Local governments told to ‘open books’

Kasich says communities, schools should use own surpluses

2/27/2017

COLUMBUS — Gov. John Kasich jealously has guarded against any attempt to tap into the state’s $2 billion budgetary reserves, but he has criticized local governments and school districts that sit on their own surpluses.

He continues to push for tax cuts at the state level while questioning whether local governments and school districts have taken full advantage of their own taxing authority before complaining about the amount of money sent from Columbus.

“It’s beyond a double standard. It’s complete hypocrisy,” said Lucas County Commissioner Pete Gerken, a Democrat. “We’ve been hearing this from Kasich through the years, and it’s ringing very shallow with us.”

Speaking recently to the Ohio Newspaper Association, Mr. Kasich noted that Congress eliminated revenue sharing with the states, equating that to the state’s continuing Local Government Fund that provides a slice of the state’s tax revenue collections to local entities.

“If the politicians in Washington can eliminate revenue sharing, what is this whole thing every time I turn around about the Local Government Fund?” he told reporters, editors, and publishers. “… I want you to look at the surpluses these small communities who complain have. ... Ask them to open their books, and then take an accountant in so you understand exactly what’s going on.”

When the Republican took office in 2011, the state’s budgetary reserves contained less than one dollar after his Democratic predecessor, Gov. Ted Strickland, depleted it to get the state through the last recession.

Today, Mr. Kasich proudly points to the fact that the “rainy day fund” holds about $2 billion. He’s warned lawmakers against touching that money, except to keep the state afloat in the next fiscal emergency.

The state isn’t there yet, but he has warned that Ohio might be on the “verge of recession.” For the first seven months of the fiscal year through January, Ohio’s tax collections have trailed projections by $388.1 million, or 2.9 percent.

“There’s a philosophical difference in how folks see it,” said Barbara Shaner, associate executive director of the Ohio Association of School Business Officials. “Our members at the local level do everything they can to be fiscally responsible.

“They’ve had a major shift in the tax burden over the last several years,” she said. “They’ve seen particular local taxes eliminated on the business side. Homeowners have had to pick up the slack. Folks who go out for levies for schools hear pushback. With a school levy, voters can say, ‘No, we don’t want that.’ ”

Mr. Gerken said Mr. Kasich has put pressure on local governments to raise taxes to maintain services so that he can continue to push for tax cuts at the state level.

“His tax reductions on the wealthy have come home to roost,” he said. “... It’s a cost shift to working people and poor people, and things are not going to change until we get a new governor. We do have a reserve. It’s a prudent reserve, not an excessive reserve. By every accounting principle, it’s prudent.”

The county reserve holds about $26 million, 16 percent of the county’s $158 million general fund budget. Mr. Gerken noted the county had figured it would have to dip into its own reserves to the tune of $6.25 million to meet the needs of this year’s operating budget.

That was a worst-case scenario that assumed the state would leave local governments completely hanging when it came to replacing revenue from a sales tax on Medicaid managed-care companies that the federal government is killing later this year.

Instead, the Kasich Administration has proposed gradually weaning counties and public transit authorities with piggyback sales taxes off their share of the revenue the next two years. He has proposed a permanent replacement — a fee on Medicaid managed-care services — that would take care of the state’s problem, but there is no permanent fix proposed for locals.

Lucas County already has asked agency heads to find 2 percent in budget cuts to help close the gap.

The Ohio House is debating Mr. Kasich’s latest two-year budget proposal unveiled late last month.

When asked about a specific school district at the newspaper event, Mr. Kasich said, “Go check their cash balances. See what they have in their cash balances. Go and see how it really works. See how they’re managing the school.

“By the way, are they doing joint work with other school districts so they have economics of scale — things like buying, computing?” he asked. “Are they doing any of that? … I would want to know the cash balances.

“And I would want to know how many students they have,” he said. “And I would want to know what their [property tax] valuation is. And I want to know what they do in terms of their own personal responsibility in passing levies.”

The governor is proposing changes in how the state distributes funds to local governments that reflect this line of thinking. Beginning in 2018, revenue flowing through the Local Government Fund would be distributed via a new formula based on their local ability to raise taxes.

The distribution of the temporary replacement money for the lost Medicaid managed-care sales tax revenue also takes into consideration whether the affected counties and transit authorities have maxed out their piggyback sales tax authority.

“We do see from members a frustration about how schools are funded, how they aren’t getting the resources they need,” Ms. Shaner said. “They have to rely on a state budget that gets adopted every two years. They don’t get too much necessarily into the specific statements the governor makes.

“His role is to go out and explain the decisions he makes,” she said. “We have the opportunity to work with the legislature to point out our views.”

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.