Legislators, Dewine at odds on estimates
The Ohio General Assembly’s budget analysts believe that the economic and tax-revenue projections in Gov. Mike Dewine’s proposed two-year state budget are too rosy.
The Legislative Service Commission suggests that legislators cut the Republican governor’s recommended spending increase of $2.8 billion by $705 million, or 25 percent.
Such a reduction could imperil some of Dewine’s biggest-ticket items, including setting aside $900 million to improve water quality in the western Lake Erie basin and other waterways feeding Ohioans’ drinking-water supplies.
However, Dewine’s budget director, Kimberly Murnieks, stood her ground before the House Finance Committee Tuesday, saying the administration’s revenue forecast is “conservative” and “not aggressive.”
Mark Flanders, director of the Legislative Service Commission, forecasts continued economic expansion and tax growth, but not at the rate on which Dewine and his Cabinet built their $69 billion general-revenue budget request. Overall, Dewine wants to spend 3.6 percent more in the first year and 4.8 percent more in the second.
House Speaker Larry Householder, R-glenford, said he favors using a lower growth forecast, one that would slice into Dewine’s spending requests.
“I think when you look at growth and Ohio’s experience historically, I think the numbers the administration is offering are pretty high,” he said. “We would like to see them be that high, but to be cautious would be better.”
Flanders said the commission projects $705 million less in income than Dewine budgeted — $197 million less of a carryover from the state’s current fiscal year, which ends June 30; $347 million less in the next fiscal year; and $161 million less in the year after that. He said his office believes that taxrevenue growth will be only two-thirds of the Dewine budget’s forecast of 6.7 percent.
The differences between the executive and legislative forecasts amount to only 1.5 percent or less, but they result in real money in a $69 billion biennial operating budget. The Legislative Service Commission’s taxrevenue forecasts typically have been higher than the governor’s shop in recent budgets, with the legislature spending more money than Dewine then-gov. John Kasich had proposed.
Rep. Scott Oelslager, R-canton, said the House Finance Committee that he leads will continue to study the numbers as hearings begin on Dewine’s childrenheavy spending wish list, including $300 million to expand social and health services to impoverished students.
“Strong children grow into strong adults,” Murnieks said.
Rep. Jack Cera of Bellaire, the House Finance Committee’s ranking Democrat, cited Tuesday what he called mistakes by both the Dewine and Kasich administrations “leaving money on the table.”
The U.S. Supreme Court ruled last summer that a state may collect sales taxes from internet retailers that have no physical presence in the state, but Ohio has not moved to ensure that it collects the money. Cera said the money could help cover needed investments in the budget.
Department of Taxation Commissioner Jeff Mcclain told the legislators that an increasing number of internet retailers are voluntarily collecting and forwarding sales taxes on Ohioans’ purchases; the group includes the 25 largest online sellers.
The additional tax revenue, if fully collected from all sellers, could total between $350 million and $800 million a year under others’ estimates, Mcclain said.
Some Democrats also suggest that the state could raise more money by scaling back or eliminating a business tax cut of $1.1 billion a year that they deride as the “LLC loophole.”
Originally billed as a “small business” deduction, the cut allows pass-through entities — limited liability corporations, partnerships and the like — to pay no state income tax on the first $250,000 of income, and to get a 40 percent cut on income over $250,000 by paying 3 percent instead of 5 percent. Democrats say the move has done little to create the jobs promised to justify the huge tax cut, while forfeiting needed revenue.
The legislature’s Republican majority is unlikely to touch the tax cut, and Dewine did not suggest that it be changed.
The governor’s administration, however, is out to remove a provision in state law that affords skilled nursing homes an annual increase in their rates based on certain costs. Removal of the guarantee would save the state $75 million in the coming fiscal year and $165 million the following year.