Counties facing loss of MCO sales tax revenue

The Lake County commissioners created a special fund needed to receive the last of the MCO sales tax revenues.

The Lake County commissioners on Oct. 5 created a special fund needed to receive the last of the Medicaid managed-care organization (MCO) sales tax revenues.

A change in federal regulation means the state can no longer impose a sales tax on Medicaid MCOs. Counties and transit agencies piggybacked on top of the state’s sales tax base for a total of $207 million annually. Lake County stands to lose between $1.6 million and $1.7 million annually.

The MCO sales tax revenue makes up roughly 4 percent of the county’s budget.

Counties and transit agencies will receive revenues for the final quarter of fiscal year 2017 — expected to be more than $400,000 in Lake County. The entities will also receive another payment in 2018. Lake County is expected to get about $200,000 from that payment.

If approved by the Ohio Senate and House, counties and transit agencies could split an additional $50 million between the 96 total entities.

The County Commissioners Association of Ohio’s Executive Board discussed how those funds would be distributed during a teleconference last week.

“We decided based on several options, the best way to do it was send it out dollar-for-dollar — whatever that comes to, 22-23 cents on the dollar — based on the average of what the sales tax collections were for counties and transit systems in ’15 and ’16,” Lake County Commissioner Daniel P. Troy.

Troy said they “did not want to get into any of the governor’s sales tax capacity formulas.”

He said those formulas would not have worked in Lake County’s best interests.

Counties and transit agencies have the potential to receive another $30 million on top of that to split in July if the state finishes the fiscal year with a surplus.

After that, the state’s 88 counties and eight transit agencies stand to lose $207 million annually with the loss of the MCO tax revenues.

The state has offset its losses on the change with a franchise fee on health insuring corporations that is projected to raise $615 million annually.

Counties and transit agencies have fought for protection from their losses. Gov. John Kasich vetoed a provision in the budget that would have fully reimbursed through a larger franchise fee — if the state received federal approval. That approval, however, appears unlikely.

The House overrode Kasich’s veto, but the Senate has taken a different approach, seeing if a deal could be reached instead.

With the deal, counties and transit agencies are getting a fraction of what they had hoped.

“It’s a compromise from our perspective,” Troy said. “As I said on the phone, I kind of feel like Germany in the Treaty of Versailles at the end of World War I, ‘These are the conditions by which you’re going to comply,’ ” Troy said last week.