The many moving parts of John Kasich’s budget proposal must all fit together, in several different ways. First, of course, the proposal is a fiscal blueprint for the next two years, one that must, by law, achieve balance. It is also a policy statement, the distribution of $63 billion reflecting the governor’s broad objectives.
Finally, the budget plan is a political document, Kasich looking ahead to a re-election campaign next year and, possibly, a run for the Republican presidential nomination in 2016.
Overall, the governor is looking more moderate, which is a good thing when running statewide in Ohio, a diverse and competitive state. Because Ohio’s demographics closely mirror the nation’s, a re-election victory could help set the stage for a national campaign.
Partly, Kasich is benefiting from comparisons to the beginning of his first term. In the current budget, for example, funding for local governments and school districts was slashed. A harsh tone also was set in the battle over Senate Bill 5, which would have weakened public sector unions.
In other words, those who were expecting more of the same now find themselves pleasantly surprised because things aren’t as bad as they have been.
Take local government. Although funding will not be restored to earlier levels, the budget plan does include increases in the Local Government Fund. What’s more, Kasich’s broadening of the sales tax base will increase revenue from local sales tax levies, subject to limits.
School districts, too, will see more state money, although not enough to make up for $1.6 billion in cuts in the current biennium. But the governor is targeting some funds to districts based on their number of poor and special-needs students, more evidence of Kasich the compassionate.
What the governor cannot afford to do, politically, is totally outrage suburban school districts (that’s where the swing voters live), so he has continued a guarantee that will prevent districts from getting cut in the first year of the new biennium.
The guarantee would start phasing out in the second year of the budget, but, by then, Kasich’s re-election campaign will be well under way.
With potential opposition from local government officials and school districts neutralized, Kasich can, literally, afford to propose another income tax cut, a 20 percent across-the-board reduction on the individual rate. Small business owners would get a 50 percent deduction on annual income up to $750,000.
In part, that would be offset by the broadening of the sales tax, applying it to services. Even with a lower rate, the broader base would result in more money, as it would with local sales tax levies.
How does that work, politically?
Democrats are calculating that the average family would save about $50 with the income-tax reduction. But who will actually stop to figure that out? What’s important during the campaign season is that Kasich and his fellow Republicans can say they delivered an income tax cut, and, to boot, lowered the sales tax rate.
Besides the relatively small amount of the income tax reduction for most Ohioans, what also will get lost in the shuffle is what the shift toward a greater reliance on the sales tax will mean for average families. Consumption-based taxes are inherently regressive; they don’t hit wealthy families nearly as hard in terms of their total income.
Never mind that. Kasich will continue to argue that cutting income taxes has been and will be the key to economic growth in Ohio, a questionable argument but one that plays well with the Republican base (the source of campaign donations) and with moderates (the source of votes needed to win).
The biggest repositioning for Kasich came in embracing a federal offer to pay between 90 percent and 100 percent of the cost of coverage for lower-income Ohioans who become eligible for Medicaid under the Affordable Care Act, or, as Kasich and his allies would say, “Obamacare.”
Talk about a “compassionate conservative.” Getting this through the Republican-dominated legislature will take effort. But if Kasich can push it through, some 456,000 Ohio residents will benefit, those with incomes, for a family of four, of up to about $32,000.
For the first three years, the feds will pay 100 percent of the cost. So, while Kasich runs for re-election, his compassion on health care won’t cost the state budget a thing. In that case, good policy really is good politics.
Hoffman is a Beacon Journal editorial writer. He can be reached at 330-996-3740 or emailed at slhoffman@thebeaconjournal.com.
