Budget Director, Lawmakers Butt Heads Over How To Use Surplus

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Ohio budget director Tim Keen says the revenue forecast hinges on how businesses and individuals may have reacted to the uncertainty surrounding the so-called “fiscal cliff” at the end of 2012, when some made moves to avoid what they feared might be higher taxes.(Photo: Flickr)
Ohio budget director Tim Keen says the revenue forecast hinges on how businesses and individuals may have reacted to the uncertainty surrounding the so-called “fiscal cliff” at the end of 2012, when some made moves to avoid what they feared might be higher taxes.(Photo: Flickr)

The committee working out the differences between the House and Senate versions of the state budget now has updated estimates on tax revenues and Medicaid.

Tax receipts are up and Medicaid costs are down, but those numbers come with a caution.

The state will likely have more money at the end of the fiscal year than originally expected. That’s the word from state budget director Tim Keen, who testified before the six-member conference committee.

“OBM projects that income tax revenues will end FY 2013 $569 million above the original estimate,” says Keen. “This is the primary reason that overall tax revenues are expected to end FY 2013 $709 million above the original estimates, and 10.8 percent over FY 2012 revenue totals.”

Keen said the revenue forecast hinges on how businesses and individuals may have reacted to the uncertainty surrounding the so-called “fiscal cliff” at the end of 2012, when some made moves to avoid what they feared might be higher taxes.

And Keen said much of the balance comes from the one-time payment to lease the state’s liquor profits. Mark Flanders with the Legislative Service Commission, which does bill analyses, says there’s also good news from Medicaid.

“While the total caseload is higher, expenditures are projected to be lower because individuals in the covered ‘families with children’ and the ‘aged, blind and disabled’ groups are more costly than those in the “all other” group. The “all other” group is least costly since Medicaid only pays for cost-sharing and limited benefits for those individuals,” Flanders says.

But while these numbers show more money in the state’s coffers, Keen said once installments to the federal government for unemployment benefits, transfers to the rainy day fund and other things are paid, there won’t be much left over.

“Using the Senate budget assumption, that leaves an uncommitted ending balance of $396.8 million. It is the governor’s view that the remaining uncommitted ending balance funds should be returned to taxpayers.”

While Keen is referring to a one-time refund for taxpayers, legislators have been thinking longer-term. The biggest sticking point between both budgets is a seven percent income tax cut in the House version and a 50 percent small business tax cut in the Senate plan.

Each would cost about $1.5 billion.

After the presentations, Keen said lawmakers have to be careful how they use these slightly improved numbers.

“We will have to carefully review the policy choices that we make in order to ensure that we maintain an appropriate structural balance that we’ve fought so hard to regain. And we will do that,” Keen said.

Conference committee co-chair Ron Amstutz, a Republican of Wooster, says the warning from Keen is being taken into account in the discussions about the two tax cuts.

“It’s going to be probably a more modest package than simply adding the two together.”

Amstutz wouldn’t say what that might look like, but suggested that something is in the works.

“We’re working on a plan that will be, have some elements that will make some news stories because you haven’t seen them.”

Amstutz says he hopes the committee will have recommendations early next week. The deadline to have the budget passed by the House and Senate and signed by Gov. John Kasich is July 1.

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