State offers counties fraction of lost sales-tax funds

County and transitauthority leaders hoping for a deal to save them from losing $207 million in annual sales-tax revenue are disappointed that GOP legislators are offering a fraction of that amount.

County officials, the Kasich administration and Republican legislators tried to reach an agreement on replacing revenue lost when the federal government said the state could no longer impose sales taxes on Medicaid managed-care organizations.

Ideas to fund replacement money, including expanding the sales tax to all managed-care organizations or increasing the severance tax on fracking, were kicked around.

But with legislators unwilling to raise more revenue and Gov. John Kasich reluctant to sign a long-term solution, Sen. Matt Dolan, R-Chagrin Falls, proposed a single $50 million payment to be made in January, and up to $30 million more in July 2018 if the state budget finishes with a surplus.

“We are obviously disappointed we are getting a short- term solution,” said Ron Amstutz, a Wayne County commissioner and former legislative leader who served 30- plus years in the Statehouse. “A short- term solution is helpful for now, but it’s going to mean a lot of hard work for the next administration and General Assembly to address this issue in a more meaningful way.”

His northeastern Ohio county, Amstutz said, stands to lose about as much as it spends per year on its entire common pleas court. The opioid crisis, he said, is putting pressure on local mental-health, criminal-justice and children’s services across the state.

Without a reimbursement, losing the managed-care tax will cost Franklin County about $21 million per year, while the Central Ohio Transit Authority will lose more than $8 million annually.

The state also stood to lose significant sales-tax revenue, but the legislature and Kasich took care of that with a new franchise fee on “health insuring” corporations that is to raise $615 million annually.

Kasich vetoed a budget provision that would have fully reimbursed counties for five years through a larger franchise fee, provided the state got federal approval. Kasich argued that such approval was unlikely, and that asking for it could cause the federal government to revisit and possibly reduce the state’s prior franchise-fee increase.

The House voted to override the veto, but Senate leaders decided instead to see whether an alternative deal could be worked out.

“The direction we felt we were getting from the (federal Centers for Medicare and Medicaid Services) was that the fee would not be granted,” Dolan said. “So the issue is: Do we override the veto, and the counties get nothing?”

The $50 million, Dolan said, is what Senate Republicans “thought the administration could dig deep and come up with.” Kasich’s budget office will be told it has to find the money without raising additional revenue.

“Neither side is happy,” Dolan said. “The administration has to dig deep, and that’s obviously going to cut into any sort of cushion that they have. The counties aren’t happy, because there is significant loss of dollars for them.”

The administration will support the deal, although Tim Keen, the state budget director, declined to comment Monday.

The money would be added to the $207 million already in the two-year budget aimed at reimbursing counties in this calendar year.

That money is largely distributed based on how much a county depends on revenue from the Medicaid sales tax. Counties with large retail sales or few Medicaid recipients will get less.

Amstutz said he is helping to craft a formula to distribute the additional $50 million to $80 million.

“It kind of kicks the can down the road, but it does help in the short run,” he said.

Dolan said there is no plan to revisit the issue next year.