Gov. John Kasich has been defending his budget, saying it’s the way to keep Ohio’s economy growing. But state lawmakers who are working on their own versions of the budget are looking at incoming tax revenues and raising critical questions.
In his State of the State speech in Sandusky last week, Gov. Kasich had a message for state lawmakers, most of whom are his fellow Republicans – don’t add more spending to the budget. “We have to always hold the line on spending. That's more true in this budget than it's really been in a number of years,” he told lawmakers in the audience. “The revenues have grown slowly, even though we have conservative projections.”
The revenues have actually come in below forecasts. The total shortfall for this fiscal year is now $615 million – more than half a billion dollars. Budget director Tim Keen has been blaming the slow economy and bigger than expected tax refunds, but he admitted he just isn’t sure what’s happening. “We’ve looked very carefully at whether some of the tax changes are causing this, and we don’t have enough information to say that that’s the case,” Keen said.
But as the budget is worked over in the House and Senate, and the revenue continues to come in under estimates, Kasich may be worried about this quote from 2015: “We plan to invest $935 million new dollars over the biennium.” That was said by former Sen. Chris Widener (R-Springfield), explaining how he and his colleagues essentially rejected Kasich’s school funding formula in his last budget by pouring nearly a billion dollars into K-12 education. In that budget, Kasich’s formula meant cuts to half of the state’s schools. This time, his budget has more than half of the state’s districts getting less money.
And meanwhile, the budget director says he’s expecting to have to revise down the state’s revenue estimates, meaning lawmakers will have a smaller budget than they started with. But Keen doesn’t expect to have those numbers for several weeks – maybe not until June. Sen. Dave Burke (R-Marysville) told Keen during a hearing in the Senate Finance Committee that he’d like those recalculated numbers now. “I’m not sure how we pass a budget when you don’t know what the end point is. So when do you think you would have available, based on when the Senate will get the budget, a reasonable forecast to which we can focus our energy towards what the new normal looks like?” Burke said. “Regardless of whatever the cause is, we’re dealing with less than we thought we would have.”
Keen replied that the revenues coming into the state don’t make sense much when compared to the data he’s seeing suggesting a good state economy, but the budget numbers may be uncertain for a while. “In order to have all the information we need to do the best job we can in this very uncertain business of making revenue projections, we need to get through the filing season, which is mostly April and the early part of May,” Keen said.
Meanwhile, Democrats say they’ve been concerned about the budget estimates for months. They’ve been arguing against the 17% income tax cut in the budget, which is paid for with increased sales taxes and hikes on taxes on cigarettes, alcohol and oil and gas drillers. Democrats have been arguing instead for investing more in education and local governments. Rep. Jack Cera (D-Bellaire) said his Democratic colleagues have always been against tax shifting – moving away from the income tax to relying on sales taxes. But he’s heard of Republicans who are getting concerned as well with continuing to do that while looking at the estimates on which the budget is based. “We’ve been raising this issue for several months now, and the administration has kind of just – ‘no, everything’s great, we’re going to move forward,’” Cera said. “And I think it’s getting pretty clear that if we keep heading this direction we’re going to be facing more difficult problems within the next few months.”
The House is set to put out its version of Kasich’s budget by the end of the month. The Senate won’t get the budget till May. And then the budget office says it will have new revenue estimates, around the time both sides take their spending plans to the conference committee to work out the differences. The budget needs to be agreed to by both chambers and signed by the governor by the end of June.