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Budget testimony before Senate Finance Committee starts, despite Ohio House not yet passing budget

April 25, 2019
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Director Kimberly Murnieks of Ohio’s Office of Budget and Management (OBM) and Director Mark Flanders of the Legislative Service Commission (LSC) testified to the Senate Finance Committee on Wednesday, as part of the first day of informal hearings on HB 166, the main operating budget. Murnieks went first, providing an explanation of how OBM went about making its forecasts as well as highlighting several of the key budget proposals Governor Mike DeWine included in the as-introduced budget. She was then asked a number of questions by the committee.

 Sales tax revenues are significantly higher for FY 2019 than they were projected to be.

Senator John Eklund opened questioning by asking for some clarification on how sales taxes collected from out-of-state, online retailers affect revenue forecasts. Specifically, he asked how Murnieks knew they had boosted sales tax revenues. She responded that she didn’t have the exact numbers with her, but sales tax revenues are significantly higher for FY 2019 than they were projected to be. One of the main drivers of this is the increase in revenue from out-of-state, online retailers. Eklund then switched to another topic, asking for a definition of wraparound services. During her testimony, Murnieks mentioned that there would be an increase in spending to provide wraparound services in schools. Murnieks clarified that wraparound services, also known as wraparound supports, are services that provide support children might need to be ready to learn that are generally not provided by teachers. One example of this is mental health services.

 Wraparound services, also known as wraparound supports, are services that provide support children might need to be ready to learn that are generally not provided by teachers.

Senators Vernon Sykes and Peggy Lehner both had questions about the DeWine administration’s commitment to early childhood education and state-funded day care. Sykes asked if there were any budget allocation increases in these areas. Murnieks stated that the Ohio Department of Job and Family Services budget includes additional federal grants of $99 million each year for Step up to Quality, an Ohio program dedicated to ensuring access to quality preschool and child care. She also stated that additional Temporary Assistance for Needy Families funding would be dedicated to this purpose. In response to a follow-up, Murnieks clarified that the number of spots available in these programs will be maintained at their current levels. Lehner then asked for clarification as to whether this money would be for increasing the quality of spots or the number of spots available. Murnieks specified that the immediate goal is to increase the number of high-quality spots for the children already being served by the program. The long-term goal is to then increase the number of those who qualify to access the program.

 The Ohio Department of Job and Family Services budget includes additional federal grants of $99 million each year for Step up to Quality.

Senator Nickie Antonio asked about the funds set aside for lead abatement, noting that it was only enough for about 500 homes. She also cited a recent study stating that Ohio ranks 47th among states in leveraging federal funds from the Centers for Disease Control and Prevention. She asked if any federal dollars were available to be used for lead abatement. Murnieks stated that was something she could look in to, although federal dollars, for instance from Medicaid, are used for lead abatement when possible. She then specified that what was provided for in the budget are just initial steps, giving the administration the opportunity to evaluate the program and see if it should be expanded. Antonio also asked if the shift to sales tax over other, more stable revenue sources would make it more difficult to pinpoint numbers. Murnieks stated that there are always risks, but she was not worried about any one revenue source versus another.

 Ohio ranks 47th among states in leveraging federal funds from the Centers for Disease Control and Prevention.

Chairman Matt Dolan finished out the questioning of Murnieks. First, he asked if the OBM had considered the effect the gas tax increase and the transportation budget in general may have on forecasts and general revenue fund revenues. Murnieks stated that, since these estimates were underway well before the transportation budget passed, these changes were not accounted, but might be considered in time for the conference committee in June. She also stated that these changes may have an effect on the revenue surpluses projected at the end of each fiscal year. Dolan then asked about the parts of the budget that receive funding from budget surpluses. Murnieks noted that this money was primarily placed in the H2Ohio fund, a dedicated purpose fund which will be used to ensure safe and clean water across Ohio. The largest portion of the $900 million that will go into this fund will come from a surplus at the end of FY 2019, the current year’s budget. Finally, Dolan asked who runs the new drug taskforces for which $4.8 million have been set aside. Murnieks stated that these funds are primarily in the budget of the Department of Public Safety (DPS) and would be allocated by the Office of Criminal Justice Services. Some of the money is also in the Attorney General’s (AG) budget, allowing for partnerships between the AG, DPS, the Organized Crime Investigation Commission and local jurisdictions.

 The largest portion of the $900 million that will go into this fund will come from a surplus at the end of FY 2019, the current year’s budget.

Flanders then gave his testimony, briefly covering LSC’s forecasts of the next biennium. Senator Dave Burke asked the first question, wanting clarification on why the LSC’s forecasts for personal income growth are 4.1% for FY 2020 while OBM projects 6.8% growth in that same time frame. Flanders and his colleagues clarified that most of the difference in income tax forecasts comes from a difference in how the two organizations forecast refunds. He clarified after Dolan’s follow-up that the primary difference between OBM and LSC is that OBM anticipates fewer income tax refunds for FY 2019 than LSC does.

 The primary difference between OBM and LSC is that OBM anticipates fewer income tax refunds for FY 2019 than LSC does.

Lehner then asked how this discrepancy compares to discrepancies in years past. Flanders noted that the discrepancy is larger than in years past. In response to a follow-up, he noted that enough data would be available to make a meaningful improvement to the revenue projections in time for the conference committee in June.  

Senator Steve Wilson asked for clarification on the differences in Medicaid spending between the two projections. Flanders explained that the difference between the two projections is $253 million for FY 2020 and $100 million for FY 2021, with LSC projecting $69 million more than OBM from state sources in FY 2020 and $55 million less than OBM from state sources in FY 2021.

 The projected reduction in Medicaid caseload is attributable to general economic growth in the state.

Sykes closed out the questioning with a couple of questions about Ohio’s economic conditions. First, he asked why economic growth in Ohio tends to lag behind the growth in the United States as a whole. Flanders and his colleagues noted that this is a trend dating back to the 1960’s. Some of the potential causes include Ohio having a different mix of economic sectors than the nation as a whole, for instance Ohio has more heavy industry, and the fact that the population is growing more slowly than in other areas of the country leads to lower demand for goods and services in Ohio. In response to the Sykes’s final question, Flanders clarified that the projected reduction in Medicaid caseload is attributable to general economic growth in the state.

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