DeWine urges caution as Ohio tax coffers overflow

Jun. 18—COLUMBUS — Pandemic or no pandemic, Ohio's tax coffers are overflowing.

Gov. Mike DeWine's chief budget prognosticator on Thursday told a joint House-Senate conference committee that it may have some $3 billion more than initially expected to tap as crafting of what is now a $75 billion, two-year spending plan enters its final phase.

"The past year and a half demonstrated without a doubt that Ohio's economy is closely linked to the health of our residents," Kim Murnieks told the lawmakers. "We have stemmed the spread of the pandemic, and consumers have returned to retail stores and restaurants, sparking growth."

But part of that largess is attributed to an unprecedented flow of cash from the federal government into the state during the coronavirus crisis, including direct stimulus checks to consumers that fueled higher-than-expected spending and sales-tax collections.

Mr. DeWine cautioned that lawmakers should look at this as one-time money that should be banked or spent on known one-time needs, like infrastructure improvement and his H2Ohio initiative targeting water quality of Lake Erie and other waterways.

"I think we have to be very, very conservative in how we spend it — in fact, not spend a lot of it, maybe not even spend a lion's share of it," he said during his latest coronavirus update with reporters.

"In addition to that, the money that we do spend, I think we need to look at the long-term needs of communities, the long-term needs of providing infrastructure in the state of Ohio," the governor said.

Thursday's number-crunching marked the first update on revenue projections for the next two years since Mr. DeWine unveiled his budget proposal in February. Since then, the House of Representatives and Senate have passed their own versions of a spending plan, leaving numerous differences between the two to be resolved.

After 11 months of the current fiscal year, Ms. Murnieks predicted tax revenues will come in $1.8 billion, or 7.4 percent, above what was projected in February. Projections for the next two fiscal years' revenue are now $1.7 billion and $1.6 billion higher, respectively.

"I don't think we know how this story really plays out," Mr. DeWine said. "...There is a concern that I have about inflation. We pumped a lot of money [into the economy]. The federal government has pumped a lot of money in. What is this going to do with inflation?"

By comparison, legislative-staff revenue projections are now nearly $1.4 billion higher for the current fiscal year, and about $1.2 billion higher for each of the two years of the next budget compared to February projections. Those earlier projections were already rosier than what the DeWine administration estimated.

"The sales and use tax was expected to weaken before the end of fiscal year 2021, but that simply did not happen," said Wendy Zhan, director of the Legislative Service Commission. "... Economists thought personal income tax revenue would fall below expectations because of business closures last year, but again that simply did not happen."

As more Ohioans are vaccinated, both Ms. Murnieks and the Ohio Legislative Service Commission are expecting lower Medicaid caseloads and spending. A shared federal and state expense, the health insurance of last resort for the poor, disabled, and infirm represents the biggest chunk of spending in the general-fund budget.

The conference committee consists of four Republicans and two Democrats who must fashion a compromise budget capable of passing both chambers and reaching Mr. DeWine's desk by the current fiscal year's June 30 end. Northwest Ohio's sole committee member is state Sen. Theresa Gavarone (R., Bowling Green).

The governor can use his line-item veto pen to strike any language he doesn't like.

The biggest dispute is expected to be over how to fund public primary and secondary schools, with supporters using Thursday's numbers to try to dispute Senate Republican contentions that the House's six-year "Fair School Funding Plan" is not financially sustainable over the long haul.

"Not only is there plenty of money in the state coffers to fully implement the Fair School Funding Plan for Ohio's kids, there is enough to phase it in fully in this biennium, rather than over the next six years, removing just about any potential question marks about fully phased-in costs," said Scott DiMauro, president of the Ohio Education Association.

"Even if they wait to fully fund it until next biennium, knowing what they know about the state's flush finances, Ohio's lawmakers should set aside the additional phase-in funding for future legislatures so there will be zero question in the next budget cycle about whether the revenue will be there to deliver for Ohio's kids," he said.

Other key issues of dispute include investment in high-speed internet broadband deployment in rural and other under-served areas, expansion of K-12 voucher programs for students to attend private and religious schools, and the fate of a child-care quality rating program.

First Published June 17, 2021, 12:13pm