OHIO BUDGET

Proposal aims to ease loss of tax

State to replace lost revenue

2/7/2017

Under Gov. John Kasich’s two-year budget proposal submitted to lawmakers last week, Lucas County would make up some tax money the county expects to lose because of the repeal of a sales tax on managed-care companies providing Medicaid services.

ASSOCIATED PRESS

COLUMBUS — The pain of losing a tax that was expected to generate $11.8 million next year for Lucas County will be eased a bit by the state.

Under Gov. John Kasich’s two-year budget proposal submitted to lawmakers last week, Lucas County would receive $2.71 million in state money for the last quarter of 2017 toward $2.75 million the county expects to lose because of the repeal of a sales tax on managed-care companies providing Medicaid services.

For all of 2018, the state would replace $9.3 million of the estimated $11.8 million loss.

“It’s not 2018 that concerns me,” county Administrator Laura Lloyd-Jenkins said. “It’s 2019 and beyond that’s my real concern. Based on internal cuts, we can make up that $2.7 million [one-year] loss.”

The federal government has cracked down on Ohio’s use of its sales tax as applied to Medicaid managed-care companies that generated state dollars that, in turn, were matched with federal dollars for additional spending on Medicaid.

To fix his administration’s own $1 billion-plus revenue hole created over the next two years by the tax’s repeal, Mr. Kasich has proposed a state fee, rather than a tax, that would be applied to all managed-care providers, regardless of whether the service provided is related to Medicaid.

But the fee won’t benefit counties or the handful of public transit authorities that levy sales taxes, and Mr. Kasich has not proposed a permanent replacement for the lost local revenue. Instead, he has proposed gradually weaning counties and transit authorities off this revenue source.

The two-year budget he unveiled last week would provide $49 million statewide in temporary replacement funds for the fourth quarter of calendar year 2017 and $158 million for the full year of 2018 toward an estimated $200 million annual loss. The money would be paid in a lump sum to counties this October.

The distribution formula considers counties’ dependence on this revenue and whether they have already taken full advantage of their ability to levy local sales taxes. Lucas County has maxed out its sales-tax authority at 1.50 percent on top of the state’s 5.75 percent tax.

“To make counties complete would be the ideal situation,” said Lucas County Clerk of Courts Bernie Quilter, president of the Ohio Council of County Officials. “We could live with this, but we’d like to see counties made whole. Obviously, that’s not going to occur with this administration. That’s another battle for the next administration. We’ll be back.”

Mr. Quilter noted that the county has told agency heads like him to reduce their budgets by 2 percent by April. He has allowed a position within his office to remain vacant to meet his share of the burden.

“This proposal will provide a total of $207 million to all 88 counties and eight transit authorities and will be paid in October of 2017,” Tim Keen, Mr. Kasich’s budget director, told the House Finance Committee last week.

“Some will suggest that the state should permanently replace the lost local Medicaid sales tax revenue, but I would point out that these revenues have only been collected since 2010,” he said. “So, in my view, a permanent replacement for what was a short-term revenue source does not make sense.”

Mr. Kasich has proposed a broadening of the state sales-tax base to include several professional services — cable television, lobbying, interior design, landscape design, elective cosmetic surgery, travel packages, and repossession. Counties and public transit authorities with sales taxes would also benefit from the widening of this base.

But both parties in the General Assembly have not been eager to embrace such base-expansion proposals in the past.

Ms. Lloyd-Jenkins noted that the additional Medicaid managed-care taxing ability came along for counties at roughly the same time that the state began reducing its revenue sharing with local governments, something that snowballed under Mr. Kasich’s first budget passed in 2011.

“We made it interesting the disparity in how the state has proposed to address this for the state as opposed to this temporary approach for counties,” said Suzanne Dulaney, executive director of the County Commissioners Association of Ohio. “We will encourage our legislators to develop a more equitable solution.”

Pete Gerken, president of the Lucas County commissioners, compared the governor’s proposal to have the state keep the proposed fee on managed care providers as a beggar’s banquet.

“This certainly is not a solution that anybody is excited about,” he said. “We get three months of temporary relief and then plugged into a formula that is secret.”

Seneca County is among counties that would receive more money under the formula than what would have been generated under the tax. Instead of $693,013 a year, the county would get $904,551 for a 15-month period to replace the tax.

Some other northwest Ohio counties would get a fraction of what they stand to lose under the Kasich formula:

● Wood County: $237,910 for a 15-month period to replace a tax generating an average of $846,393 a year.

● Fulton: $368,374 covering 15 months to replace a tax generating $488,652 a year.

● Hancock: $116,906 covering 15 months to replace a tax generating $467,622 a year.

● Ottawa: $226,182 covering 15 months to replace a tax generating $447,742 a year.

● Sandusky: $558,488 covering 15 months to replace a tax generating $732,434 a year.

● Henry: $216,876 covering 15 months to replace a tax generating $231,619 a year.

● Putnam: $126,494 covering 15 months to replace a tax generating $192,253 a year.

● Defiance: $142,872 for 15 months to replace a tax collecting $295,699 a year.

The Toledo Area Regional Transit Authority’s local subsidy comes from property taxes collected in its service area, not a sales tax, so it is not affected by the repeal.

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