On Wednesday Ohio’s Office of Budget and Management (OBM) released preliminary data on general revenue fund (GRF) receipts for the month of April. Through April, GRF receipts for the fiscal year are 4% below estimates. In April alone tax receipts missed estimates by $866.5 million – (35.3% below estimates). Receipts are down in all tax categories. For the month of April, sales and use tax receipts are down by 24%, personal income tax receipts are down by 50.5% and commercial activity tax receipts are down by 11.1%. Before the COVID-19 public health emergency required changes in our daily movement and economic activities in late March, the state of Ohio had revenue receipts above budget estimates and the state was spending money at rates lower than budgeted estimates.
As the public health emergency continues for the foreseeable future, along with the increase in unemployment, it is clear that the state of Ohio will miss estimates for GRF receipts in May and June. Therefore, to meet the constitutional requirement of a balanced budget at fiscal year end on June 30, 2020, the governor announced a $775 million reduction in GRF spending to take place by the end of the fiscal year. Details of those spending reductions are also contained in the preliminary data sheet released today and include reduction in spending for all agencies.
The governor announced the reductions on Tuesday and provided an explanation of why he would not use the budget stabilization fund (BSF) commonly referred to as the rainy-day fund. In a tweet he stated: “I have decided to not draw money from the rainy day fund to cover the next two months’ deficit…” As he put it in a subsequent tweet, “I know that I have said that “it’s raining,” but we do not want to tap into that fund yet. The “rain” is not a passing spring shower — it could be a long, cold, lingering storm, and we should not use it until it is necessary.”
Thankfully, the governor did not call for tax increases to balance the 2020 fiscal year budget. Any increase in taxes or tax rates would be the wrong method to balance the budget while Ohioans try to maintain household income and businesses struggle to survive during the pandemic.
Hopefully, the combination of the financial strength the state of Ohio through the first nine months of the fiscal year and the announced spending reductions will keep the books balanced on June 30, 2020. If these steps are not sufficient, the legislature may need to introduce a budget correction bill later this spring to make last minute adjustments to appropriations to keep the ledger balanced through June 30th.
Read OBM’s release and support documents here.