Policy Matters Ohio: 'Our State. Our Community. Our Budget. – Why Care About State Budget?'

CLEVELAND, Ohio, Dec. 4 - The Policy Matters Ohio issued the following study entitled "Our State. Our Community. Our Budget. - Why Care About the State Budget?":

Here are the excerpts:

Introduction

Everyone, no matter where they live or what they look like, deserves safety, security and dignity. We pool our tax dollars to build the foundation: clean water, clean air, public schools; safe roads and bridges, public transit to get to work. We elect lawmakers to decide how to use our public dollars to make Ohio a great place to live.

State lawmakers will hammer out a state budget between January and June of the coming year. They face a daunting task: a global pandemic, a recession and a national reckoning on the historical and continuing unequal treatment of Black and brown people in America. There is no certainty on tax collections to support needed investment in schools, health care and other public services. The federal government sent funds, but some expired and others will end before the pandemic and recession are over.

There is certainty about the past, and the old challenges remain. Before the pandemic, six out of 10 of Ohio's most common job groups paid so little that a full time worker with a small family would need food aid to make ends meet. The recession makes it harder for many households. More Ohioans need public programs to help them get by: food pantries, SNAP,/1 Medicaid, cash assistance. In the coming budget, lawmakers could lay the groundwork for a broad and inclusive recovery that helps all Ohioans, or they could support policies that push more Ohioans further behind (see box).

This is why Ohio's budget matters. The state budget is a tool that can help eliminate inequities and boost opportunity for all Ohioans.

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The state budget can help all Ohioans live the life they deserve.

42 states have healthier residents and health disparities here are increasing

sharply.

36 states have better rates of high school graduation; 46 do better in graduating Black teens.

Ohio ranks 35th in college affordability but 45th in terms of affordability for students of modest income.

Ohio ranked 41st among the states due to high infant mortality. Policy and investment choices contributed to push the Black infant mortality rate ranking down to 48th.

47 states spend more per capita on public health and draw down more federal funds.

With prisons at 120% of capacity, Ohio's mass incarceration system ranks 3rd in the nation in COVID-19 deaths, in both absolute and relative terms.

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Decisions about budget priorities are made by the governor and elected state lawmakers in the General Assembly (made up of the Ohio House of Representatives and the Ohio Senate). For the past 15 years state lawmakers have prioritized tax cuts and tax breaks, boosting deductions, credits and exemptions to almost $10 billion a year/2 and cutting taxes so deeply that the annual state revenue system comes in $7 billion a year below what it would have been under the tax laws of 2005./3

Chart 1 illustrates how, when accounting for inflation, tax collections in the General Revenue Fund for public services have fallen by 14% over the past 15 years.

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The tax cuts and tax breaks benefitted corporations and the wealthiest 1% of people, who pay about $40,000 a year less in Ohio taxes, on average, than they would have under the tax laws of 2005. Over time, middle income households got no benefit from all the tax law changes, and the poorest now pay more. It's not fair, but it was done in the name of "job creation." Lawmakers told us that cutting taxes for top earners and giving tax breaks to corporations would make companies want to move to Ohio and provide lots of good jobs.

Cutting taxes for the wealthy doesn't create jobs. After all these years, Ohio employers added jobs more slowly than the rest of the nation. Furthermore, too many Ohio jobs today pay low wages and lack benefits, like paid sick leave and health insurance./4

Ohio entered the recession behind the curve: Outdated public health information technology hindered critical data collection./5

Skeletal staff in state agencies could not deliver timely unemployment checks to hundreds of thousands of Ohioans who suddenly needed them./6

State lawmakers will face a choice early next year during the budget debate: to harness Ohio's public resources to support all families, improve all communities, reduce inequities and build a stronger, more resilient state - or continue to cut services and push for more tax breaks for the wealthiest and corporations.

This paper is about budget basics: how Ohio generates public revenue (taxes) and how our lawmakers chose to direct those resources (expenditures). It describes the budget process, public services funded by the budget, and changes in the support of those services over time. It talks about how you can get involved. Your knowledge, participation and voice can make Ohio a better place.

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State budget overview

Ohio has five separate budgets./7

The operating budget is the largest and gets the most public attention. It funds education, health, human services, corrections and more. Ohio has a biennial (two-year) operating budget. In the first half of the coming year, lawmakers will hammer out a new operating budget for state fiscal years (SFY) 2022-23. The state's fiscal year runs from July 1 to June 30; the budget for 2022-23 will start on July 1, 2021 and run through June 30, 2023. Chart 2 shows the major funds in Ohio's current budget, for SFYs 2020-21. The two-year, "all-funds" operating budget for the current period authorized the expenditure of $145.5 billion across many different funds./8

The focus of most budget analysis is the General Revenue Fund (GRF); see Chart 1.

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General Revenue Fund (GRF): When Ohioans and Ohio companies pay taxes, those revenues go to the state General Revenue Fund. State dollars in the GRF make up 32.5% of the state budget: $47.3 billion over the two-year budget for 2020-21. Chart 2 also shows how some federal funds are included in Ohio's GRF.

Federal funds: The federal government supports many public services, from interstate highways to health care, education, housing, rehabilitation services, child care and much more. Congress requires states to invest or "match" funding in many federal programs. The $54.2 billion in federal dollars make up 37% of the total, All Funds 2020-21 budget.

A dedicated or special purpose fund may be raised from a specific source and used for a specific purpose. For example, revenues collected from state fees on hunting licenses support public safety and maintenance of hunting areas. Special purpose funds make up 19% of the budget ($27.7 billion). This pandemic year, the state is accounting for $2.7 billion in federal pandemic aid -- CARES Act funds -- as a dedicated purpose fund./9

Fiduciary funds are collected by the state but passed through to other entities. For example, the state collects sales taxes levied by counties and transit agencies and distributes them back to the local entities. Fiduciary funds make up 11% of the budget ($16.3 billion).

State spending: Where does the money go?

Chart 3 shows a breakdown of the state-source funds in the General Revenue Fund (GRF). Education receives the largest share: A combined $21.7 billion supports K-12 schools in the current two-year budget and $5.4 billion supports higher education.

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Health care provided by Medicaid is the second largest share of state funds in the GRF. The federal government pays, on average, about two-thirds of each Medicaid dollar spent on health care; the state provides the remaining third.

Chart 4 illustrates how state GRF expenditures changed over time by major area. The changes are not dramatic, other than the impact of the 2008 recession. The sharp decline in state revenues was backfilled in part with federal stimulus dollars, followed by deep budget cuts in 2012-13 when federal policymakers failed to extend federal stimulus funding, allowing the support to expire before the recession ended statewide.

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Recommendations & conclusion

The budget for FY 2022-23 will be critical to how Ohio recovers from the pandemic recession. Ohio could recover into a state with sustained funding in health care, a boost in public health and education, funding to improve the social determinants of health: housing, social services, public transit, job training and a focus on communities in need. Or it could face years of economic hardship, particularly in communities of color and poor rural communities.

In this budget, it will be essential to pay attention to and fully fund the 34 recommendations of the Minority Health Strike Force to address the structural racism that has led to shocking disparity in the ravages of the COVID-19 pandemic on communities of color. The funding they recommend in education, preschool, health care, housing, broadband, public transit, workforce training and other areas will help Black and brown Ohioans and will help all Ohioans struggling in the recession.

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Acknowledgements

We are grateful for the support of the Center on Budget and Policy Priorities, the Ford Foundation, the Gund Foundation and other national and state level philanthropic organizations that support our work, as well as to the hundreds of individuals and businesses that have contributed. Thank you.

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REPORT, CHARTS and ENDNOTES: https://www.policymattersohio.org/files/news/ohbudgetguide2020.pdf

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