Governor should rethink parts of budget

It’s not surprising that some of Ohio Gov. John Kasich’s 2017-18 budget has put him at odds with local governments, especially Lorain County’s two largest cities, Lorain and Elyria.

City councils in both cities adopted resolutions opposing parts of Kasich’s proposed budget.

Lorain City Council believes the governor’s budget would harm residents.

According to Lorain legislation Council adopted March 20, the city is opposed to the state mandating centralized collection of net profit tax returns and other provisions related to municipal income tax which will cause a substantial loss of revenue needed to support Lorain.

The new state tax collection method would erode home rule powers granted to cities by the Ohio Constitution, according to the city legislation.

Municipal income tax is Lorain’s single largest revenue source, paying for essential services and a positive quality of life that residents and businesses alike rely upon.

The legislation added, “Any forced reduction in this revenue will have a negative impact on residents and businesses, creating an environment detrimental in retaining and attracting business in Ohio.”

Lorain is a community trying to reinvent and transform itself, especially the downtown, and if the city believes the proposed budget will hurt, the governor needs to know that.

Lorain Councilman-at-Large Joe Koziura went as far as to say the state is trying to circumvent the rights of local government.

Koziura listed issues ranging from cuts to local government funding to an increase in sales tax in Ohio to the growth of charter schools and vouchers.

And now, Koziura is calling for Mayor Chase Ritenauer and Treasurer Terri Soto to work with their respective elected official associations to oppose the change in tax collection.

Koziura also is predicting that local governments would have to raise taxes if the governor’s office gets its way.

“This is one that we ought to be prepared to fight because this is going to do harm to us,” Koziura said.

He could be right and he has some support on Council.

Councilwoman-at-Large Mary Springowski said this state budget proposal is a “complete over-reach on the part of this governor.”

Meanwhile, Ritenauer told Council the issues fall in with a larger initiative that could cut state and federal help for cities.

He cited examples such as eliminating Community Development Block Grants, revamping the Affordable Care Act and eliminating Medicaid expansion in Ohio.

Ritenauer said, “If just a fraction of these things come true, we haven’t seen any tough sledding yet, in terms of what we’ve dealt with. These would be catastrophic to the city of Lorain. So, we’re monitoring that very closely.”

In Elyria, the City Council adopted a resolution to oppose Kasich’s proposed budget regarding the processing of local income taxes.

Elyria Finance Director Ted Pileski told Council there is a lot of concern among city finance directors, treasurers and auditors that this is not a good idea, because they don’t think the department has the wherewithal to process the returns and quickly return the money.

Elyria contracts with the Regional Income Tax Agency to process and collect payroll tax withholdings and estimated income tax payments required by ordinance and individual and corporate tax returns.

According to city legislation, if the state centralizes collection of net profit returns, the city of Elyria could face a loss of revenue needed to support the health, safety, welfare and economic development of the city.

Pileski said, “It’s hard to put a number on exactly how much we will lose, but the concern is that they’re going to eliminate the throwback factor of the allocation of net profit calculations. Meaning, certain businesses will be affected such as warehouses and distribution centers; that’s where we stand to lose money at.“

Pileski makes it clear that if the state takes over, it will put pressure on his city’s general fund. And the big problem with that is going to be cash flow because the city would have to wait three months to get any money from the state of Ohio tax department.

Pileski said Elyria already has a struggling general fund and cash flow isn’t good now.

So, the governor’s plan would put a strain on Elyria’s general fund and police levy fund.

Last year, Regional Income Tax Agency charged 1.4 percent on net collections and the state is proposing 1 percent, but there are other factors to consider.

Pileski said, “We won’t get our money on a timely basis, and if this goes, I think next they are going to attempt to take over the withholding tax part of it. They will take everything away from us. We will be at their mercy.”

The state needs to listen to these cities and their concerns.

The two-year budget must pass the Republican-controlled legislature before July 1.

So, there’s still time for the Kasich administration to look at tweaking the budget.

It’s still the people’s money.