House, Senate OK compromise budget

One tax provision was cut, but others would still affect school finances.
By JEFF ORTEGA
VINDICATOR CORRESPONDENT
COLUMBUS -- State lawmakers negotiating a compromise two-year, $48.7 billion state budget have eliminated a tax provision that state officials say could have cost public schools millions of dollars in property tax revenue.
A House-Senate conference committee approved striking from the budget bill Thursday a provision that would have reduced the taxable value of manufacturing and machinery after 2003.
Left in the budget bill, however, were provisions that would speed up the phasing out of the property taxes on business inventories and those that would eliminate the state's reimbursement of the property tax exemption on the first $10,000 of a business' tangible personal property over a 10-year period.
Both provisions could have a serious impact on schools and other agencies dependent on property taxes.
Approved and sent on
The House and Senate approved the compromise budget early today and forwarded the proposal to Republican Gov. Bob Taft for his consideration. The state's new spending plan is to be in place by July 1.
The provision eliminated would have phased out a reduction of the taxable value of manufacturing and machinery after 2003, a proposition legislative researchers said could have cost public schools and local governments $28 million to $34 million per year fully implemented.
Legislative researchers said that of the public schools' portion of the potential forgone local revenue -- about $10 million to $12 million -- would have been made up by state funding beginning in 2006, under the deleted provision.
Backers of the stripped provision said it was a way to help spur business investment in machinery, but agreed that the concept needed to be further honed.
Legislators said they had heard concerns from public schools about the proposed manufacturing and machinery provision.
Concerned about others
Barbara Shaner, a lobbyist for the Ohio Association of School Business Officials, said public school groups were pleased the proposed manufacturing and machinery provision was erased from the state budget, but were concerned about the other two provisions.
Shaner said if the state carries them out, school districts and local governments will have no choice but to return more often to voters for increased funding.
Business inventories are taxed at 23 percent of their true value. Current law provides that the assessment rate is to be reduced by 1 percent per year. But the budget bill, if enacted, would speed that up to 2 percent a year beginning in tax year 2005.
According to legislative researchers, the speeding up of the inventory tax phase-out would cost school districts in and local governments about $35 million in foregone revenue in 2005, which would grow with time.
Because of the reduced property valuation, the state would make up about $10 million of that reduction in 2005 through the school funding formula, legislative researchers said.
The proposal to eliminate the state's reimbursement of the property tax exemption on the first $10,000 of a business' tangible personal property over a 10-year period would cost local revenues to schools about $6.8 million in fiscal 2004 and $19.7 million in fiscal 2005, researchers said.
Eliminating the reduced taxable value of machinery and equipment provision was a key to securing minority Democratic votes in both chambers, House Minority Leader Chris Redfern said.
Local legislator's comment
State Rep. John Boccieri, the assistant Democratic whip or fourth-ranking Democrat, agreed but said he believed the provisions would push more property tax burdens on residential taxpayers.
"I keep telling my constituents if they thought property taxes were bad now, just wait," said Boccieri, a New Middletown Democrat.
Overall, the proposed compromise state budget is less than the $49.3 billion spending plan approved by the Senate earlier this month. The House approved a two-year $48.7 billion state budget in April. The compromise budget spends about $200 million less over two years on primary and secondary education than the $14.6 billion approved by the Senate.
The compromise budget spends about $80 million less than the nearly $5 billion the Senate authorized for higher education over two years.
The current two-year, $44 billion state budget runs through June 30.