Governor prompting tax hikes, locals say
Gov. John Kasich’s proposal to redirect state funding to local-government entities with less taxing capacity is creating a set of winners and losers that is drawing fire.
Kasich and his budget team have argued that the current local-government funding formula drives too much money to larger cities, and does not take into account
whether areas have the ability to fund their own services.
But the Ohio Municipal League says that kind of talk sounds like a push for some to raise local taxes.
“The conversation centers around your ability to raise revenue locally, which is tax talk for raising your rates,” said Kent Scarrett, executive director of the Municipal League.
“The pressure is being placed on local taxpayers. We don’t think that’s the right solution to address the inequities and challenges the cut in the local government fund has had and the elimination of the estate tax.”
Since 2005, local governments have lost hundreds of millions of dollars in state funding, though the figure has stabilized in recent years. Cities also no longer collect about $200 million per year from the estate tax, some lost millions in revenue after the tangible personal property tax was repealed, and counties may lose tens of millions next year from the loss of sales tax on Medicaid managed care.
“We don’t think robbing Peter to pay Paul is sound revenue-sharing policy,” Scarrett said.
Under Kasich’s budget, the local government fund is set to rise to $393.5 million overall by 2019, a 3.5 percent increase over two years. But of the 24 cities in central Ohio, 14 will get smaller increases.
The current formula Licking Fairfield Licking
Union Franklin Franklin
Franklin Fairfield Licking
Delaware Franklin Pickaway
Franklin Franklin Delaware
Franklin Franklin Franklin
Franklin Franklin Franklin
Franklin Franklin Franklin
Pickaway Fairfield Licking
Union Delaware Franklin is largely based on population. Kasich is proposing taking 5 percent of that money this year, and 10 percent in 2019, and distributing it under a new formula that takes into account how the tax capacity of counties, cities, villages or townships compares to the state average. He wants it at 20 percent by 2020.
Columbus stands to lose about $309,000 in state funding over the next two years, about a 1.5 percent decrease. The city fares better than Cleveland and Cincinnati, who respectively would lose about $2.1 million and $1.2 million.
Rep. Scott Ryan, R-Newark, the vice chairman of the House Finance Committee, said he’s not sure that carving out part of the existing fund to change the distribution is the right approach. But he said a long-term conversation on the local government fund needs to occur to “provide something that is a little more relevant.”
“The distribution model for the local government fund is an absolute mess,” Ryan said, adding that, in a lot of cases, it’s based on populations from the 1940s. “It has no bearing on common sense.”
Ryan pointed to Pataskala, a city that has grown heavily in recent years. This year, Newark is expected to get 24 times as much local government funding as Pataskala, even though the Licking County seat’s population is only about triple that of its neighbor to the west.
Under Kasich’s plan, Pataskala would get a 162 percent funding increase over two years, the biggest percentage increase in central Ohio.
The Municipal League wants the local government fund restored to its old rate, more than double the current 1.66 percent of the state general revenue fund. If that doesn’t happen — and it likely won’t — the League is advocating that the current fund remain, but a supplemental pot of money is distributed under a new formula.
There have been past efforts to change how local government funds are distributed, including by Rep. Bill Seitz, R-Cincinnati. But it is politically difficult because changes usually mean some local entities lose money.
Rather than changing the current funding, Ryan said he is more supportive of creating a separate stream of money “that we can distribute in a more sensible way.”
That money, Scarrett said, could come from interest on the state’s $2 billion rainy day fund.
Under Kasich’s plan, the biggest dollar increases in central Ohio would go to Newark ($131,000), Reynoldsburg ($126,000) and Lancaster ($96,000).
On the flip side, Dublin takes the biggest hit, losing nearly 25 percent of its funding — an $86,000 cut. Other cities seeing cuts include Whitehall ($53,000) and Worthington ($52,000).
All central Ohio counties would see increases, though Franklin County’s is the smallest at 3.1 percent over two years.
The House is expected to change and pass the Kasich budget in mid-April, sending it to the Senate.
“State policy changes that result in further budget cuts fundamentally weaken our ability to protect our communities and create jobs,” said Findlay Mayor Lydia Mihalik, speaking on behalf of the Ohio Mayors Alliance.