The State of Ohio Has Recovered Fiscally: The Possible Impact

Straight from the Ohio Society of CPAs web site:

State revenue is exceeding budget estimates for fiscal year 2006, though any surplus will be used to replenish the state’s dwindling budget stabilization fund (BSF).

Total tax receipts exceed Office of Budget Management estimates by $350 million and state spending is down $585 million, according to Gongwer News Service. Should the numbers hold true, the state is on track to realize its first surplus since FY 2000.

Any surplus is destined to replenish the state’s budget stabilization, or “rainy day,” fund, which contains about half the money mandated by statute. This amount is 5 percent of the previous year’s state spending. In recent years, the legislature has raided the BSF to cover soaring Medicaid costs.

If any surplus remains after the BSF is replenished, remaining funds will be returned to taxpayers through the Income Tax Reduction Fund.

Three points about the $935 million swing to the better:

1. Thanks to George Bush and Congress for the 2001 and especially 2003 tax cuts, which have finally filtered through to even poorly-run states like Ohio.
2. This ought to be an argument to consider state tax cuts beyond whatever is going into the Income Tax Reduction Fund.
3. IF spending can stay lower in the next fiscal year, IF the legislative version of Ken Blackwell’s Tax Expenditure Limitation (TEL) is enforceable (which appears to be in doubt), and IF the base from which TEL operates is actual spending and NOT what has been budgeted, the allowable spending increases under TEL might be appropriately low, and can stay low into the future.