State Budgeting Matters: “The Week that Was”

The January 9, 2009 issue of State Budgeting Matters by Richard Sheridan, Center for Community Solutions, is called “That Was the Week that Was.” This issue reviews and analyzes four reports that were released in December 2008:

• A response from state agencies/departments outlining how they would reduce spending in the next biennial budget by 25%
• The results of a directive issued by Governor Strickland to reduce the FY2009 budget by $640 million
• A report issued by the Auditor of State on the implementation of the recommendations of a performance audit of the Medicaid program
• A report released by Families USA on federal aid to states

The following are some of the observations made in this report regarding the budget situation for the state of Ohio:

• Some state agencies cannot reduce certain line items because they must preserve federal matching funds.
• Since the FY08-09 budget was enacted, GRF tax revenues are expected to be $1,519 billion less than expected.
• Two-thirds of the December 2008 ordered cuts in the current budget have been made in health and human services.
• Managing Medicaid spending presents a variety of challenges.
• The estimated savings in the Medicaid program if the recommendations of a state audit were fully implemented are not really known.
• The recommendation in the Medicaid audit to develop a vision and priorities for Medicaid should be studied.
• Without federal assistance, the state budget will have to undergo another “re-balance.”

“The practice of pushing Medicaid obligations for one biennium into the next has been expanded to the point of fiscal irresponsibility—the effect of which is to disguise the need for more state revenue, much as the use of other one-time revenue enhancements disguises the reality of a state in deep fiscal problems.”

“Increasingly, the state is taking more and more of its Medicaid spending out of the GRF and putting it into special accounts. Thus, when Medicaid spending is reported, it is almost always restricted to GRF spending, excluding the now-15% of the ODJFS Medicaid budget that is outside of the GRF, as well as the Medicaid spending by five other state agencies.”

According to this analysis, there is an “unspoken reality” regarding the state’s budget crisis, because, “the next budget will be impossible to balance without a substantial tax increase and/or the elimination of tax breaks (even if there is some federal economic recovery help forthcoming)” (p. 1).

“The real questions for the next biennium should be which taxes should be raised, which should be reduced, and what principles should be applied in making those determinations” (p. 1).

• Full report >

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Quality Counts 2009

The 13th annual Quality Counts education report issued by Education Week called Grading the States: Securing Progress, Striving to Improve, was released on January 8, 2009. This year the report, which is researched and prepared by the Editorial Projects in Education Research Center, provides a state-by-state analysis of 35 educational indicators in three graded categories: the Chance for Success Index, developed by the EPE Research Center; Transitions and Alignment; and School Finance and Equity.

This year’s report also provides a special focus on English language learners, including information about policy issues, and research on teaching, training, screening, graduation barriers, funding, etc. The report does not update information from states in several categories that have been included in the past, such as the teaching profession, standards, assessments, and accountability, although these categories are included in the report cards for each state. The authors explain that these categories will be updated biennially, and included in Quality Counts 2010.

The following categories were updated for Quality Counts 2009:

• Chance for Success Index. According to the report, overall the nation earned a C plus on this year»s Chance for Success Index, and Massachusetts earned the only A. This index combines information from 13 indicators, including family income, parent education and employment, high school graduation rates, and adult income and employment.
• Transitions and Alignment. This category tracks and grades states on 14 indicators related to transitions through the educational process, college readiness, and workforce readiness. The nation earned an overall C, and Maryland, New Mexico, and West Virginia earned an A.
• School Finance. This report analyzes school spending patterns and equity in distributing funds to school districts. The nation earned a C minus. Rhode Island and Wyoming earned an A-.
• English Language Learners. This report includes a detailed analysis of the 5.1 million students who are learning English.
• Report for Ohio. Overall Ohio earned a B minus and a score of 81.2 compared to a national score of 76.2. Ohio ranked sixth in the nation behind Maryland, Massachusetts, New York, Virginia, and New Jersey in its total score.

Ohio earned a B minus (80.3 score) in Chance for Success, which includes a score of 84.7 for early foundations, 78.6 for school years, and 77.9 for adult outcomes. Ohio earned a B minus (82.1 score) in Transitions and Alignment, which includes a score of 100 for early childhood education, 60 for college readiness, and 87.5 for economy and workforce. Ohio earned a B minus (80.2 score) for School Finance, which includes a score of 87.6 for equity, and 72.8 for spending.

• Complete report >
• Analysis for Ohio by the Ohio Department of Education > (follow the links for 1.07.2009)

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Ohio Kids Count 2008 Data Book

The Children’s Defense Fund-Ohio, Ron Browder executive director, has available on its website Ohio’s KIDS COUNT: 2008 Data Book. This report includes data on 14 indicators of child well-being in the categories of economic security, health, education, and safety for each of Ohio’s 88 counties and a summary of trends for each indicator. This year the Data Book also features information on the state’s implementation of Healthy People 2010 (HP 2010), a federal initiative that provides set objectives for measuring the health of the population. The report also includes examples of successful model programs and links to resources. The report was prepared with the support of the Annie E. Casey Foundation’s Kids Count project.

According to the economic security data for Ohio, the number of children living in poverty increased from less than 15% in 2001 to 18% in 2005. Metropolitan areas posted higher increases in poverty than other parts of Ohio. Increases were posted in the number of students receiving free or reduced price lunches, food stamps, and participation in public health care programs. Improvements were noted in education achievement and indicators related to abuse and neglect, teenage pregnancies, and adolescents adjudicated for felonies.

The data reviewed to measure education include graduation rates and an in-depth analysis of interventions for children and youth with serious emotional disturbances/severe behavioral handicaps. According to the report, “Black students saw a nearly 20% increase in their graduation rate,” especially those attending public schools in Ohio’s cities.

The report also includes facts and trends about Ohio’s child population, including percentage of children by age and by county, and shows if the indicator is getting better or worse in each county.

• Complete report >

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Policy Reports Released About School Funding and HB920

The KnowledgeWorks Foundation and Education Tax Policy Institute released reports on January 26, 2009 that focus on school funding models and HB 920, the tax reduction factor. The KnowledgeWorks Policy Report, The Importance of Costing out a Quality Education in Ohio: Why Evidence-based Should be Ohio’s Choice by Julie Brinker, provides insight into why Governor Strickland has adopted an “evidence-based” approach to revamp Ohio’s school funding system. The report recommends identifying initiatives, supported by research, that improve student achievement, such as extending the school year, all-day Kindergarten, linking students to community health and wellness resources, creating smaller classes, etc., and creating a school funding system that aligns resources to what works.

KnowledgeWorks and the Education Tax Policy Institute also released last week a second policy report called Property Taxes for Funding Public Education: Ohio’s Unique Method for Controlling Tax Increases by Bill Driscoll of Driscoll & Fleeter. This report examines the “origins and effects of Ohio’s unique system of adjustments to control year-to-year property tax increases—tax reduction factors commonly called House Bill 920.” It provides an excellent history of the HB920, an analysis of how property taxes work in general, and information about how the tax reduction factors are calculated.

According to the report, HB920 has forced school districts in Ohio to repeatedly ask voters to approve additional levies. In fact school districts in Ohio lead the nation in the number of local levies placed on the ballot. But, the report notes, “In the end, school district taxpayers paid slightly higher taxes through voted tax increases than they would have if HB920 never existed and taxes had risen automatically through higher valuations.” And, states the author, “"Thus, a major disadvantage of House Bill 920 lies in its inefficiency. Its control of automatic tax increases comes at the price of frequent ballot activity.”

The report outlines in a chart several options for addressing the negative impact of HB 920 on the ability of school districts in Ohio to secure stable and growing revenue to keep up with rising costs.

• Links to reports >

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Comprehensive Report Released on Ohio's Taxes, Tax Structure, and Impact

The Cleveland based Center for Community Solutions, John Begala director, released on January 12, 2009 a comprehensive report called Taxing Issues Redux, Paying for Essential State Health and Human Services Fiscal Year 2010 and Beyond by John Habat, Richard Marountas, Emily Campbell, Wendy Feinn, and Richard Sheridan. The authors also consulted an advisory committee that included R. Gregory Browning, Ph.D.; Hugh Calkins; Howard Fleeter, Ph.D.; Edward (Ned) Hill, Ph.D.; Jon Honeck, Ph.D.; William Keip; William Wilkins; and Rick Yokum. The views of the report are not necessarily those of advisory committee members. The report provides an overview of Ohio’s tax structure, an analysis of the impact of the changes made in state taxes over that past years, how Ohio ranks compared to other states, and proposed “solutions” to Ohio’s budget woes.

The report states that the impact of the national recession and tax reforms adopted by the Ohio General Assembly in 2005 will create a budget shortfall of $8.2 billion rather than the $7.3 billion projected by the Strickland administration for the biennium. The impact of the loss of this revenue will affect basic health and human services that Ohio citizens need. The report also notes that the 2005 tax cut and subsequent changes in the state’s tax structure supported by the Strickland administration have altered the tax burden and tax equity in Ohio.

This report updates an analysis of state and local taxes prepared by the Center for Community Solutions in 2003 called Taxing Issues. Using a new revenue forecasting method developed by Richard Marountas, the report describes the multibillion dollar structural gap in Ohio’s budget, which will be solved only temporarily if Ohio receives the billions of dollars it is requesting from the federal government.

According to the report, “The state has a major structural budget deficit that will not be erased once the economy improves. Options to significantly increase revenues and/or sharply cut essential state services await Governor Strickland and the 128th Ohio General Assembly. Potential budget cuts of up to 25 percent threaten to fundamentally change state government and curtail its capacity to fulfill its roles in meeting the needs of its citizens and public institutions.”

The report proposes that state leaders implement certain options to fix the structural problems of Ohio’s tax system and budget deficit. These include cutting the budget further, raising additional revenue, using the state’s Budget Stabilization (rainy day) Fund, closing tax loopholes, postponing phased-in changes in the tax structure such as the elimination of the corporate franchise tax, and more.

The Center for Community Solutions provides strategic leadership to improve targeted health, social, and economic conditions and is dedicated to conducting research and analysis to inform public debate on key public policy issues.

• Link to report >

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