September 25, 2009 HIGH COURT SAYS VLT'S SUBJECT TO REFERENDUM; DECISION PUTS STATE S CREDIT RATING AT RISK

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1 September 25, 2009 HIGH COURT SAYS VLT'S SUBJECT TO REFERENDUM; DECISION PUTS STATE S CREDIT RATING AT RISK Supreme Court Rules on VLT Referendum On Monday, the Ohio Supreme Court ruled that Governor Ted Strickland's plan to install video lottery machines (VLTs) at horse racetracks is subject to referendum. The decision, a 6-1 opinion, allows LetOhioVote.org, a ballot issue group, 90 days in which to circulate petitions in its drive to overturn a provision in the state budget that authorizes the Ohio Lottery to operate video slots. Authoring the majority opinion, Justice Terrence O Donnell said the Court was aware of the effect its decision might have on the state budget. "(However), our own constitutional duty is to ensure compliance with the requirements of the Ohio Constitution irrespective of their effect on the state's current financial conditions. Gov. Strickland proposed installing up to 17,500 slot machines at seven tracks in hopes of generating $933 million during the biennium to help balance a budget built on billions in federal aid and spending cuts. Under state law, LetOhioVote.org now has 90 days in which to submit at least 241,366 valid signatures, equaling at least 6% of the 2006 gubernatorial vote, and in at least 44 of the state's 88 counties. Should the group should reach the required number of signatures, the question would appear on the Nov. 2, 2010, general election ballot. Attorney General Richard Cordray's office previously had argued that granting the order LetOhioVote.org sought would be a vain act. The state contended the Ohio Lottery Commission already has authority needed to implement video gambling without the amendments contained in the budget bill. Gov. Strickland directed the lottery in July to immediately begin implementing placement of 2,500 video slots at each of the seven tracks. However, he conditioned the directive on the General Assembly's enactment of the VLT provisions in dispute. 1

2 Justice O'Donnell opined that the lawsuit did not turn on policy considerations but rather with whether Ohioans had a right of referendum. The provisions were subject to a potential challenge because they were not tax levies, appropriations for current expenses, or emergency laws needed to preserve public peace, health, or safety said the majority. Wasting little time after the Court s decision, a mere five hours later, LetOhioVote.org submitted referendum summary language to Attorney General Richard Cordray, and delivered 77 petitions. Firm Announces Revision of State Bond Rating Outlook In another unfortunate rebuke to the Administration, Gov. Ted Strickland's slots-at-racetracks plan has caused a national bond-rating agency to lower its outlook for Ohio's general obligation debt to "negative." On Wednesday, Standard & Poor's Ratings Services announced its outlook revision, while maintaining a long-term rating of the GO debt, which plays a part in the state's cost of issuing bonds, at a relatively high AA+. The firm cited Monday's Ohio Supreme Court's decision: "This was a key component to balancing the budget and was expected to generate nearly $1 billion over the biennium. The Court decision adds uncertainty about the timing and realization of these revenues, which were one of the primary revenue enhancements included in the budget stabilization reserve and the ongoing use of general and other state reserves." Under constitutional requirements, money from the VLTs, because they would be operated by the Ohio Lottery Commission, must be dedicated to K-12 education programs. However, the Conference Committee on the budget, while assuming some $933 million from the new slots revenue source, also backed out more than $1.1 billion in general revenue funds from the Department of Education budget. Administration spokeswoman Amanda Wurst was quick to note that Ohio faces the same budget challenges as other states and while S&P s revised their outlook, all three credit rating agencies, including the S&P, have maintained Ohio's credit rating, which remains the highest quality. Fitch and Moody's rating services previously had cut Ohio's bond ratings from the second-to third-highest levels while revising the state's outlook to "stable. Those two firms have yet to react to the VLT circumstances. SENATE MOVES REDISTRICTING PLAN TO HOUSE ON PARTY LINES On Wednesday, the Republican controlled Senate passed a plan to revise how Ohio divvies up its legislative and congressional districts, but the measure failed to garner a single vote from the minority, all but guaranteeing it s shelving in the Democrat-controlled House. The legislation passed after a party-line vote following the tabling an amendment that would have removed language regarding a district competitiveness standard. 2

3 The bill s sponsor, Sen. Jon Husted (R-Kettering), said the measure would create a sevenmember Ohio Redistricting Commission that would go a long way toward taking politics out of the process of drawing district lines following the decennial censuses. As drafted, the legislation would call for a commission comprised of top state elected officials who would oversee the drawing of House and Senate districts (currently performed by the Apportionment Board) and the realignment of congressional boundaries (now performed by the General Assembly). Adoption of the new plans would require a five-member supermajority of the commission that includes two votes from non-majority party members. The panel would be comprised of the Governor, Auditor, Secretary of State, House Speaker, Senate President, and leaders of the minority party from both chambers. However, Speaker Armond Budish (D-Beachwood) took note that the resolution failed to garner any Democratic backing, spokesman Keary McCarthy said later. "The Speaker feels that real improvements to the redistricting process must start with broad consensus-building efforts and conclude with bipartisan support. HOUSE BEGINS HEARINGS ON ELECTION LAW REFORM MEASURE On Wednesday, the House Elections & Ethics Committee initiated hearings on comprehensive election legislation sponsored by Chairman Dan Stewart (D-Columbus). The Chairman joined co-sponsor Rep. Tracy Heard (D-Columbus) in delivering sponsor testimony. The sponsor noted the following numerous significant changes in current election law amongst the many reform provisions the legislation (HB 260) entails: reduce the use of provisional ballots, enhance the statewide voter registration database, clarify existing voter identification rules, eliminate existing special election days, allow vote-by-mail for special federal elections needed to fill vacancies in the U.S. Congress, and reduce to 21 days the period for in-person absentee voting prior to a general election. Among the bill s provisions, the following issues will prove of particular interest to commissioners as the legislation is debated: Special Elections: Possible elimination of non-charter special elections and chargeback provision modifications. National Voter Registration Act. Ballot language limits. Elections by mail. Early voting locations. Vote centers pilot project. Annual absentee registration. 3

4 The Secretary of State's office said that in the absence of an emergency clause, enactment of the measure would have to occur by Dec. 29 in order for worker training and other steps in advance of the May 2010 primary. Chairman Stewart said the panel might hold public forums and subcommittee sessions outside Columbus in addition to Statehouse hearings. CCAO policy staff has worked with the Ohio Association of Elections Officials and Secretary of State s office in offering recommended changes to the legislation as introduced and will continue to work with legislators and stakeholders as the measure moves through the General Assembly. For more information, please don t hesitate to contact CCAO Policy Director Cheryl Subler at csubler@ccao.org or CCAO Policy Analyst Josh Hahn at jhahn@ccao.org. BIPARTISAN SENATE TAX BILL WOULD DIRECT REVENUE TOWARD ADOPTION ASSISTANCE AND SOIL AND WATER CONSERVATION On Tuesday, the Senate Finance and Financial Institutions Committee held proponent testimony for SB 155, which is co-sponsored by Senators John Carey (R-Wellston) and Dale Miller (D-Cleveland). The measure proposes to decouple two tax provisions from the American Recovery and Reinvestment Act (ARRA, federal stimulus bill) from Ohio tax law. The bill would generate revenue for the following three programs that were cut in HB 1 (budget bill): adoption assistance subsidies, soil and water conservation districts, and disability medical assistance. The budget dropped adoption subsidies from $300 per month per family to $240 per month per family, leaving counties to pick up some of the difference (about $20). HB 1 also cut soil and water conservation districts by 79% in SFY 10 and 53% in SFY 11. The budget eliminated in total the Disability Medical Assistance program. Under SB 155, adoption assistance would receive $8 million each in SFY 10 and SFY 11, generating $17.3 million in federal match in SFY 10 and $15.3 million in match in SFY 11. Soil and water would receive $6 million in each fiscal year. Disability medical also would receive $6 million in each year. The bill also would increase temporarily Local Government Fund and Public Library Fund distributions. LGF distributions would increase by $1.4 million in SFY 10 and $400,000 in SFY 11. PLF distributions would go up by $700,000 in SFY 10 and $200,000 in SFY 11. However, beginning in 2012, each fund would begin to lose those gains, but would lose no more than they gained because of the changes in the bill. The ARRA permits corporation and pass-through entity owners to defer for federal tax purposes debt that creditors forgive. SB 155 requires these entities to treat as income for Ohio tax purposes that debt. Another provision in the ARRA allows a small business to elect to apply net operating losses against profit experienced in the business preceding three, four, or five taxable years, thus creating a refund due the small business. The bill delays paying Ohio income tax refunds owed to a small business that takes advantage of that ARRA provision. Jerry Collamore with the Ohio Job and Family Services Directors Association (OJFSDA) and Greg Kapcar with Public Children Services Association of Ohio (PCSAO) testified in favor of the adoption and disability medical portions of the bill, as did Jon Honeck with the Center for Community Solutions. Lawrence Burdell, representing the Ohio Federation of Soil and Water Conservation Districts, and Etta Reed, supervisor of the Butler Soil and Water Conservation District, testified in support of the soil and water funding portions. 4

5 COMMITTEE SCHEDULE Week of September 28, 2009: TUESDAY, SEPTEMBER 29 Senate Health, Human Services & Aging, (Chr. Coughlin, ), North Hearing Rm., 10:00 am SB 144 FAMILY STABILITY (Miller, R.) To create the Ohio Family Stability Commission in the Department of Job and Family Services and to repeal section of the Revised Code four years after the effective date of that section. --3rd Hearing-Opponent Senate Session, (Chr. Harris, B., ), Senate Chamber, 1:30 pm WEDNESDAY, SEPTEMBER 30 House Agriculture & Natural Resources, (Chr. Domenick, ), Rm. 018, 9:30 am HB 124 DOG BREEDING (Hagan, Weddington) To establish licensing requirements and standards of care for certain dog breeding kennels, dog intermediaries, and animal rescues for dogs. --3rd Hearing-All testimony House Local Government/Public Administration, (Chr. Chandler, ), Rm. 114, 10:00 am HB 7 BUILDING STANDARDS (Harris, M., Pillich) To require a building or structure erected or constructed using state capital moneys to adhere to certain sustainability standards. --3rd Hearing-All testimony HB 175 HUMANE AGENTS (Gerberry) To require a person to file proof of successful completion of training with the county recorder prior to being appointed as a humane society agent and to require the revocation of an appointment under certain circumstances. --3rd Hearing-All testimony House Elections & Ethics, (Chr. Stewart, ), Rm. 122, 10:00 am HB 92 ELECTION LAWS (Mecklenborg) To require absent voter's ballot identification envelope statements to be completed for absent voter's ballots to be counted, to require boards of elections to notify absent voters that their ballots will be rejected if they do not complete the required statement, to generally prohibit same day voter registration and application for absent voter's ballots, to permit election observers to be appointed to serve at the board of elections or at another designated site during the time absent voter's ballots may be cast in person, to revise the time period in which voters may cast absent voter's ballots in person, to permit a board of elections to establish additional locations at which voters may cast absent voter's ballots in person, to require the Secretary of State to notify boards of elections of mismatches between voter registration information and motor vehicle records, and to revise the process for appointing members of a board of elections. --1st Hearing-Sponsor HB 260 ELECTION LAWS (Stewart) To revise the Election Law. --2nd Hearing-Proponent Senate Session, (Chr. Harris, B., ), Senate Chamber, 1:30 pm House Session, (Chr. Budish, ), House Chamber, 1:30 pm Senate Judiciary-Civil Justice, (Chr. Seitz, ), North Hearing Rm., 2:30 pm or after session SB 23 LANDLORD PAYMENTS (Schaffer) To enable a judgment creditor landlord to obtain a court order directing the Tax Commissioner to pay the judgment debtor tenant's income tax refund to the landlord. --2nd Hearing-All testimony 5

6 House State Government, (Chr. Gerberry, ), Rm. 017, 2:30 SB 85 WATER TANKS (Stewart) To authorize certain political subdivisions to contract for engineering, repair, sustainability, water quality management, and maintenance of a water storage tank through a professional service contract under specified conditions. --1st Hearing-Sponsor HB 187 REGISTRATION PAYMENTS (Huffman) To require the Bureau of Motor Vehicles and deputy registrars to accept credit cards and debit cards for all state-related transactions they process. -- 2nd Hearing-Proponent HB 230 STATE REGULATION (Moran, Zehringer) To enact the Common Sense Regulation Act to improve state agency regulatory processes, especially as they relate to small businesses, to require state departments to develop customer service training programs, and to require the director of environmental protection to provide environmental regulatory compliance assistance to small businesses. --2nd Hearing-Proponent 6