Last week, Ohioans got their first look at the governor’s budget proposal. Lawmakers got their first chance to ask questions about his plans.
Gov. Mike DeWine outlined the broad strokes of his spending plan in his state of the state address, late last month. He put heavy emphasis on supporting families through tax incentives, education policy and a new cabinet department focused on youth.
In the Ohio House finance committee, budget director Kim Murnieks began laying out the dollars and cents underpinning DeWine’s spending proposal.
All told, the administration wants to spend $103.3 billion in the coming fiscal year followed by $99.8 billion in the next. A significant share of those dollars come from the federal government to help fund programs like Medicaid.
Zeroing in on the state’s discretionary spending, DeWine’s proposal appropriates $28.1 billion in the first year and $29.4 billion in the second. The tax revenue forecast for the coming years is $28.7 billion and $30.1 billion respectively.
Murnieks repeated “now is the time,” to invest in kids, education, mental health, workforce, and communities. But the economic forecast she shared isn’t quite as optimistic.
She explained her office looked to forecasts from Moody’s and Standard and Poor’s to set its expectations. The only problem is one predicts a recession and the other doesn’t.
“Given most professional forecasters are currently projecting a national recession, it is conservative and wise to include an underlying economic forecast that has a mild recession built in,” she argued.
Murnieks said a Wall Street Journal survey of economists in which a majority predicted a recession within a year bolstered their thinking as well.
That said, she noted economic indicators at the moment look good. The legislative service commission prepares its own forecast, which she described as “ever so slightly, less than 1%, more optimistic.”
“Were a little more conservative,” she added. “That’s frankly, exactly where I like to be.”
Putting numbers to priorities
Murnieks argued that stewardship is responsible for the $6 billion cash balance sitting in the general revenue fund. DeWine’s proposal recommends spending the bulk of that surplus on “one-time” expenditures.
The largest among those priorities is $2.4 billion to prepare sites around Ohio for economic development. The hope being if Ohio builds it, the next Intel will come. The budget makes one-time investments of more than $300 million for a new rivers initiative, $200 million for K12 career tech facilities and $150 million for smaller city innovation hubs.
Murnieks also elaborated on how much DeWine’s proposed tax breaks will cost. As part of his effort to help families, DeWine wants to eliminate sales tax for childcare products like diapers, cribs and strollers. That change alone represents $16 million, Murnieks said. Adding in DeWine’s proposed $2,500 per child income tax deduction and a new tax deductible home ownership savings account, the price tag rises to $200 million.
After Murnieks’ presentation, committee members peppered her with questions. Rep. Jean Schmidt, R-Loveland, voiced misgivings about the proposed Department Children and Youth. What would it mean for state funding earmarked for local service providers whose mission extends beyond youth, she asked? Murnieks sought to assure her the new agency isn’t meant to disrupt any existing programs. If a recent Gongwer survey is any indication, DeWine still has some work to do convincing lawmakers it’s a good idea.
Rep. James Hoops, R-Napoleon, asked for more details on the governor’s housing tax credit proposals. Developers can “cash them in” against their future tax liability, Murnieks explained, once they complete approved multifamily rental properties or single-family homes.
The most probing questions, however, came from the other side of the aisle. Rep. Bride Rose Sweeney, D-Cleveland, wanted an explanation of the costs to expand Ohio’s EdChoice vouchers. The governor is proposing a dramatic expansion to cover families at 400% of the federal poverty level. The current cut off is 250%.
“We expect that that will increase the EdChoice expansion scholarship numbers by about 5600 students, about 25%, in the first year, and then by an additional roughly the same amount in the second year,” Murnieks explained. “The estimated cost is $22 million in fiscal ‘24 and $28 million in fiscal ‘25.”
To refund or deduct?
Reps. Beth Liston, D-Dublin, and Michael Skindell, D-Lakewood, raised concerns about the impact of the proposed tax deductions.
“Families that make around $31,000 and under would not receive any dollars, any benefit, from a tax deduction,” Skindell argued, “and the maximum for the highest income earners on this would receive what $100 Maximum on a tax deduction.”
“Why do we give a tax deduction to those making $250,000, a quarter of a million, and no tax benefit to those making $31,000 or less?” he pressed.
Breaking down the $200 million tax savings Murnieks had touted, Liston noted $130 million comes from per child income tax deductions and about $50 million comes from the home ownership savings program.
“And so when I look at this $200 million,” she said, “it’s only that $10 to $15 million that has any impact whatsoever on the at least 19% of kids in poverty.”
Liston and Skindell both argued for a refundable credit like the federal child tax credit instead. Under that approach filers would receive money instead of the current proposal which simply lowers a filer’s tax exposure.
Murnieks pushed back arguing people making less than $31,000 aren’t getting a benefit because they’re not paying taxes. She added major programs like Medicaid and TANF directly support poor Ohioans and compared the tax credit model to universal basic income.
The governor’s proposal, of course, is just that — a proposal. House and Senate lawmakers will both have opportunities to make additions and subtractions before the finalized spending plan returns to DeWine’s desk. Murnieks’ presentation gave a high level explanation of the governor’s budget proposal. One-by-one cabinet officials will present a more detailed explanation of spending plans falling under their purview. Those hearings have already begun with more scheduled to resume on Tuesday.
If the House finance committee can stick to its plans, those presentations should be done by mid-March. The committee has three hearings reserved for public testimony during the week of March 20th.
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