COLUMBUS, Ohio — Some Ohio municipalities, including Cleveland, fear a funding distribution change proposed in Gov. John Kasich’s budget could lead to more cuts in their state aid.
The state’s local government fund — established in 1934 in a deal with local governments to create the state sales tax — is currently divvied up based on several factors, including population. Kasich’s plan calls for a portion of the fund to be allocated based on need, or the local government’s “capacity” to raise local revenue.
Cleveland Mayor Frank Jackson on Wednesday criticized the plan as another hit to cities, the source of the bulk of state tax revenue, that are still coping with past cuts.
“So it’s not based on who pays into the pot and an equitable redistribution back,” Jackson said. “They’re talking about based on needs — whose needs?”
Ohio Budget Director Tim Keen said governments with higher property values and are more urbanized have greater ability to raise money through local taxes. Keen told lawmakers they should support the idea if they represent areas that have been economically challenged.
“…Because it’s the state trying to focus resources to help those local entities deliver the basic services that their citizens expect from their local governments rather than send these dollars out as we have to those, frankly, who don’t need much assistance because of the ability they have to raise revenue out of their existing tax capacity,” Keen told the House Finance Committee on Wednesday.
In 2018, 10 percent of the fund would be allocated according to the new formula, Keen said. That amount would rise to 18 percent in 2019 and 20 percent in 2020. The money would be distributed directly to cities, villages and townships instead of through counties.
Keen said 37 percent of the new fund would go to counties, about 48 percent would go to cities, about 10 percent would go to townships and about 5 percent would go to villages.
Previous cuts
Kent Scarrett, executive director of the Ohio Municipal League, opposes the change, which he said would create a system of winners and losers. Cities and villages could be punished for recently raising their taxes, or they could be forced to raise taxes in the future if they get less state support.
“We’re hopeful the legislature sees fit to give our communities a break and stop the continuous assault on our abilities to manage what revenues are left,” Scarrett said.
The local government fund is a percentage of state general revenues, which largely come from income and sales taxes.
In 2011, Kasich slashed the local government fund in half over two years as part of patching an $8 billion budget hole. The fund went from taking 3.68 percent of the state’s general revenue fund in 2011 to 1.66 percent today.
Local governments have said those reductions, coupled with the elimination of the estate tax and phase out of another state tax, were devastating to police and fire squads and other public services.
Previous coverage: 12 smaller cities losing millions from state cuts
On Wednesday, Keen said those were “reasonable and manageable reductions,” and the funding represents less than 2 to 5 percent of the total budgets of local governments.
The idea isn’t completely new
This isn’t the first time Kasich has proposed funding based on ability to raise local taxes.
In 2015, he proposed a similar funding formula for schools using property values and median incomes, along with other factors like special education needs and poverty.
About half of the state’s school districts would have received less money under the plan. Lawmakers scrapped the plan after hearing complaints from school officials and parents.
The local government change wasn’t highlighted during Monday’s public rollout of Kasich’s 2018-19 budget plan.
The governor did reiterate his view that wealthier districts have a responsibility to carry a bigger share of their expenses.
“We have to have a system that allows people who can help themselves help themselves so that we can put more into poor districts that need it,” Kasich said Monday. “There are people in some parts of the state that can’t help themselves because they don’t have the wealth to do it.
“To whom much is given much is expected.”
2017 Ohio Budget Coverage
Our editors found this article on this site using Google and regenerated it for our readers.
