Tax Committee Agenda 2

Table of Contents Page # Tax Committee Agenda 2 March 18, 2015 Guest Bios 3 OBM Monthly Financial Report 6 OMA Tax Counsel Report 30 OMA HB 5 Tax Counsel Memo 32 HB 64 Tax Counsel Memo 36 OMA Public Policy Report 41 OMA HB 64 Foundation Document 43 OMA HB 64 Executive Summary 48 OMA HB 64 Testimony 51 State Budget Highlights Document 58 Budget in Brief Document 74 OMA Tax Expenditure Senate Testimony 78 OMA News and Analysis 84 OMA Tax Legislation 88 2015 Tax Committee OMA Tax Committee Meeting Sponsor: Calendar Meetings will begin at 10:00 a.m. Wednesday, March 18, 2015 Thursday, May 28, 2015 Thursday, October 15, 2015 Page 1 of 90 OMA Tax Policy Committee March 18, 2015 AGENDA Welcome & Self-Introductions: Michele Kuhrt, Chairman Lincoln Electric House Bill 64 State Budget Discussion OMA Tax Committee Members Guest Speakers State Representative Jeff McClain Chairman, Ways and Means Committee State Representative Ryan Smith Chairman, Finance Committee OMA Counsel’s Report Mark Engel, Bricker &Eckler OMA Public Policy Report Rob Brundrett OMA Staff Please RSVP to attend this meeting (indicate if you are attending in-person or by teleconference) by contacting Denise: [email protected] or (614) 224-5111 or toll free at (800) 662-4463. Additional committee meetings or teleconferences, if needed, will be scheduled at the call of the Chair. Thanks to Today’s Meeting Sponsor: Page 2 of 90 Representative Jeff McClain 87th House District State Representative Jeff McClain is serving his third term in the Ohio House of Representatives for all the citizens of Wyandot, Crawford and Morrow counties and parts of Marion and Seneca counties. Prior to his time in the House, Jeff was the Wyandot County Auditor for more than 26 years. He has served on many professional, community and faith- based boards over the years. Jeff has a Bachelor of Business Administration in higher accounting from Tiffin University. While in school, he was a scholarship athlete competing in baseball and basketball for the Dragons. In his tenure as a representative, McClain has been named a "Friend of Agriculture" by the Ohio Farm Bureau, awarded the "Watchdog of the Treasury" award in 2010 and 2012 by the United Conservatives of Ohio, and was named the "Elected Official of the Year" by the Ohio District 5 Area Agency on Aging, as well as the Ohio Association of Area Agencies on Aging. The McClain family that Jeff and Barb are blessed with are Riordan and Sarah McClain, Chad and Mallory Guined, and Mackenzie McClain. There are also three lovely little granddaughters named Norah, Makaria, and Fiona. The Ohio Statehouse Columbus, Ohio 43215 (614) 644-6265 [email protected] Page 3 of 90 Representative Ryan Smith 93rd House District State Representative Ryan Smith was appointed to the Ohio House of Representatives during the 129th General Assembly. He represents the 93rd House District, which includes Jackson and Gallia counties, as well as portions of Lawrence and Vinton counties. Upon obtaining his B.S. in Finance from The Ohio State University in 1995, Representative Smith worked for 10 years as a financial advisor with Advest, Inc. In 2005, he began working for Smith Financial Advisors of Hilliard Lyons, where he still serves as financial consultant, vice president and partner. Representative Smith maintains an active role in his community through civic involvement. In the past, he has functioned as president of the Gallia County Chamber of Commerce and the Gallia County Community Improvement Corporation. Representative Smith is a former member of the Gallipolis City School Board of Education. In addition, he holds membership in the Gallia County Renewable Energy Committee and is active in his local church. Representative Smith and his wife, Vicki, have been married for 15 years and are the proud parents of Grant, Blake, Kennedy and Camryn. The Ohio Statehouse Columbus, Ohio 43215 (614) 466-1366 [email protected] Page 4 of 90 Representative Gary Scherer 92nd House District State Representative Gary Scherer is currently serving his second term in the Ohio House of Representatives after being appointed to the 129th General Assembly. He represents the 92nd House District, which includes Fayette County, as well as portions of Pickaway and Ross counties. Representative Scherer is a lifelong resident of Ohio. He attended Miami University and The Ohio State University, where he obtained a B.S. in accounting. Throughout most of his career, he has worked as a CPA. In addition to his career in public accounting, Representative Scherer has worked for a time as the president of Circleville Oil Company. He has also held majority ownership of Buckeye Tax Professionals since 1997. Representative Scherer has always strived to remain active within his community. Prior to joining the Ohio House, Representative Scherer had served as president of the Circleville Rotary Club and the Circleville-Pickaway Chamber of Commerce. He also served as a trustee of the Berger Health System. Among other involvement, he continues to maintain his membership in the Ohio Farm Bureau, as well as his position as a finance committee member of his local church. Representative Scherer and his wife of 38 years reside in Circleville. They have been blessed with three children and eight grandchildren. The Ohio Statehouse Columbus, Ohio 43215 (614) 644-7928 [email protected] Page 5 of 90 March 10, 2015 MEMORANDUM TO: The Honorable John R. Kasich, Governor The Honorable Mary Taylor, Lt. Governor FROM: Timothy S. Keen, Director SUBJECT: Monthly Financial Report ECONOMIC SUMMARY Economic Performance Overview x Economic growth slowed to a 2.2% pace in the fourth quarter from approximately 4.8% during the middle two quarters. The economy expanded by 2.4% for the year. x U.S. employment increased by a strong 295,000 jobs in February, although the gain in January was revised down slightly. The unemployment rate decreased to 5.5% – a new low for the expansion. x Ohio employment increased by 25,100 jobs in January. Employment growth in 2014 was revised upward to 72,000 jobs. As of January, Ohio employment is higher by 396,100 jobs since the cycle low in February 2010. The unemployment rate held steady in January at a revised 5.1% – 0.6 percentage points below the national unemployment rate that month. x Despite a softening recently in some measures of national economic activity, leading indicators remain consistent with uninterrupted growth at a moderate pace across the country and in Ohio. Economic Growth Real GDP Real GDP growth in the fourth quarter was Percent Change, Annual Rate 7.5 revised down from 2.6% to 2.2%. The economy expanded by 4.6% and 5.0% in the middle two 5.0 quarters of the year, respectively, and contracted by 2.1% in the first quarter. For all 2.5 of 2014, real GDP grew 2.4%, measured both from the fourth quarter of 2013 to the fourth 0.0 quarter of 2014 and for the entire year. -2.5 Even after the revision, growth during the -5.0 fourth quarter came almost entirely from personal consumption expenditures, which -7.5 contributed 2.8 percentage points to overall -10.0 growth. Nonresidential fixed investment 08 111009 12 1413 1-Quarter 4-Quarter Page 6 of 90 contributed 0.6 percentage points, followed by exports, which contributed 0.4 percentage points, and inventory accumulation and investment in residential structures, each of which added 0.1 percentage points. Growth was constrained by an increase in imports, which subtracted 1.6 percentage points, and by federal defense expenditures, which subtracted 0.6 percentage points following an unsustainably large increase in the third quarter. The greater penetration of imports likely reflects the effects of the recent strengthening in the foreign exchange value of the dollar, which has made foreign goods and services less expensive to domestic purchasers and will be an ongoing factor. The deceleration in real GDP in the fourth quarter resulted from the increase in imports, the decrease in federal defense spending, and slower growth in nonresidential fixed investment and exports. Working against these factors were the increases in personal consumption expenditures, private inventory investment, and an acceleration in state and local government spending. The downward revision from the initial estimate of fourth quarter growth primarily reflected a downward revision to private inventory investment and an upward revision to imports. Upward revisions to nonresidential fixed investment and to state and local government spending partially offset the downward adjustments from other sectors. Leading economic indicators remain generally Leading Economic Index 6-Month Smoothed % Change consistent with the continuation of the economic 20 expansion. The composite Leading Economic Index from the Conference Board increased 0.2% in January, with six of the ten components making 10 positive contributions during the month. The 6- month smoothed annual rate of change was 5.7% – 0 the slowest in approximately a year but still well ahead of the trend since mid-2011 and comfortably above zero. The Leading Economic Index does not -10 point to either acceleration or deceleration in economic activity in the near-term. -20 The diffusion indexes of state-level coincident and -30 leading economic indexes compiled by the Federal 151413121110090807 Reserve Bank of Philadelphia continued to point Source: The Conference Board toward economic expansion in December. The values for January will not be released until late March. The consensus among economic forecasters is that growth will remain moderate in the near-term, with a chance that the sharply lower price of oil will result in somewhat faster growth this year. The price of oil is widely expected to remain in its new lower range for much or all of 2015.

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