June 20, 2017

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Overview: Ohio Senate Sub-Bill

As expected, the Ohio Senate took action on June 12 outlining changes to the state budget in its own bill, Substitute House Bill 49 (Smith). The bill was later accepted for consideration during a hearing of the Senate Finance committee, chaired by Sen. Scott Oelslager (R-North Canton). This version aims to balance a budget in the face of a projected shortfall of nearly $1 billion, as state revenues have continued to come in under estimates. This figure is higher than the administration’s request of $800 million over the biennium. The Senate has stated that further reductions to its proposed bill are unlikely to be needed during Conference Committee.

Last week, we wrote about the five factors to watch as the Senate prepared changes: State revenues slipping, deeper across-the-board cuts, school funding, Medicaid funding, and dollars invested to combat Ohio’s opioid crisis. We’ll take a quick look at how these factors affected the Senate’s version of the budget.

  1. Revenue

This was perhaps the driving factor behind many of the Senate’s decisions, as the state’s revenue woes are something we have written about extensively. The estimated $800 million announced by state leaders in April keeps climbing.  This led to the elimination of earmarks, a cut of $20 million to the Department of Rehabilitation and Corrections, and a six percent cut to both the House and Senate administrative line items. During a press conference, when asked if the Senate planned to adjust the state’s tax policy to address the decline in revenue, Sen. Bob Peterson (R-Washington Court House) stated they would allow time for the administration to continue to identify what may be the cause of the decline, and will wait until those findings are provided to determine needed adjustments.

  1. Deeper Across-the-Board Cuts

As expected, the Senate expanded across-the-board cuts to many state agencies’ administrative line items from the House-passed 1.5 percent to three percent and even four percent for some agencies and statewide offices, and a reduction of six percent for both the House and Senate. As was reported, many of these cuts were identified by working with the Office of Budget and Management (OBM), and are, by and large, likely to stand.

  1. Medicaid Spending

The Senate used the House version of the Medicaid budget, but reduced it further by $200 million. The majority of the reductions came from the state share of the general revenue fund (GRF), including approximately $75 million in cuts to hospitals and $25 million in administrative cost reductions identified by the Ohio Department of Medicaid.

  1. School Funding

As anticpated, school funding would likely come out as one of the budget “winners,” as fewer districts received cuts and the Senate found additional dollars to invest. Sen. Randy Gardner (R-Bowling Green) outlined that the budget now includes school funding amounting to $154 million in fiscal year 2018 and $177 million in fiscal year 2019. The practical effect is that 535 districts across the state will be held flat or otherwise will be receiving an increase. Only districts that have lost more than five percent of their students over the past two years would see cuts under this version.

Also eliminated by the Senate was the Straight A Fund, a grant program used to stimulate innovative ideas among educators, and classroom facility grants used by high performing community schools to expand their offerings.

  1. Ohio’s Opioid Crisis

As previously written, House Republicans included $170 million in additional funding to combat Ohio’s growing opioid crisis. The Senate aims to add $6 million to that investment. The one distinguishing factor outlined by Sen. Gayle Manning (R-North Ridgeville) was that the Senate shifted the source of the funding from GRF dollars to non-GRF dollars. She cautioned that while the dollars will still be there, additional restrictions will likely be placed on those dollars based on their source.

A full list of changes as accepted into the substitute bill can be found here.

The Senate will conclude a series of meetings this week, and send final round of changes later this month to conference committee, a legislative process intended to reconcile the differences between the House and Senate budget versions. Conference committees for the state’s budget bills have traditionally included each chamber’s finance committee chair, vice chair, and ranking member. It is expected that the final version of the bill will be voted on by the House and Senate some time before June 30, after which it heads to the governor’s desk for his signature.

© 2017 BARNES & THORNBURG LLP

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About this Author

James W. Sheppard III, Barnes Thornburg, Education Department Lawyer, Public Pensions Funds Attorney
Associate

James W. Sheppard III is an associate in Barnes & Thornburg’s Columbus office and is a member of the Government Services and Finance Department.

Prior to joining Barnes & Thornburg, Mr. Sheppard was the chief of staff for the Ohio Department of Education where he directed the activities of the department’s policy, legal, legislative, and communications offices, among others. He served as a liaison to the State Board of Education, the governor’s office, General Assembly and professional associations representing the State Superintendent...

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