After receiving the bill from the House in late April and hearing several weeks of testimony; yesterday, the Senate made its first round of changes to the state’s two-year operating budget. The Senate is expected to complete its action on 2,947 page House Bill 110 next week.

One of the changes made by the Senate would accomplish a longstanding Ohio Chamber public policy objective – the elimination of the sales tax on employment services. Ohio is one of only a few states that require sales tax on the contract of staffing provided to third parties to meet temporary needs of those third-party businesses. The current tax is nothing more than an onerous and outdated tax that raises the cost of creating jobs, and the elimination of this tax on hiring will improve the business climate and make Ohio more competitive with our neighboring states.

Getting this change added to the budget was a top priority for the Ohio Chamber, but it was not the only Ohio Chamber-sought budget change that was accepted by the Senate. The Ohio Chamber also was successful in getting language incorporated into the budget that makes it clear that employers are not required to permit or accommodate an employee’s use of medical marijuana in or outside of the workplace.

Unfortunately, we have been unsuccessful so far in extending the time during which businesses are provided qualified immunity from liability related to COVID-19 exposure. We will continue to push for an extension, as the current liability protection expires on Sept. 30, 2020.

Also of interest to employers – especially those who continue to struggle with workforce challenges – the Senate added additional funds for the TechCred program. TechCred, launched in 2019, assists employers in “upskilling” their existing workforce as well as attracting prospective employees by providing state grant dollars to businesses to help underwrite the training costs for employees pursuing industry-recognized, technology-focused credentials.

Beyond these important business issues, other significant changes made by the Senate include an expansion of the 2% across-the-board income tax rate cut on all nonbusiness income that was previously put in the budget by the House. The Senate would increase that reduction to 5%, with the reduction being phased in over two years: a 3.5% reduction for taxable years beginning in 2021 and the fully phased in reduction of 5% in taxable year 2022. This represents a total personal income tax cut of $750 million.

The Senate also removed the $190 million the House added in funding for the newly-created Broadband Expansion Grant Program. This program, supported by the Ohio Chamber, seeks to deploy broadband service to some of the 300,000 Ohio households that currently lack access to high-speed internet.

Similarly, the Senate took a different approach to K-12 education funding, rewriting the major changes to the funding formula proposed by the House in April. The Senate removed the variable per-pupil funding and instead set a per student funding amount that will more schools to operate under the formula and fewer under funding guarantees or caps common today. The approach to the school funding formula is certain to be one of the biggest points of difference between the House and Senate versions of the budget that the two chambers will need to resolve.

After more hearings tomorrow and Friday on yesterday’s changes, the Senate is expected to finalize and vote on HB 110 next week. Undoubtedly, the House will reject the changes and send the bill to a conference committee, where the numerous differences between the versions of the budget will be worked out. Ultimately, the bill needs to be signed into law by Gov. Mike DeWine by the end of the current fiscal year, or midnight on June 30, 2021.