Revenue Shortfalls Complicate Work on New State Budget

With the House set to unveil its first set of adjustments to Gov. John Kasich’s proposed budget in less than two weeks, news that tax receipts for the current fiscal year are now nearly $615 million below forecasts have caused lawmakers to reassess the assumptions on which they’ll craft the new budget. At a press conference on April 13, the governor, Senate Pres. Larry Obhof and House Speaker Cliff Rosenberger announced they will cut spending by $400 million each fiscal year from what was in the original executive budget proposal.

The announcement is a recognition that sluggish tax collections are not an aberration, but are expected to continue indefinitely. Given this economic uncertainty, taking steps to scale back projections – and expectations – before the legislature begins to make any budget decisions is a responsible and wise approach to keeping Ohio’s fiscal house in order.

Lowering revenue forecasts almost certainly means that more income tax cuts are a nonstarter. The governor’s budget calls for a net $39 million reduction in personal income taxes: income tax cuts totaling $3.1 billion, offset by tax increases totaling roughly the same amount. Even before today’s announcement, there appeared to be minimal support for this tax package amongst legislators.

The General Assembly is currently on a two-week spring break, and is set to return to Columbus on April 25. It is on that day that the House is scheduled to make public its substitute version of the budget bill, House Bill 49. Trimming $200 million per year certainly won’t be easy, either from a public policy point of view or politically.

Committee hearings and testimony on the House changes are anticipated throughout the rest of the week of April 25, with a second round of amendments to be considered early the following week. The full House is expected to vote on HB 49 on Thursday, May 4. From there, the Senate will begin its consideration of the budget. A final budget package must be signed by the governor by the end of June.

Fortunately, a top Ohio Chamber priority for the budget shouldn’t be impacted by today’s news. That’s because the common sense municipal tax reforms included in the governor’s budget that would simplify filings don’t have a financial impact on the state budget. They would, however, save Ohio businesses time and money that is better served growing business and creating jobs.

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