Gov. John Kasich used his third State of the State address on Tuesday to convince Ohioans and state lawmakers that his budget plan is the right mix of smart government service delivery and business-friendly tax policy.

Kasich detailed progress made in Ohio since he took office in 2011 and urged lawmakers to continue to back his ideas, which he says will bring jobs to Ohio.

“If we unite and we stay together, nothing but nothing can stop us from becoming the greatest state in the greatest country in the world,” Kasich told the nearly 1,700 people in the audience during his hour-long address at the Veterans Memorial Civic Center.

The first-term governor will have to fight for key elements in his 4,000-plus page budget, even among his fellow Republicans. Kasich wants to expand Ohio Medicaid, lower the state sales tax rate but apply it to a longer list of services, cut the state personal income tax by 20 percent and install a new K-12 school funding formula.

Kasich claims the tax reforms will result in a $1.4 billion tax cut during three years. Normally a cut would be a big selling point but the proposal to expand the sales tax has generated opposition from small business owners and professionals who provide legal, engineering, architecture and other services.

The last major overhaul of the state tax code came in 2005 when lawmakers approved a 21 percent income tax rate cut phased in over six years and extended the sales tax to several services.

“Gov. John Kasich has a great vision on how to change Ohio and grow our economy, which I share,” said state Rep. Mike Henne, R-Clayton. “He did a great job at highlighting our successes and laying out the budget for the upcoming year. I look forward to working on this budget to keep the momentum going.”

State Rep. Fred Strahorn, D-Dayton, criticized the speech and Kasich’s budget proposal.

“Great speech. Very optimistic. Very flowery. But a lot of it doesn’t match the reality of what we are seeing happening,” Strahorn said. “The tax proposal is regressive and it is not so much a tax cut as it is a tax shift.”

Medicaid

Expanding Ohio Medicaid will be another point of contention in the budget bill. Medicaid is a state and federally funded health care program for roughly 2.2 million poor and disabled Ohioans. Kasich’s proposed expansion is part of the federal Affordable Care Act, also known as Obamacare, which he and other Republicans have opposed.

The expansion will add roughly 265,000 people to the program and another 230,000 people who are already eligible but not enrolled are expected to sign up. That translates into a $13 billion expansion over seven years, though the federal government will pick up 100 percent of the expansion costs initially and then dial it back to 90 percent. The program as is costs $19 billion a year.

House Speaker William Batchelder, R-Medina, and Senate President Keith Faber, R-Celina, declined to immediately endorse Kasich’s Medicaid plan, saying it needs more analysis and debate.

School funding

The budget plan boosts overall funding for K-12 education by $1.2 billion over two years, but the method for calculating district allocations has received criticism from school superintendents. Under the plan, the state would fund the difference between a district’s per-pupil valuation and what it would raise if the per-pupil valuation were $250,000 for the first 20 mills plus more for students in special education, gifted and English language programs.

District-by-district numbers showed many high-income school districts would receive more money in the next two years while most poor districts would not receive any additional funding.

Faber said the funding formula estimates concern him and the plan will need a closer look, but lawmakers agree with the philosophy behind the model.

“The concept behind the governor’s proposal is one that finds great support in the Senate and the House and we need to make sure there aren’t unintended consequences that cause problems for districts that are not wealthy that are doing a good job that are already staying below the state average,” Faber said.

Democrats criticized Kasich’s K-12 funding proposal, noting that 400 school districts won’t get any additional state money and some of the wealthiest areas will see the biggest percentage increases.

“There is a lot of smoke and mirrors going on in this budget,” said state Rep. Debbie Phillips, D-Athens.

The speech was the second in as many years held out of the state capital. Last year, Kasich spoke at top-ranked Wells Academy in Steubenville. Kasich said moving the event to Ohio communities is an opportunity to highlight success across the state.

Kasich told the Lima News that he was so overcome with emotion the day following his Steubenville address that he cried.

Lima sits 70 miles north of Dayton in the heart of Allen County. Unemployment there reached 12.1 percent in January 2010 and has since dropped to 7 percent in December 2012, slightly above the state rate of 6.7 percent. The Lima economy has its roots in railroads and manufacturing, home to a Ford Motor Company plant that makes car engines.

President Barack Obama stopped in Lima on the campaign trail last year, the first sitting president to visit the city since Harry S. Truman in 1948. But Obama only got 37 percent of the vote in Allen County to Republican Mitt Romney’s 61 percent.

Kasich called Lima and Allen County shining examples of a community that is coming back strong.

“Lima is winning and Ohio is winning,” he said.