COLUMBUS, Ohio — As state lawmakers prepare to make their mark on Gov. Mike DeWine’s first state budget proposal, all signs are pointing toward major elements of the plan getting cut.
DeWine’s $69 billion, two-year budget plan, which he has marketed to state lawmakers and the public as an investment in Ohio’s future, has two costly signature items — a $900 million “H2Ohio” fund to keep Lake Erie and other state waterways clean, and an increase of $550 million over two years in spending on “wrap-around” support services for at-risk public-school students.
He’s also proposed myriad spending increases for smaller programs geared toward public-health programs and children’s services, like lead-paint removal or increased home-visits for pregnant women and young mothers, and crisis stabilization funds.
But unless the Republican-controlled House leadership — which has been tight-lipped — makes a surprising decision to raise taxes, DeWine’s signature proposals seem to be in danger of being cut.
A confluence of factors is at play.
• The $500 million revenue difference
DeWine’s plan is built off his budget office’s belief that the state will take in $48.4 billion in tax revenues over the next two years. The Ohio Legislative Service Commission, the legislature’s research arm, believes that number is about $47.9 billion.
The $500 million difference — primarily due to differing opinions about how much income tax revenue the state will take in this year — will translate to $500 million less to spend, if House members go with the lower number, which they’ve indicated they’re likely to do.
DeWine Budget Director Kim Murnieks last week told members of the Senate Finance Committee, which has begun hearings on the state budget even though the House hasn’t passed its own plan yet, that the DeWine administration’s forecasts are a more conservative version of the baseline model provided to them by a IHS Markit, an outside economic modeling company.
“OBM’s track record for forecasting GRF (general revenue fund) tax revenues is to be consistently conservative. Our forecast is not aggressive,” Murnieks said.
Ross Miller, chief economist for the LSC, told Senate Finance Committee members this week legislative researchers two years ago changed their model for predicting how much the state will pay out to taxpayers in refunds.
“That is the reason for hundreds of millions of dollars in the difference,” he said.
• Conflicting education plans
Two well-respected House members — Bob Cupp, R-Lima, and John Patterson, D-Ashtabula — to much fanfare have introduced a new school-funding formula that would send an extra $720 million over two years to Ohio’s K-12 schools to pay for classroom instruction.
Meanwhile, DeWine hasn’t proposed any increase in base school funding. Instead, as his signature proposal, he’s proposed a $550 million increase over two years to pay for “wraparound” support services — like after-school programs or mental and physical health services — targeting at-risk students.
In other words, House members seem primed to assume they’re working with less money while proposing to spend more on K-12 schools. It seems that something has to give. House Speaker Larry Householder has said he’s leaning toward separating the school-funding increase from the rest of the budget, but leaving money for the House plan in the future may require cuts in DeWine’s plan now.
“I personally feel that (DeWine’s wraparound proposal) is a very worthwhile investment for the state of Ohio,” said Sen. Matt Dolan, a Chagrin Falls Republican who chairs the Senate Finance Committee, which will review and approve the Senate version of the state budget. “Can we do both? Can we do Cupp-Patterson and that? No. The revenues don’t support it.”
DeWine, meanwhile, has taken to promoting his education plan when asked how negotiations are going with the legislature.
“We’ve thought out what our priorities should be. I’ve talked with certainly over half the legislature in person. I haven’t had anyone tell me ‘Mike, I don’t think these goals are the right goals.’ That doesn’t mean they won’t have their own ideas,” he told reporters this week.
• An obscure state law
DeWine’s budget proposal scrapes up against an obscure Ohio law — referred to as the State Appropriation Limit — that caps the amount by which the state can increase its spending in 2020 at 3.5%.
DeWine’s budget proposal falls under that cap, but just barely, by about $3.3 million in 2020 and $1.2 million in 2021. State lawmakers have discussed the limit, viewing it as a damper on any spending increases they might otherwise consider.
The recently passed state transportation budget added $70 million in annual funding for public transit, and $35 million in state highway patrol funding, seemingly exceeding the SAL.
But thanks to an accounting maneuver in the transportation budget that switched an extra state employee pay period to a different year, Murnieks told Senate Finance Committee members that DeWine’s budget remains under the limit, even with the new transit and law-enforcement spending.
“As a result of those changes, there’s a little more room, but not a whole lot more room, to do more spending,” Dolan said. “I’m curious what the House is going to do.”
Where does the budget stand today?
DeWine’s budget is currently parked at the House Finance Committee, which last held a public meeting on March 21. House staff previously had said they expected that amendments, which were due on April 12, would be introduced at public hearings sometime during the week of April 22.
But that hasn’t happened. Staff said Friday that budget negotiations are ongoing, and changes are expected to be introduced next week.
Once the budget clears the House, it will go to the Senate for further changes. A conference committee then will be formed to hash out the differences before sending it back to DeWine for his signature in time for a June 30 legal deadline