State leaders through the budget make impactful policy decisions. In estimating revenue, the budget can raise or lower tax rates. And in deciding how how $92 billion in taxpayer money is spent over two years, the budget decides what programs or initiatives will or will not be funded.
This story explains how the state budget is molded, and how tax increases and funding proposals in the proposed state budget may impact our region. It is part of our Inside Ohio Politics series, which gives readers an in-depth look at how the Statehouse works, and how policies impacting all Ohioans become laws.
Budget basics
The budget is a piece of legislation proposed by the Ohio governor and vetted by the Ohio House and Senate. Most of its appropriations in some way go toward funding programs administered by Ohio’s executive branch.
The current budget proposal is dubbed House Bill 96.
The bill funds Ohio’s executive offices (governor, lieutenant governor, secretary of state, attorney general, treasurer and auditor) and the state’s 30-plus executive departments, boards and commissions that make up the state’s vast and complicated administrative arm.
Those government organizations are responsible for administering over $11 billion toward public and private schools; about $3 billion toward Ohio’s 13 public universities; and so on.
While Ohio’s executive branch is far and away its most expensive and expansive branch of government, the operating budget also funds the state’s legislative branch and its judicial branch, whose respective $128.6 million and $472.6 million budget requests primarily cover payroll expenses.
One last basic: While the operating budget is by far the state’s largest obligation, it does not include most of the state’s spending on transportation, capital projects, or worker’s compensation, which are matters handled in separate spending bills.
Here’s the general outline of how Ohio creates its operating budget:
Step 1: Governor’s proposal
As the head of Ohio’s executive branch, it’s the governor’s job to propose an executive budget that both meets constitutional requirements and allows the state to complete its objectives.
That responsibility currently falls to Ohio Gov. Mike DeWine, who unveiled his fourth-and-final budget proposal earlier this month that, in all, was framed as a continuation of DeWine’s focus on Ohio’s youth and workforce.
Former Ohio Gov. Bob Taft said in an interview with this news outlet that the governor’s budget proposal is largely crafted through the Office of Budget and Management, which in the background directs executive agencies and offices to submit their own budget proposals, reviews those requests, and “identifies decisions that are to be made” by the governor.
“At the same time,” Taft said, “they’re also making and working with outside experts to arrive at revenue projections. That’s pretty essential for creating the budget. What do you expect in the next two year period (between) income tax, sales tax, business taxes.”
Taft explained that the Ohio Constitution requires that the governor submits, and ultimately passes, “a balanced budget, one that doesn’t spend any more money than is being collected or sourced from some source.”
To do this, the executive branch forecasts the amount of state tax revenue it will raise over the next two years, along with the amount of federal funding it expects, and from there sets appropriations to ensure that it expends no more than it receives over the next two years. If it looks like it’ll be a tighter budget, or one with considerable cuts, the governor can guide agencies' budgetary requests from the get-go.
Outside of ensuring that the state’s essential operations are funded, the governor gets to use his first swing at the budget as a way to directly propose policy to the Ohio legislature.
For example, DeWine’s current proposal has an assortment of new programs, including proposals to give Ohio families a $1,000 tax credit per child funded by a $1.50 cigarette tax increase, and to increase sports gambling taxes from 20% to 40% and direct the new revenue into a fund for major and minor league teams to improve or fully replace their stadiums and for the state to offset sports costs for Ohio youth.
He also proposes expanding drivers education, changing higher education funding, doubling taxes on recreational cannabis sales, and more.
Steps 2 & 3: Ohio House and Senate
Once the governor unveils his proposal, it gets sent to to the Ohio General Assembly, which is tasked with vetting, amending and approving a final bill.
The budget always starts in the 99-member Ohio House before a House-approved version gets passed along to the 33-member Senate.
In both chambers, the vetting process is largely controlled by the finance committee, which is tasked with ensuring the bill can get voted out of the chamber with support from at least a majority of its members.
Credit: Avery Kreemer
Credit: Avery Kreemer
Due to the breadth of the bill, finance committees will delegate certain responsibilities to relevant standing committees. For example, the House Human and Children Services Committee, chaired by local Rep. Andrea White, R-Kettering, was tasked with overseeing the budget requests of Ohio’s Department of Job and Family Services in February.
But, the finance committee gets final say on the budget before it gets sent to the chamber floor for a vote.
There’s a mind-boggling number of decisions to be made by the Ohio legislature when it comes to the budget, but perhaps none are as important or as debated as decisions on school funding and tax policy.
School funding
As House Finance Ranking Member Rep. Bride Rose Sweeney, D-Westlake, told this outlet, the budget is the vehicle in which Ohio lawmakers fulfill the legislature’s only explicit constitutional duty: funding the state’s K-12 public schools.
Ohio’s public schools are funded by both state funds and local property taxes. The state devises the formula that decides where and how it directs tens of billions of dollars toward public education every two years.
That formula can be either completely replaced or tweaked each budget cycle. Even small tweaks or omissions can make a difference of hundreds of millions of dollars toward public schools.
Sweeney, an advocate for robust state funding for public schools, told this outlet that if the state doesn’t pay its fair share, it forces local school districts to make tough decisions, given that the state shares the funding burden with local property taxes.
“We’re basically cementing a reliance on local property owners to either increase their property taxes or substantially cut services to our students,” Sweeney said.
DeWine’s current budget proposal would cut funding to traditional public schools and increase spending for voucher and charter schools, according to a nonpartisan legislative analysis of H.B. 96. DeWine’s office says this is a byproduct of the current school funding formula caused by increased property values.
In the last few days, the Ohio General Assembly has heard from multiple organizations, parents and school districts about the provision. Very few people who have testified so far agree with the cuts.
Ohio House Speaker Matt Huffman, R-Lima, meanwhile has suggested an overhaul of the state’s school funding formula, calling the current system “unsustainable.”
Any difference of opinion on how and how much Ohio’s schools are funded will be hashed out in the legislative process.
Taxes
Given that Ohio’s budget must be balanced, it has become the natural vehicle for the state to enact significant tax reforms, because changes in tax revenues mandate changes in appropriations.
DeWine’s proposal includes increases to taxes for cigarettes, cannabis and sports gambling.
Area Sen. George Lang, R-West Chester, told this outlet that he’s hoping to fold in his Senate Bill 3 into the state budget to “lower the income tax from 3.5 to 2.75 (percent) for the highest earners,” creating a flat 2.75% income tax for all earners in Ohio that make north of $26,000 a year.
“You know, based on the past couple of budgets, all of our reduction of income taxes has been put in the state budget,” said Lang, referencing the efforts the state has made to go from nine income tax brackets in the 2000s to just two today. “So, assuming (my bill) gets done, I think this is the right vehicle.”
Lang, whose ultimate goal is to eliminate income taxes entirely, said he expects a flat 2.75% income tax to actually increase the overall tax revenue the state generates.
“Tax revenues will go up as they have every time we have lowered taxes,” said Lang. “It’s a big misnomer that when you lower taxes, revenue will go down. Just the opposite has happened both at the federal level and at the state level.”
Once the budget is approved by the House, it then gets sent to the Senate, which runs its own vetting process and almost always makes considerable tweaks.
Any difference in the Senate and House budget gets sorted out in what’s called a conference committee, which includes just a handful of legislators that are tasked with compromising on differences.
Step 4: Becoming law
Once the legislature finishes up its tweaks, the bill then goes back to the governor’s desk for final approval.
The governor has considerably more power at this stage than just signing the bill into law — the Ohio Constitution gives the governor’s office line-item veto power on the budget and any other bill that makes fiscal appropriations. In effect, it allows DeWine to strike out provisions added by the legislature that he doesn’t like.
Once the operating budget is signed into law, it’s largely the executive branch’s responsibility to begin doling out the money as prescribed.
However, given that the budget is based off of a series of projections, some on-the-fly cuts might need to be made if revenues fall below projections.
“The governor is responsible for making sure that the state doesn’t spend any more in a year than we collect under the Constitution. In that case, the governor will have to do across-the-board cuts,” said Taft, who noted that he had to make a variety of cuts in the early 2000s due to a recession limiting the amount of revenue the state could raise.
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Avery Kreemer can be reached at 614-981-1422, on X, via email, or you can drop him a comment/tip with the survey below.
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