On July 20, 2016, the Ohio Office of Budget and Management (OBM) released guidance for the Fiscal Years 2018-2019 Operating Budget.

The newly released guidance serves as an initial roadmap for executive agencies’ priorities for the approaching 2018 and 2019 State Operating Budget.

In the coming months, state agencies will develop budget requests based on policy and programs they would like maintained and implemented. These requests will highlight agencies’ current work to date while also adding future priorities and initiatives, prioritizing funding across programs and not line items. This will allow agencies the opportunity to highlight the narrow way programs impact their mission, an opportunity that is not available when using line item budgeting.

All state agencies, including Medicaid, are asked to highlight what General Revenue Fund (GRF) programs can be funded with a 10 percent cut to their adjusted fiscal year 2017 appropriations (including funding requests that were approved before the Controlling Board) when preparing their budget for fiscal years 2018 and 2019. Revenue that is deposited in the GRF is generated primarily from major state taxes (personal income tax, sales and use tax, business taxes, etc.) and is used to fund slightly over half of the state’s expenditures[1]. In addition, agencies are asked to include detailed information about expanded and new activities for extended program budget requests that could be supported fully by their adjusted fiscal year 2017 appropriations.

State agencies’ GRF requests are submitted along with the agency director’s letter and a detailed questionnaire that agencies must include, emphasizing the purpose and the need of a particular program, the population served by the program the funds are being requested for, and the details of the services that will be provided by a particular program.

Non-GRF budget requests are permitted to be requested at 100 percent of adjusted fiscal year 2017 appropriations for fiscal years 2018 and 2019. Additional non-GRF funds can be requested if an agency can tie the request to additional cash from a reliable funding stream that is reasonably expected to be available. Non-GRF are Special Revenue Funds (highway operating funds, wildlife fund group, Lottery Profits/Education Fund Groups, etc.), Internal Service Funds, Debt Service Funds, Agency Funds, and Enterprise Funds. In the Operating Budget, just under 50 percent of the allocated funds are non-GRF. The Ohio Department of Transportation has a significant amount of their budgets generated from non-GRF (highway operating fund, Highway Safety Fund), allowing them to fully request their 2017 appropriations[2].

Following the October 14 deadline for agencies’ budget submissions, OBM will analyze these requests and advance recommendations that will be submitted to the governor’s office for final review. Other budget submission dates include September 16, for professional regulatory boards, commissions and other small agencies, and November 1, for constitutional statewide officeholders, legislative, and judicial agencies.

The governor, along with the support of key staff members, will take an active role in reviewing and finalizing the final Operating Budget Blueprint that will be released early in calendar year 2017. The Operating Budget proposal will be submitted to the 132nd General Assembly no later than four weeks after its organization.

This will be Governor Kasich’s final Operating Budget, and we can expect large legacy items in the final version of his proposal. The governor may be looking to move large scale policies that he has been unable to move through the legislature in past Operating Budgets and Mid-Biennium Reviews. He may also add on to larger items, like Medicaid expansion, to fully conceptualize his early and continuous goals as governor.

Apart from the governor’s desire for large legacy items in agencies requests, the OBM Guidance did not shy away from reminding agencies that they “should remain cognizant of the Governor’s commitment to restrain government spending, regardless of the source of revenue that is supporting the appropriations.” Furthermore, OBM took the chance to highlight the large reserve that is currently present and growing in the Budget Stabilization Fund, also known as the “Rainy Day Fund.”

Additional resources from the Office of Budget Management are available here, and a look back at The Center for Community Solutions’ work on the current state budget can be found here.

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[1] Ohio Office of Budget Management “Budget Overview” http://obm.ohio.gov/budget/operating/doc/fy-16-17/budget/Section-C.pdf

[2] Ohio Office of Budget Management “Ohio Department of Transportation” http://obm.ohio.gov/budget/operating/doc/fy-14-15/bluebook/budget/Section-D_DOT.pdf