April 04, 2012
April 04, 2012
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Even though there is no budget shortfall, Ohio Gov. John Kasich and House Republicans propose squeezing $95 million out of Ohio’s current budget without using the money to restore critical services. The bill does not include a defined plan for use of the funds cut from various agencies.
The new Mid-Biennium Review (HB 487) contains the budget corrections that typically come at this point in the policy process. But it also has so many disparate elements that it may be broken up into separate bills. The heart that will remain — corrections and adjustments — will yield a net $95 million cut across agencies. Yet there is no budget shortfall. What will the money be used for?
There is a lot of language in HB 487, but no defined plan for use of the 1 percent budget cut all agencies were asked to offer up. In the context of Ohio’s $112 billion biennial budget, a cut of this size — $95 million is not quite a tenth of 1 percent — is relatively small. But to the 14,000 Ohio families waiting for services from the Department of Developmental Disabilities, it is enormous. According to the Ohio Association of County Boards, if we spent just $8 million, we could secure federal matching funds to expand services and reduce the wait. Just $6.2 million could stop the cut pending in the coming fiscal year to alcohol and drug treatment services, funding treatment for an estimated 3,800 Ohioans. According to the Public Children’s Services Association of Ohio, Ohio provides the nation’s lowest level of support for local child welfare; $20 million could make life safer and more secure for struggling Ohio children.
Policy Matters’ analysis of the bill found that good timing and favorable terms generated savings in debt service. This was the largest contributor to the reductions across line items. It reduced lease rental payments in agencies and saved millions of dollars for the Ohio School Facilities Commission and for the Public Works Commission. Reductions in federal lines also contributed to reductions. This occurred, for example, in a line item within Developmental Disabilities used to correct a payment glitch of earlier years, and in a line item within the Rehabilitation Services Commission attributable to a federal hiring freeze. However, red ink spreads in smaller amounts across programs even within agencies that come out in the black.
Ohio families depend on public services in the most critical areas of life: care and education of children, career preparation for young adults, assistance for the elderly, public transit to get to work, health standards that prevent injury and disease. Ohio let public services erode over this past decade, and slashed the current state budget. The damage of these cuts is just now being felt.
This issue brief focuses narrowly on the budget corrections of HB 487, one of the first MBR bills out of the chute. As the bill is restructured and other bills move through hearings, we will look at revenue recommendations, energy, education and development proposals.
The Kasich Administration outlines new policy directions and budgetary changes in a group of bills introduced as part of a process they call the “Mid-Biennium Review” (MBR). The first bill to come out of the MBR, House Bill 487, contains the corrections and adjustments typically offered at this time in the biennial budget cycle. HB 487, however, is not typical. It contains so many disparate elements it may be split into separate bills. It is accompanied by other bills, ranging from capital appropriations and re-appropriations to a set of new initiatives in energy, education and economic development.
The defining characteristic of the multi-faceted HB 487 is another round of budget cuts. These new cuts come in the middle of a brutal budget that slashed schools by nearly $2 billion and local governments by $1 billion, leaving students praying for school levies and local governments dimming street lights, closing fire houses, abandoning road maintenance and reducing waste collection.
In this issue brief, Policy Matters Ohio focuses narrowly on the budget corrections of HB 487. We will turn our attention to revenue recommendations and non-budget elements of HB 487 as the bill is restructured in the House, as well as to the companion legislation that will be considered over the course of a busy spring at Statehouse Square.
The state budget is still in balance, but House Bill 487 reduces appropriations by a net $95 million, even as 14,000 Ohioans wait for services under the Department of Developmental Disabilities and as up to 20 percent of school districts prepare to implement fees for extra curricular activities (“Pay to play”). It takes $123 million out of funding for state services on an all-funds basis and adds back $28 million in new investment. Reductions total $3.1 million for FY 2012 and just under $92 million for 2013. The cross-agency legislation affects budget line items in 36 agencies, about a third of the 110 state government departments covered under the current state main operating budget (HB 153), plus the Department of Public Safety within the Ohio Department of Transportation, the Bureau of Workers Compensation, and the Ohio Industrial Commission. More three quarters of total reductions stem from budgetary adjustments in just six agencies (see Figure 1):
Funding increases are not common but several agencies see net gains (Figure 2):
General Revenue Fund/Non-GRF Changes
The General Revenue Fund (GRF) is considered the part of the budget that best reflects the choices of elected officials. Non-GRF funding, such as funds received from the federal government, or fees, or funds with defined purposes (like some of the new casino revenue funds) are shaped by outside forces: Congress, the market, the level of fees, statutory or constitutional definition. Taxes fund the GRF, and elected officials make decisions about how to allocate those monies. Legislative intent can be best understood by analyzing changes within the GRF. Over time, however, a growing share of state services has been funded outside of Ohio’s General Fund. Figure 3 compares state funds in the budget to non-GRG funds since 1997. Today non-GRF funds support more in public services than tax dollars in the GRF. Review of changes in non-GRF appropriations has become important, in spite of less controllable characteristics, as these funds increase in the budget.
In House Bill 487, 27 percent of net budget changes are made within the GRF, compared to 73 percent in non-GRF funds. By and large, changes in the GRF mirror that of the all-funds budget. Figure 4 below shows the overall changes in budget areas and the bullets below describe some of the interesting details not all of which can be captured by the figure. Within the GRF lines included in HB 487, the largest reductions are due to savings in debt service (School Facilities, Public Works Commission) and changes within the Ohio Board of Regents. Other changes include:
Reorganization and renaming
In a number of budget lines, funding sources are merged into new line items or reorganization is reflected in funding changes.
Other language in HB 487
Themes emerging in the non-budgetary language of House Bill 487 that we will track in subsequent analysis of the Mid-Biennium Review include:
Summary and recommendations
Apart from the non-budgetary language, HB 487, the first bill of the Mid-Biennium Review, resembles ordinary corrections bills. What is out of the ordinary is that significant reductions are made, yet not reinvested. How will the net $95 million squeezed from the current lean state budget be used? The rainy day fund? More tax cuts? These options are discussed, but restoration of funding for schools, local governments, and other public services are not part of the conversation. They should be.
Working Ohio families depend on public services in the most critical areas of life: in care and education of children, career preparation for young adults, assistance for the elderly, public transit to get to work, local health standards that prevent injury and disease. Ohio let public services erode over this past decade, and slashed the current state budget. The damage of these cuts is just now being felt. Savings from HB 487 should be directed toward rebuilding these services, and legislators should engage in a serious discussion of how to fairly bolster the state’s revenues and ensure that last year’s cuts do not become a new baseline for public services.
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