused on the future that builds on the progress of his first budget.

Appropriations in the bill became effective immediately. All other items become effective on September 30, 2021, unless a later date is specified in the bill.