Ohio Senate’s $85.8B budget: Controversial flips on affordable housing, child care left out

The Senate voted 24-7 along party lines Thursday to formally endorse its version of Ohio’s next two year operating budget, an $85.8 billion document championed as a conservative win by its drafters that, in many ways, contrasts from the House’s budget proposal.

The variation from the chambers promises to bring further deliberation before the bill becomes law.

Specifically, the Senate’s version differs from the House version with its proposals for universal school vouchers, an extended sales tax holiday, increased mental health funding, regulations on content and social media for children and a $1 billion strategic investment fund that diverts most governor and House-approved local projects to 2025.

Recent amendments saw several bills folded in, including the contentious college campus regulation measure Senate Bill 83 folded into the budget as well, which would block state universities from taking stances on public issue and prohibit employees from going on strike.

Within the Senate, Democrats unanimously opposed the budget, arguing that the chamber crammed unrelated legislation like SB83 into a document that the state is constitutionally obligated to pass before the end of the month. Outside of that, the seven-person caucus argued that the Senate’s proposal doesn’t go far enough with resources at the state’s disposal to address the concerns and needs of middle and lower income families.

In the background of this cycle’s budget process, Ohio is expected to bring in about $6 billion in surplus tax revenue and still holds over $400 million in federal American Rescue Plan Act (ARPA) funds awaiting earmarks.

The surplus fund has been a point of contention among DeWine and the chambers as each have different ideas of how it should be used. Senate Finance Chair Matt Dolan, R-Chagrin Falls, explained to his peers his budget directed surplus funds to four main areas: to prepare sites across Ohio for future businesses; to public services like building demolitions and water quality upgrades; the one-time local project fund that will go into effect in 2025 and a two-week tax holiday that removes sales tax most items, expected to cost about $1 billion.

Dolan has characterized the tax holiday as a way to get money back to Ohioans. It’s paired with the elimination of income tax brackets that will have an outsized benefit on wealthier Ohioans in the hopes that it spurs economic activity and incentivizes job creators to move to the state and capped off commercial activity tax reform that will eventually see about 90% of Ohio businesses excluded from the tax.

Sen. Vernon Sykes, D-Akron, cited the dichotomy between state’s current financial affairs and its 12% poverty rate, housing stock shortage, mental health crisis, literacy challenges for children, high infant mortality rates and higher dependency on food assistance. Sykes characterized those areas as “significant social-economic challenges” that ought to be tackled proportionally with the state budget.

“Our obligation to have a balanced budget goes well beyond mathematical calculation. We should also use available resources to do our best to balance priority, to balance needs and aspirations,” Sykes said in his testimony on the Senate floor. “(This budget) is out of balance, out of touch, with the State of Ohio.”

Senate Republicans applauded the budget proposal, characterizing it as a fiscally responsible document that provides record funding for mental health, adequately funds public schools and provides across-the-board tax relief through fewer tax brackets and the extended sales tax holiday.

Sen. Rob McColley, R-Napoleon, called the proposal an “Ohioan-centered budget” and lauded its universal school voucher proposal that would grant scholarships (about $6,200 for K-8th graders and about $8,400 for 9-12th graders) to all students in households below 450% of the federal poverty level to attend a private school. Students from households above that line would get smaller scholarships.

The universal voucher program is a key point of a broad array of educational changes — most of which follow a strict partisan line and many of which involve folded in Senate bills that have not yet completed the legislative process.

Along with SB83, this includes Senate Bill 1, which would largely remove the State Board of Education’s power and transfer it to the Department of Education, and Senate Bill 117, which mandates the creation a prescribed institutions at Ohio State University and the University of Toledo to teach predetermined values like constitutional order and the historical ideas and traditions it emanated from.

Minority Leader Nickie Antonio D-Lakewood said the inclusion of those bills, which she believes would be a detriment to the state’s education system, made it “fundamentally impossible” for Democrats to support the budget — the first time in several budget cycles where a bipartisan agreement wasn’t met.

Antonio said it was known from the start that those bills might get folded in, but ultimately there wasn’t much back-and-forth or bipartisan work during the Senate’s budget process — a diversion from the way the House produced its budget.

Now that it’s passed the Senate, the House will get a chance to vote to concur with the Senate’s proposal. The expectation is that the chambers will not agree, triggering a conference committee where select Senators and Representatives will deliberate the budget and come to a final conclusion.

Antonio said the House’s bipartisan proposal will likely give Democrats some leverage in the conference committee and that she hopes to see the bills folded in to the Senate’s proposal ultimately get removed.

“We will work closely with our colleagues in the House to hopefully find something that comes out of conference (committee) that perhaps we can support,” Antonio said. “I’d like nothing better than to be able to vote for the budget.”

Dolan and Senate leadership are themselves prepared for a conference committee, but weren’t direct about which aspects of their budget they’d be willing to budge on, or which aspects of the House budget they’d be willing to accept.

“First of all, we’ll see what they ask for. Second of all, we want to maintain some of the provisions we think are very important,” Dolan said. “So, we’ll see what they come with and we’ll see what can actually get to 50 votes in the House and 17 votes over here.”

The Legislature is required to finish its deliberations and negotiations before the end of the month. Once finished, it will move on to DeWine, who has line-item veto power.

Child care

Perhaps the furthest diversion from the Senate pertained to child care, as the chamber undercut nearly all of Gov. Mike DeWine’s proposed child care programs and expanded funding that industry advocates said were needed to catch Ohio’s child care capacity and enrollment up.

At present, DeWine’s $150 million childcare scholarship program was abandoned by both chambers; his effort to increase access to subsidized childcare at a cost of over $200 million was almost entirely slashed by the Senate; and the House’s $30 million allocation to increase childcare capacity at existing childcare centers was cut in half.

While the Senate budget would increase funding for child care programs in comparison to the current operating budget, industry advocate Lynanne Gutierrez of Groundwork Ohio said those marginal increases don’t keep up with higher costs associated with inflation and long awaited pay increases. She characterized the Senate’s stance as a missed opportunity.

“The governor’s proposal was thoughtful and timely to help the childcare industry in the state survive the moment that we’re in — post pandemic with increased cost and increased need as we see jobs going unfilled,” Gutierrez said. “The Senate’s proposal completely walked backwards on that.”

Dolan told reporters that the Senate opted not to substantially increase access to child care while existing centers were struggling with capacity.

“It is having enough spots that is the problem right now that we have to address,” said Dolan, who noted that the Senate approved $15 million for that purpose — though the Senate’s proposal halves what the House approved.

Affordable housing

The Senate’s most notable course change came in the area of affordable housing. Its first proposal nixed DeWine’s proposal for new housing tax credit programs intended to couple federal and state tax incentives and stepped further to block certain housing developments from receiving the blanket incentives provided by federal and local sources to promote economic development. The Senate’s original stance was referred to as an “assault” on housing by an industry advocate.

In its revision, the Senate reversed course and restored DeWine’s proposals.

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