Ohio, other states sitting on huge piles of money, new report says
The Oho Statehouse, Columbus, Ohio. (Photo by Graham Stokes for the Ohio Capital Journal. Republish photo only with article with which it originally appears.)
Ohio has enough in its rainy day fund to operate the state government for 35 days on that money and nothing else. If you factor in the money it has in other unexpended balances, the number of days grows to 73, according to a report released last week by the Pew Charitable Trusts.
It’s part of a trend in which states are sitting on reserves that are at or near record levels after states got unprecedented federal assistance during the coronavirus pandemic while their revenue collections didn’t drop off as much as they feared. In 21 states — including Ohio — collections even exceeded pre-pandemic growth.
Governments aren’t banks and their basic role isn’t to sit on huge reserves of taxpayer money. But today’s big reserves might come in handy in the not-too-distant future. Government data released Thursday said that gross domestic product grew at an annualized rate of 2.6% in the second quarter, but experts warned that other signs of a coming recession loom.
As anyone who watched government finance during the Great Recession between 2007 and 2009 knows, in such circumstances tax collections can plummet, leaving state and local governments to face excruciating choices for years.
“States use reserves and balances to manage budgetary uncertainty, including revenue forecasting errors, budget gaps during economic downturns, and other unforeseen emergencies, such as natural disasters,” the Pew report said. “This financial cushion can soften the need for spending cuts or tax increases when states need to balance their budgets.”
In addition, large cash reserves can give states and local governments better credit ratings, allowing them to float bonds and otherwise borrow at better rates.
“For example, Fitch Ratings upgraded Michigan’s credit rating in July 2022, citing the state’s buildup of reserve levels as part of its rationale,” the report said.
However, the amounts states are sitting on can be eye-popping. For purposes of comparison, Pew expresses them in terms of the number of days states can operate solely on their reserves. Those amounts range from 350 days for Wyoming to 12 for Illinois.
At 71 days, Ohio comes in a little below the 50-state median of 89 days.
In dollar amounts, Ohio is estimated to have $5.5 billion in reserves for 2022. That’s far in excess of any year since at least 2000 except for last year, when reserves totaled $7.4 billion, according to the Pew report.
And those amounts don’t count unexpended federal coronavirus dollars to the states. This summer, Governing Magazine reported that at the end of 2021, states had spent just 27% of those funds.
In August, Cleveland.com reported that Ohio had spent nearly two-thirds of its $5.4 billion in American Rescue Plan funds, primarily repaying an unemployment loan, on law enforcement and sewer grants, and on incentives for the Intel chip plant.
Meanwhile, other pressing needs only partially have been met.
Ohio’s foodbanks say they’re desperate for supplies and infrastructure. In May they requested $50 million in emergency funding and have made an overall request of more than $100 million to also upgrade their infrastructure.
So far all they’ve gotten from the state is $15 million in coronavirus funds that Gov. Mike DeWine announced earlier this month.
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