Wednesday, January 16, 2008


Ohio's December financial reports

The December monthly financial reports from the Governor’s Office of Budget and Management (OBM) and the Ohio Legislative Service Commission (LSC) seem to indicate that the rest of the country may soon feel some of the economic strain that Ohio has experienced. Unemployment is up nationally, the housing market is stagnant, and oil prices continue to rise.

So far this state fiscal year, Ohio’s general revenue fund tax receipts have been slightly less than projected (1.6%) and expenditures are slightly more than projected (1.6%) according to OBM, with November a particularly rough month. The OBM report indicated that the corporate franchise tax and personal income tax contributed to the revenue shortfall, and tax reforms continued to affect revenue growth. Expenditure increases were partly due to rising caseloads in Public Assistance and Medicaid. Although Medicaid disbursements were only 1.1% above estimate so far this fiscal year, a one percent increase costs an additional $109 million according to OBM. Most other expenditure categories were below estimate year-to-date.

The Governor’s Counsel of Economic Affairs expects Ohio’s GDP to grow at a slow rate (1.6% annually) through mid-2008. It attributes this to higher energy costs, a tightening of credit conditions, and a softening labor market. According to LSC the Federal Reserve has indicated that it does not expect a rebound in this region’s housing and construction markets until 2009. The good news is that many analysts suspect that Ohio’s housing market has already seen the bulk of expected damage from the sub-prime mortgage situation, whereas much of the rest of the country is just beginning to see the effects. Perhaps the worst is behind us.

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