State Budget Update

The staredown between Senate Republicans and the governor and House escalated this week as Senate President Bill Harris dug in his heels in opposition to expanding gambling through video lottery terminals (VLTs) at Ohios racetracks. Continuing to say that he has questions about the revenue estimates and how it would run, Harris on Wednesday announced the formation of a five-member Select Committee on Video Lottery. Chaired by Sen. Mark Wagoner (R-Toledo), the committee also includes Republican Sens. Tim Grendell (Chesterland) and Jon Husted (Kettering) and Democrat Sens. Capri Cafaro (Warren) and Dale Miller (Cleveland). Hearings started Thursday.

The House, on the other hand, responded by scheduling a series of three hearings by the House Finance and Appropriations Committee on the impact of potential Senate budget decisions with House Speaker Armond Budish (D-Beachwood) saying it is apparent the Senate intends to propose deep and painful cuts to programs and services which are likely to cause great pain for the people of Ohio. This is after the governors proposed budget solution for FY10-11 already includes $2.4 billion in cuts.

It became official: Ohio did not meet the July 1 deadline to have a budget in place for the FY10-11 biennium. So the state is currently operating in a continuing budget for seven days through Tuesday, July 7 at basically 70 percent spending levels except school districts are to receive 100 percent of what they are due from the foundation formula and colleges and universities are to receive a months worth of instructional subsidy funding. In addition, debt service is exempt; Medicaid is authorized to make required payments; and the Controlling Board gets money for emergencies. This first interim budget was attached to HB16 (Sykes), the Industrial Commission budget.

However, a second interim budget, this one running through July 14, has already passed the House. HB245 (Sykes) is similar to the first interim budget.

Some effects of the interim budgets are already being seen among state agencies including the shutting down of the Ohio Medicaid Consumer Hotline for the duration of the interim budget.

Interestingly enough, Republican Sen. Bill Seitz (Cincinnati) said he believes the governor is correct that VLTs at racetracks should, indeed, be approved through legislation and not as his Senate president wants it done, through an executive order. It is prudent for the Legislature to have statutory guardrails normally the Legislature wants to do that. Issues he said that should be dealt with in law are procurement questions, inspector general authority and the possible tension between this proposal and the current prohibition on slot machines.

In almost a footnote to the weeks budget news, the Office of Budget and Management (OBM) sent the FY08 financial statements to Auditor of State Mary Taylor so that she can begin her audit of the states books for FY08. Taylor, back in March, had threatened to declare the state unauditable since the documents had yet to be produced. Some even called for the resignation of OBM Director Pari Sabety who said the transition to the Ohio Administrative Knowledge System (OAKS) had made it difficult to meet the normal timeframe.

The Center for Community Solutions, a Cleveland policy research outfit, urged lawmakers to drop consideration of a film tax credit from budget deliberations, saying it would be ineffective and could end up costing the state money. Jon Honeck, a policy fellow at the center, said the film industry typically does not create permanent jobs and imports people for most high-paying jobs from out of state, and he said the credits create bidding wars among states, increasing pressure to increase the credits.