Ohio tax revenues plummeted in April during first full month of coronavirus closures


By Andrew J. Tobias - Advance Ohio Media, Cleveland (TNS)



COLUMBUS, Ohio — Ohio’s April tax revenues came in $866 million lower than state officials were expecting, according to new state data released Wednesday containing the first full month of coronavirus business closures.

Roughly three-quarters of that drop-off — $635.7 million — is due to state income taxes coming in lower than expected. Most of the shortfall in income taxes appears to be due to the state’s decision to defer tax day from April 15 until July 15, although the state also saw taxes withheld from Ohioans’ paychecks come in $57.8 million lower than expected.

State sales tax revenues came in $236.7 million lower than expected, including $90.5 million due to lower than expected car sales.

The plummeting revenue numbers, tied to job losses and a slowdown in commercial activity, prompted Gov. Mike DeWine on Tuesday to announce $775 million in state spending cuts. Most of the cuts affect education and health-care spending, which make up the vast majority of the state budget.

Officials with DeWine’s Office of Budget and Management released more detailed information, including the tax figures and a breakdown of the cuts, to the public on Wednesday morning.

“It’s not entirely unexpected, given the actions that we had to take to contain the COVID pandemic, but it obviously has a significant impact on the state, hence the budget reductions we announced yesterday,” Office of Budget and Management Director Kim Murnieks said in a Wednesday conference call with reporters.

Here are some key takeaways from the new information the state released on Wednesday:

Education

As DeWine indicated on Wednesday, the cuts in state funding to public K-12 schools aren’t equal across the board. As a percentage of the schools’ overall funding, including local funding, they range from 0.26% to Kellys Island School District, the state’s smallest public school system, to 2.83% in cuts to Highland Local School District in Medina County.

Overall, state schools will absorb funding cuts of $300 million, or 3.7% of the state’s formula funding. However, the impact of the cuts could be greater since they are being imposed in the final two months of the school calendar, instead of being spread out over the full year.

Murnieks said the cuts are deeper for communities with greater local property tax revenues, giving them greater ability to fund themselves locally.

She didn’t immediately have details on how cuts would affect charter schools that receive public-school funding. She did say that $5.7 million of the cuts are from an unused balance of the state’s voucher program that gives scholarships for students to attend private schools.

House Speaker Larry Householder, a Perry County Republican, said Wednesday that state lawmakers are studying whether to try to restore some of the education funding with the state’s rainy-day fund. He said that may be something the House tackles when it’s back in session next week.

“I talked to a lot of superintendents around the state to get their take on it, and they not had a chance yet to do a deep dive on how it was going to impact the district or what they’re gonna have to do,” he said.

Meanwhile, cuts to the state share of public university funding were a flat 3.8%, adding up to $76.7 million. This means schools with large fundraising endowments, like Ohio State University, will get a proportionately equal hit to community colleges like Cuyahoga County Community College.

Medicaid cuts

Funding for Medcaid, the state and federally run health insurance program for the poor and disabled, will be cut by $211 million. DeWine has said these cuts won’t affect essential services for enrollees, even though enrollment already is increasing as people lose their jobs.

Murnieks didn’t have additional details on how that will work out.

But she said that state officials are trying to negotiate lower rates with managed care organizations, private health-care companies that manage Medicaid caseloads on behalf of the state.

A factor in these talks is that Medicaid has seen fewer health-care claims, as people either were avoiding hospitals and doctors’ offices during the coronavirus pandemic, or hospitals delayed nonessential procedures to comply with a DeWine administration health order.

Are future cuts possible?

Overall, state tax revenues are $777 million below estimates for the fiscal year, which runs through June 30. This is an equal number to the cuts announced by DeWine on Wednesday.

But Murnieks told reporters the state should be able to make it through June 30 — and meet a state constitutional requirement to balance the budget by then — without any additional major cuts or accessing the state’s $2.7 billion rainy-day fund, which requires legislative approval.

Asked how that was possible, given that May and June likely also will have revenue shortfalls, she said the administration has other tools at its disposal, such as putting off payments until the next fiscal year, or accessing one-time money within the state’s coffers.

She also said the DeWine administration built up a a cash balance of $500 million in this year’s operating accounts. While she didn’t provide details, the state had seen consistently higher than expected monthly tax revenues until the onset of the coronavirus pandemic.

“We will have to see more of the impact on the pandemic on May and June for us to know what that mix of tools looks like,” she said. “But we will balance the budget on June 30, and we will continue to constrain state agency spending in a large way.”

Agency level cuts

Budget officials released a list of 43 state agencies that will see their budgets cut by an average of 3.6%.

On a percentage basis, the cuts range from 0.6% at the Adjutant General, which oversees the Ohio National Guard, to 79% at the Ohio Department of Transportation, which oversees the state’s system of highways and bridges.

The governor’s office is cutting its expenses by $50,000, or 1.7%.

Asked why some agencies have higher cuts than others, Murnieks said it reflects the nature of what the agency does.

“There are some agencies that are largely personnel, and so it is more challenging to make an immediate reduction,” she said. “…Meanwhile other agencies where we have large equipment lines or service lines or contracts, it is easier to constrain those budgets more quickly by doing things like canceling contracts, forgoing major purchases or limiting major travel budgets.”

The state has no immediate plans to lay off staff, although Murnieks said that could change. Meanwhile, it will continue DeWine’s previously announced freeze on new hires and promotions.

“We’re not taking any of our abilities to control personnel costs off the table,” she said. “I think you’ll see some things that we will be announcing in the upcoming weeks related to exempt staff and others… I would anticipate that we will be taking several different steps to address personnel costs.”

Department/FY2020 budget/Cut/Cut pct.

Adjutant General $55,974,904 $349,400 0.6%

Dept. of Aging $97,726,075 $1,441,500 1.5%

Dept. of Agriculture $144,466,406 $4,770,000 3.3%

Arts Council $18,970,723 $1,333,600 7.0%

Auditor $90,877,405 $146,300 0.2%

Dept. of Higher Education $2,721,287,310 $109,088,900 4.0%

Board of Tax Appeals $1,845,494 $57,500 3.1%

Commission on Service and Volunteerism $307,176 $2,600 0.8%

Dept. of Administrative Services $830,601,303 $677,300 0.1%

Dept. of Developmental Disabilities $152,533,075 $2,269,100 1.5%

Development Services Agency $162,465,102 $7,378,700 4.5%

Dept. of Natural Resources $129,732,941 $2,167,400 1.7%

Dept. of Health $99,192,943 $5,254,100 5.3%

Dept. of Transportation $8,444,687 $6,660,200 78.9%

Dept. of Public Safety $50,517,099 $3,006,500 6.0%

Dept. of Rehabilitation and Correction $1,843,040,272 $865,400 0.0%

Dept. of Veterans Services $51,107,964 $1,346,700 2.60%

Dept. of Youth Services $226,464,976 $6,197,500 2.7%

Environmental Review Appeals Commission $634,000 $13,500 2.1%

Dept. of Education $8,187,203,556 $364,590,000 4.5%

Elections Commission $435,221 $2,600 0.6%

Environmental Protection Agency $12,811,610 $670,700 5.2%

Employment Relations Board $3,998,046 $34,900 0.9%

Broadcast Educational Media Commission $9,801,131 $146,700 1.5%

Expositions Commission $363,750 $38,700 10.6%

Board of Embalmers and Funeral Directors $1,000,000 $196,300 19.6%

Office of the Governor $2,914,740 $50,000 1.7%

Office of Inspector General $1,512,881 $53,300 3.5%

Dept. of Job and Family Services $916,880,385 $36,180,300 3.9%

Library Board $5,343,236 $100,400 1.9%

Dept. of Medicaid $4,810,925,618 $211,973,500 4.4%

Dept. of Mental Health and Addiction Services $444,090,887 $8,288,800 1.9%

Commission on Minority Health $4,667,407 $830,700 17.8%

Office of Budget and Management $4,613,824 $200,000 4.3%

Opportunities for Ohioans with Disabilities $17,931,310 $63,400 0.4%

School for the Blind $12,440,519 $99,200 0.8%

School for the Deaf $13,082,919 $136,200 1.0%

Office of the Ohio Public Defender $99,686,145 $6,110,000 6.1%

Ohio Facilities Construction Commission $452,920,833 $314,000 0.1%

Secretary of State $12,100,196 $144,600 1.2%

Commission on Hispanic/Latino Affairs $464,888 $12,100 2.6%

Dept. of Taxation $61,437,717 $2,574,700 4.2%

Treasurer of State $11,463,075 $425,900 3.7%

Total $21,725,277,041 $776,264,200 3.6%

Sources: Ohio Office of Budget and Management, Ohio Legislative Service Commission

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By Andrew J. Tobias

Advance Ohio Media, Cleveland (TNS)

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