Daniel Chi / Asst. photo editor
As a result of new measures outlined in the state of Ohio executive budget for fiscal years 2014-2015, the percentage of state funding Ohio State receives each year is subject to change.
Ohio Gov. John Kasich released the budget proposal for the final two fiscal years of his term as governor on Feb. 4, a plan which includes adjustments to the State Share of Instruction (SSI) funding formula, which is used to divide the state’s higher education funding among Ohio’s 37 public universities and colleges.
Under the new formula, the allocation of funds at the university level will begin emphasizing degree completion rather than course completion starting in fiscal year 2014.
The new SSI formula will award 50 percent of state funds to universities based upon the percentage of students who complete degrees, with 28.2 percent for course completion. Under the current formula, 20 percent of funds are awarded for degree completion and 58.2 are for course completion.
Currently, only 26 percent of adults in Ohio have a bachelor’s degree, which is 5 percentage points below the national average.
Jeff Robinson, deputy director of communications for the Ohio Board of Regents, said the change in emphasis from enrollment to degree completion in providing state funding was made as an incentive for state universities to promote higher graduation rates.
“Raising the number of Ohioans with degrees was kind of the impetus to get everything else rolling,” Robinson said. “That was what led to dividing that new funding formula that rewards completion versus just enrollment.”
According to data compiled by the Chronicle of Higher Education in 2010, OSU had a six-year graduation percentage of 78.1 and four-year graduation rate of 48.6 in 2010, both of which ranked second among Ohio’s public universities behind Miami University.
With more than 56,000 students on the Columbus campus and more than 63,000 total students as of Fall Semester, OSU has the largest student enrollment of any university in the state of Ohio.
Additionally, tuition increases at OSU and other public institutions above the statewide average cost will be limited to 2 percent each year.
Niraj Antani, communications director for OSU College Republicans, said he believes the higher education reforms will be beneficial for OSU students financially.
“The governor put in a cap on the amount that universities in Ohio can raise tuition,” Antani said. “I think that portion is definitely going to help students.”
Institutions whose tuitions are below the statewide average cost, however, can increase the tuition up to 2 percent above the statewide average cost.
Patrick Gauding, communications director for College Democrats of Ohio, said his party takes exception to the “loophole” for institutions below the statewide average.
“Students (attend schools whose tuition prices are below the average) and their families can be hit with thousands of dollars of increase because of this loophole that’s been left in,” Gauding said. “It’s really, really disingenuous to say we’re going to cap tuition hikes to 2 percent, because that’s just not true.”
Additional reforms to the SSI formula for 2014-2015 include the elimination of the stop loss, a redistributive mechanism which reduces university allocations to higher-performing institutions in order to mitigate funding losses at struggling institutions.
Overall, the SSI budget will increase by $33 million to $1.78 billion in fiscal year 2014, and $34 million to $1.82 billion in 2015.
The higher education reforms to Kasich’s budget were recommended by the Higher Education Funding Commission, which is chaired by OSU President E. Gordon Gee.
In a Feb. 4 university press release, Gee expressed his support for the higher education reforms outlined in Kasich’s budget.
“At a time when other states are reducing critical funding for higher education, the governor has once again affirmed the importance of an educated workforce to our state’s economic well-being by providing an increase for a new funding formula that rewards degree and course completion,” Gee stated.
A university spokesman declined The Lantern‘s request for further comment and the Kasich administration did not respond for comment.
Another part of Kasich’s budget proposal introduces tax reforms that will affect people statewide. The budget will reduce income tax rates by 20 percent over the course of the next three years, reduce small business income taxes by an additional 50 percent and reduce the state sales tax to 5 percent from 5.5 percent.
The sales tax base, however, will be increased by $53 billion, because it will be broadened to include non-exempt services as taxable, including legal services, accounting, parking, entertainment events and sporting tickets.
Richard Wood, a law tax and corporations professor at Capital University Law School, said that because high-income people pay more income tax than low-income people, the income tax reduction will be more beneficial to wealthy people, while the overall effect of the tax reforms will “shift the burden of taxation to low-income people.”
“Poor people pay a higher percentage of their income in sales tax than wealthy people,” Wood said.
Gauding said he expects the sales tax expansion to affect students as well.
“Students are the ones who are going to pay for it,” Gauding said. “It hits students to a much bigger extent of their income than somebody who might be further on in their career. Ohio students have a lot to be concerned with this.”
According to a report compiled by Policy Matters Ohio and the Institute for Taxation and Economic Policy, the average person within the lower 60 percent of the state’s economic class will be paying more as a result of tax reforms, but the top 1 percent of people will be paying an average of more than $10,000 less.
“The biggest share of the cuts go to the people who need it the least,” said Zach Schiller, Policy Matters Ohio research director.
The tax reforms could, however, help more people find employment. Antani said the reductions to income taxes, especially those on small business, could increase job creation.
“Any time small businesses have more capital to spend, they’re going to create more jobs,” Antani said. “They’re going to be able to hire more people, they’re going to pay their current employees more.”
Wood, however, said studies on the effects of taxes on job creation have disputed this claim.
“There’s very little effect on job creation as a result of lowering income taxes on high-income taxpayers,” Wood said.
Antani said he believes the plan to cut taxes is beneficial overall, and that the tax reductions should also help students, especially those who are preparing to graduate.
“Any time we can cut taxes, it’s a good thing,” Antani said. “Any time we can cut taxes as a whole, even if we are taxing things that haven’t nec
essarily been taxed before, it’s going to help.”
Kasich told reporters during the Ohio Newspaper Association convention Wednesday that lowering income taxes will help the state’s economy grow.
“The income tax has been an impediment to our growth … the ability to help the 50 percent of the job creators in this state, which is our small business, will be a shot in the arm for Ohio,” Kasich said. “Recognizing where the economic activity is in the 21st century and helping our small businesses and lowering our income tax will be a shot in the economic arm for Ohio.”
In addition to higher education funding and tax reforms, the 2014-2015 budget plan also calls for reforms to how the state public primary and secondary education system, and changes to the state’s Medicaid system.