Thursday, May 28, 2009


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Thursday, May 07, 2009


State Budgeting Matters

The newest issue (May 7) of State Budgeting Matters is now posted on our Website: FY 2010 - FY 2011 State Budget: The Out-of-Balance House Version. Sheridan examines in detail what the House of Representatives did to the governor’s budget proposals, who the "winners" and "losers" are in Sub. H.B. 1, what risks the House takes in its version, and what the Senate will likely be concerned about as it acts on Sub. H.B. 1 in the next four (or more) weeks. Read it here now:

Tuesday, May 05, 2009


State rainy day funds may be needed now, throwing HB 1 further out of balance

Less than one week after the Ohio House of Representatives sent the FY 2010-11 budget to the Senate, a Strickland Administration press conference today highlighted the abysmal under-performance of the personal income tax in April. April is a crucial month when the Tax Department closes its books on the 2008 filing season. Tax Commissioner Richard Levin’s presentation showed that 2008 annual returns produced $192 million (22 percent) less than expected. The administration’s estimates were closer to the mark in estimating employer withholding for the month (just 2 percent below estimates) but were much too optimistic in every other income tax category. In total, the income tax produced $322 million less GRF revenue in April than had been expected. Ten months into FY 2009, income tax collections are 15.3 percent lower than in FY 2009. Commissioner Levin did not mention that some of the underperformance was due to the final round of income tax cuts.

OBM Director Pari Sabety discussed the implications of the shortfall for FY 2009. She expected the downward trend in income tax revenue to continue in May and June, contributing to a cumulative deficit between $600 million and $900 million. With only two months remaining in the fiscal year Director Sabety said that only a small portion of the shortfall, perhaps $100 – $150 million, could be addressed through additional cost savings – the rest would probably have to come from the state’s rainy day fund, which requires legislative approval.

Any substantial use of the rainy day fund in this fiscal year would throw H.B. 1 further out of balance, jeopardizing the gains made by human services advocates in the House for programs such as food pantries and child and adult protective services. H.B. 1 relies heavily on the rainy day fund as well as roughly $6 billion in other federal and state one-time resources.
The continuing shortfall in tax receipts also will impact H.B. 1. OBM will not have new revenue estimates available until the conference committee, but these are likely to be much lower even than the most recent estimates prepared in December.

There are still many pieces to the budget puzzle that we don’t know, but which may become clearer in the coming days. Strangely, today’s press conference only covered the income tax. OBM will release preliminary returns for other April taxes soon (perhaps as early as tomorrow) and then we can see the big picture for total GRF revenue. It is also possible that larger than expected state agency under spending could help to address part of the FY 2009 shortfall.

The bottom line, however, is that H.B. 1 was built on unrealistic assumptions. The House used an extra $100 million in unclaimed funds and more generous Legislative Service Commission revenue estimates to make it fit together. The estimates did not take into account lower revenues from the tobacco tax which will result from recent federal legislation. Let’s stop putting on the band aids and fix the patient -- the state needs to take steps to shore up its eroding revenue base. The 2005 tax change framework, which will cause a net loss to the GRF of $2 billion in FY 2010, simply cannot be maintained in this environment.

Note: Jon Honeck is the author of this post. He can be contacted at

Monday, May 04, 2009


Recovery Watch: Shift in direction not unusual

Increased levels of investment in certain programs through the American Recovery and Reinvestment Act and the Fiscal Year 2010 Budget Resolution passed last week by the U.S. House and U.S. Senate reflects a shift in priorities under the Obama Administration. In recent history, it has been common for a sweeping change in budgetary and fiscal direction during the first year of a new President’s term. During their first seven months, Presidents Ronald Reagan, Bill Clinton, and George W. Bush all signed the most significant economic legislation of their presidencies.

Reagan’s Economic Recovery Act included tax cuts, regulatory relief, higher defense spending, and tight monetary policy to control inflation. After several years of increasing deficits, Clinton changed course and proposed one of the most aggressive deficit reduction programs in history. Clinton’s plan coupled tax increases with modest spending reductions. Bush’s tax cuts, which sought to spur economic growth by putting money in the hands of consumers rather than government, were included as part of his first budget proposal.


Five Things You Need To Know This Week, May 4, 2009

1. In the Nation...
For the first time in more than three decades, Social Security recipients will not get any increase in their benefits next year, federal forecasts show.

2. In the State...
The same budget plan that promises billions to primary and secondary education over the next decade would deny thousands of low-income Ohio youngsters access to state-funded preschool.

3. In the Region...
Twinsburg plant among five Chrysler to close by end of 2010

4. At Community Solutions...
This week, readers of State Budgeting Matters are treated to two editions—one special edition by John Begala (May 1) and the regularly scheduled edition by Dick Sheridan (later this week). The special edition, “Medicaid and the Impending Train Wreck in Ohio Government,” illustrates how the evolution of Ohio’s Medicaid program through the decades is exemplary proof of George Santayana’s well-worn admonition: “Those who fail to learn from history are doomed to repeat it.” Read it here now:

5. Miscellaneous
The American Chestnut Foundation hopes to reintroduce the American chestnut tree, which once dominated forests in northern Ohio and other states before becoming virtually extinct.

Friday, May 01, 2009


State Budget Update

As the state budget officially moved from the House to the Senate this week, human service advocates were partially successful at shoring up funding needed for many critical services.

We are pleased that the House made a number of needed changes, and we hope that the Senate will continue working toward full restoration of funding for human service programs. Some of the key changes included:

  • Adding $50 million per year for child and adult protective services; These programs are still $12 million short of full restoration;Boosting funding for the Second Harvest Food Banks to $12 million per year, leaving the program $5 million per year below the requested level;
  • Adding $1 million per year for behavioral health services for children under the age of 7;
  • Increasing the Medicaid rate ceiling for behavioral health providers by ½ of 1% in each year of the biennium; and
  • Increasing home and community based options for long term care by creating a “superwaiver” in the Department of Aging and ending limitations such as the number of slots in the assisted living program and regional limits for the self-directed Choices waiver.

We are disappointed that the House chose not to restore full funding to county job and family service departments even though more Ohioans are requesting assistance. The House also removed some executive proposals and added other provisions that will increase costs and make it more difficult to keep the budget in balance. In the long run these choices will add to the already substantial FY 2012-2013 structural deficit. Several of these items include:

  • Elimination of a provision that limited reimbursements to hospitals from Medicaid managed care plans to rates paid for Medicaid fee for service. The removal of this proposal will increase Medicaid managed care costs by $35.1 million in FY 2010 and $110.5 million in FY 2011 and by even more in the next biennium;
  • Increasing state support for nursing facilities – an industry where the supply of beds exceeds demand; and
  • Elimination of proposed sentencing reforms that would substantially reduce the number of low-level, non-violent offenders in prisons.
We remain concerned about state revenues. April’s monthly report will be released soon, and there is no reason to expect that state revenues will look much better than they did in March. The continued erosion of FY 2009 tax receipts will lower the base for the updated estimate currently being prepared for next month’s conference committee.

Let’s hope that the forecast specialists at the Department of Taxation and Legislative Service Commission are adding foil to the antennae on their crystal balls to improve the signal and rubbing lucky pennies as they update their estimates.

Advocates need to stay alert, engaged, and informed. The ride is just getting started.


This Week in Washington - 5/1/09

Congress finished its work on the budget resolution this week. The President has indicated he will send up his detailed budget request next week, which will help move the appropriations process to the next stage. It will also include important details on the Administration’s revenue proposals, including “loophole closers” and other revenue raisers that can help finance important investments.

Congress passed a final budget resolution on Wednesday. Remember, as a resolution, it does not go to the President for his signature. The budget projects $3.6 trillion in total outlays, including $1.1 trillion for discretionary spending, in FY2010. It also projects a deficit of $1.2 trillion. It provides reconciliation instructions to the Finance and Health, Education, Labor and Pensions Committees in the Senate, and to the Ways and Means, Education and Labor (HELP), and Energy and Commerce Committees in the House, largely to accommodate the passage of health reform. The late reporting date – October 15 – will allow the Finance Committee to put off the decision about whether to use the reconciliation process to enact health care reform legislation.

The House vote was 233-193. The Senate vote was 53-43. No Republican in either chamber voted for the final budget. Seventeen House Democrats – including Representative Kucinich – voted no. Four Senate Democrats voted no.

Adoption of the budget resolution will help move the appropriations process forward, and will help facilitate consideration of health care, education, and energy/climate change policies.

Meanwhile, House Blue Dogs continue to press for enactment of statutory pay-as-you-go rules to help restore fiscal discipline. Speaker Pelosi and Majority Leader Hoyer put the Senate on notice, via letter, that the House will attach statutory PAYGO to legislation to extend middle class tax cuts, the AMT, the estate tax, or Medicare physician payments, and will not consider any bills or conference reports on these issues unless the bills or conference reports include statutory PAYGO, have been fully offset under traditional scorekeeping, or statutory PAYGO has already been enacted into law. Speaker Pelosi has also asked committee chairmen to find ways to cut spending on programs under their jurisdiction and report back to her by June 2. Her letter did not indicate the level of savings she is looking for.

As part of its deliberations on health reform, the Senate Finance Committee held a closed-door meeting yesterday to review options to cut costs and improve quality in the health care delivery system. In advance of the session, Chairman Baucus publicly released a policy options document, which can be found here. The Committee has not yet made firm decisions about these options, but many are expected to become part of the Chairman’s health reform “mark.”

Two additional policy options documents will be released following the “coverage” and “financing” roundtables scheduled for May. The coverage roundtable is scheduled for next Tuesday, May 5,th and we expect extensive discussion about the role of Medicaid in health reform. If one of your Senators is a member of the Finance Committee, consider contacting staff before Tuesday’s roundtable to reiterate the need to strengthen and improve Medicaid as part of health reform.

The Senate HELP Committee (of which Sherrod Brown is a member) also held reform-related events this week with hearings on primary care access and state-level reform efforts. As mentioned in last week’s email, the Finance and HELP committees are expected to mark up separate, complementary bills that will be merged into a comprehensive piece of legislation.


Cleveland's air quality improving

The American Lung Association came out with State of the Air this week, its annual air quality report card. It gave Cuyahoga County a grade of F in both ozone and particle pollution, and Cleveland-Akron-Elyria ranked 10th highest for people at risk from year-round particle pollution. However, despite these grades, the report noted that Cleveland showed significant, continued improvement over the past five years. We stand to continue improving as we recognize the effects that the built environment has on public health, and we give more consideration to these factors in urban planning decisions to improve air and water quality, safety, and other health factors.

Air pollution increases the risks for certain illnesses. According to the report, year round exposure to particle pollution has been linked to increased risks from asthma, lung cancer, and cardiovascular disease. Particle pollution poses higher risks to children and the elderly, and those with lung or heart diseases. It particularly increases risks for children living near roads with heavy truck or trailer traffic. The report also found disparities in who is exposed to the pollutants, with low-income and some minority groups having higher exposure. It included speculations from scientists about the reasons for the disparities, including racism and class bias in the housing market, lack of access to health care, grocery stores, and good jobs, dirtier workplaces, and higher exposure to traffic.

The report also provided recommendations on how to improve air quality including the use of federal transportation funds to retrofit diesel engines. Local planning decisions can also improve air quality by reducing the amount of miles we drive through mixed-use and denser development patterns, improved public transit, and the use of vegetation in land developments to purify the air.


Special Edition State Budgeting Matters

The May 1, 2009 issue of State Budgeting Matteris now posted on our Website. This special edition issue takes a look at Medicaid and the Impending Train Wreck in Ohio Government. Read it here now:

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