BUDGET CLEARS SENATE; HOUSE REJECTS AMENDMENTS, SETS STAGE FOR CONFERENCE

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1 June 9, 2011 BUDGET CLEARS SENATE; HOUSE REJECTS AMENDMENTS, SETS STAGE FOR CONFERENCE Considered one of the most policy-heavy packages in recent memory, the $55.7 billion, twoyear state budget cleared another major hurdle Wednesday with the Senate GOP majority's endorsement on the Senate Floor. The measure then moved to the House, where it was rejected, as expected. Now, the stage is set for Conference Committee between the two chambers to resolve differences. Sen. Chris Widener (R-Springfield), the Senate Finance Chairman, said he didn't expect there would be substantial extra funds available for lawmakers to appropriate after revenue and Medicaid caseload estimates are updated for Conference Committee. Sen. Michael Skindell (D-Lakewood), the ranking minority member on the Finance Committee, disagreed. "There is a lot of work to be done in conference committee. We will have revised estimates coming forward," he said after the committee meeting. "There is a significant amount of dollars that is going to be there and one of the points we wanted to direct is that we still have a lot of holes in this budget with regard to protecting the most vulnerable, protecting senior programs. If we have revenue over and above the projections, those revenues...should go into those programs as opposed to tax cuts for the wealthy, tax cuts for the large corporations." The latest Office of Budget and Management revenue data show state coffers on course to exceed tax revenue estimates by close to $1 billion, although the Kasich Administration has stressed that most of those funds are already accounted for in the budget. The current state fiscal year is performing 5.5 percent over estimates, for a total of $837 million dollars. Prior to passing the bill out of Senate Finance Committee, an omnibus amendment was included. Some provisions of interest to local governments include the following: Adjusts Senate language to provide county commissioners appropriation authority over court fees by eliminating probate court computerization fees. 1

2 Removes language restricting payments to court reporters for electronic recording and transcripts. Expands the allowable use of political subdivision police and fire levy monies to include emergency medical, communications, and administrative personnel. Retains current law authorization for boards of county commissioners, in counties that have at least 500,000 in population and meet certain criteria, to create up to six additional memberships on the county veteran s service commission. Removes from the bill a provision that would have increased the administrative fee retained by counties in regards to Housing Trust Fund fees. Removes language that was added in the Senate Sub-Bill that would allow for local governments to use reverse auctions for design and construction services. Makes various changes to the bill s provision regarding county quarterly budgets, including raising the spending threshold to trigger quarterly budgets from 105% to 110% of their annual human resource appropriation. Replaces the County Board of Information Services language in the bill with the County Automatic Data Processing Board and requires the County Auditor to be the chief administrator of this type of function, as under current law. Clarifies and consolidates the records retention procedures and schedules for local public authorities, and revises the procedure used by the Ohio Historical Society for selecting historically valuable records. Specifies that the statute of limitations for a civil action on public record destruction is 5 years. Prohibits the use of political subdivision funds, other than those of municipalities and certain counties exercising local self-government powers, for paying the costs, premiums, or charges associated with a health care policy, contract, or plan that provides coverage, benefits, or services related to an abortion that is performed when the life of the mother would not be endangered if the fetus were carried to term or the pregnancy of the mother was not the result of a reported rape or incest, as continuing law does with regard to state funds. Prohibits the use of any institution, structure, equipment, or physical asset that is owned, leased, or controlled by the state or any political subdivision of the state, except for municipalities and certain counties exercising local self-government powers, for performing or inducing an abortion when the life of the mother would not be endangered if the fetus were carried to term or the pregnancy of the mother was not the result of a reported rape or incest. The omnibus amendment includes a requirement that DAS submit a state government reorganization plan to reduce the number of state agencies and increase efficiencies; revisions to the construction law update that are intended to more closely align the language with the proposals of a task force; amendments to the lottery management privatization plan that would 2

3 add more legislative oversight; and a substantive change to prevailing wage proposal as passed by the House. Specifically, the prevailing wage-related changes would reduce the threshold at which public projects are subjected to the union-based wage requirements from the Housepassed level of $3.5 million to $125,000 next year, $200,000 the year after and $250,000 in the following year. The threshold is currently about $78,000. Gov. Kasich had proposed an increase to $5 million per project. In addition, the amendment removes as one of the criteria for holding judicial office that a judge have prior legal practice in Ohio for at least 6 years and instead specifies a 2-year Ohio practice requirement. Finally, the amendment requires the General Assembly to enact legislation to guide the Request for Proposal process for the sale or lease of the Ohio Turnpike and allows the Director of OBM to provide compensation to responsive unsuccessful bidders for a proposal to lease the turnpike. Separately Sen. Keith Faber (R-Celina) offered the legislator pay cut amendment, which was eventually adopted without opposition on a voice vote in Committee. The amendment would lower the base pay to $57,550 and would apply to legislators' next elected terms and moving forward for lawmakers appointed mid-term, he said. Those currently in office can ask the clerk to reduce their pay and direct the difference to the Ohio Association of Second Harvest Foodbanks. SENATE VERSION OF BUDGET ALTERS DISTRIBUTION OF LGF FUNDS WITHIN COUNTIES, COUNTY SHARE WOULD BE DRAMATICALLY REDUCED The Senate version of the state budget (HB 153) includes a provision that, if enacted, would dramatically reduce the local share of Local Government Fund (LGF) money distributed within each county to most county governments in the state. Existing law requires the County Budget Commission within each county to distribute all funds received from the state and deposited in the County Undivided Local Government Fund on the basis of either a statutory or alternative formula. Based on 2005 data, 83 counties distributed LGF money within each county on the basis of an alternative formula and 5 distributed LGF money on the basis of the statutory formula. Existing law establishes certain guidelines which must be followed by the county budget commission in the distribution of LGF money to the county under either the statutory or alternative method of local distribution. In both instances, the law establishes maximum distributions of the county share based on the percentage of municipal population within the county. The following maximum distributions apply to statutory and alternative formulas. Percentage of Municipal Population within Percentage Share of County Shall not Exceed County Less than 41% 60% 41% or more but less than 81% 50% 81% or more 30% Under existing law, if the political subdivisions within the county wish to adopt an alternative formula for the distribution of LGF money, the alternative formula must be approved by the board of commissioners, the legislative authority of the largest city located wholly or partially in 3

4 the county, and a combination of other legislative authorities of municipal corporations and townships representing a majority of the subdivisions within the county. The Senate passed version of the state budget would dramatically alter the approval process and distribution of LGF money within each county to the county and other subdivisions. Major provisions of the new local distribution formula are the following: Establishes a new default or statutory formula. Eliminates the current statutory and alternative formulas as they currently exist. Permits the adoption of a new alternative formula if 75% of the subdivisions within the county agree to such an alternative formula. Requires the subdivisions within any county wishing to retain either the existing statutory formula or an existing alternative formula to achieve the 75% approval previously mentioned. Eliminates the requirement that any alternative formula must include the approval of the board of commissioners and the approval of the largest city. Provides that the base allocation for the county is 30% and the base allocation of any metropolitan park district, if one exists, is 5 ½ % of the total allocation. Establishes base allocations to other subdivisions on the basis of three year rolling average of current and two prior year allocations. Allows for the distribution of excess allocation on the basis of property wealth, income, population, and population density as defined in the amendment. LGF dollars lost to the county would be reallocated to other subdivisions. The new statutory formula and any new alternative formula adopted under the amendment would be adopted after July 1, 2011 and thus presumably would apply for the first time in calendar year CCAO believes that the existing statutory formula and any existing alternative formula currently in use in any county will be scrapped in most counties because other smaller political subdivisions that would benefit under the new statutory formula will have no reason to continue to use the current statutory and alternative formulas. Furthermore, it is unlikely that any county is going to be able to achieve the 75% approval requirement for the approval of any alternative formula under the amendment. (Keep in mind that any existing alternative formula and the current statutory formula as applied in any county all effectively become alternative formulas that must be approved by 75% of the subdivisions in each county under the amendment.) Based on the latest data available to CCAO from the Department of Taxation, 79 of the counties currently receive more than the 30% allocation provided by the Senate version of the budget. 4

5 Seven counties currently receive a 30% share and three counties currently receive less than 30%. The losses resulting from the new statutory formula would be in addition to revenue losses that counties will experience due to the 25% and 50% overall reduction in state revenues for the Local Government Fund proposed by the administration in SFY 2012 and SFY 2013 and retained with certain modifications by the House and Senate versions of the budget (See following article for additional changes to LGF). STATE LOCAL GOVERNMENT FUND DISTRIBUTIONS PROPOSED FOR $50 MILLION INCREASE IN EACH OF SFY 2012 AND 2013, GUARANTEE AMOUNT INCREASED TO $750,000 The Ohio Senate has taken $50 million per year of commercial activity tax revenue that was earmarked by the House to fund grants to local governments to help cover the costs of implementing or enhancing shared services and allocated that same amount to the LGF in each year of the biennium. In addition to increasing the amount allocated to the LGF, the Ohio Senate increased from $500,000 to $750,000 the guarantee amount provided to the county undivided local government funds of the smallest counties. Under the amendment, any county undivided local government fund that received less than $750,000 in SFY 2011 would receive no reduction in their distribution in either SFY 2012 or SFY The amendment also provides that any county undivided local government fund that would receive less than $750,000 in either SFY 12 or SFY 13 as a result of the overall cut in funds would receive at least $750,000 in each of those state fiscal years. The counties that would benefit from this hold harmless guarantee according to the Legislative Service Commission include Adams, Brown, Carroll, Fayette, Gallia, Hardin, Harrison, Henry, Highland, Hocking, Holmes, Jackson, Meigs, Monroe, Morgan, Morrow, Noble, Paulding, Perry, Pike, Van Wert, Vinton, and Wyandot. The cost of this guarantee is approximately $1.3 million in SFY 2012 and $5.15 million in SFY 2013 and would be deducted from the overall increase of $50 million per year to all county undivided local government funds in proportion to distributions in SFY For additional information on amendments to the LGF in the state budget as approved by the Senate, contact Brad Cole of the CCAO staff at bcole@ccao.org or by calling (614) CCAO OFFERS SUPPORT ON HOUSE BILL 225 On Tuesday, CCAO Managing Director of Research Brad Cole joined Tuscarawas County Commissioner Kerry Metzger in appearing before the House Local Government Committee to offer support testimony on House Bill 225. The measure is sponsored by former Fayette County Commissioner and current Representative Bob Peterson (R-Sabina) as well as Representative Al Landis (R-Dover) CCAO supports provisions of HB 225 which would permit any county auditor to adopt a direct deposit payroll policy for county employees. The policy may exempt certain employees that cannot provide an account number, or for other reasons specified in the policy. CCAO supports this authority because it will save county funds and improve the security of payroll transactions. 5

6 The measure also would permit a county to reserve the greater of 5% of the revenue credited in the preceding fiscal year to the fund in which the account is established or one-sixth of the expenditures during the preceding fiscal year from the fund in which the account is established. HB 225 updates current Ohio law to reflect a number of options the Bureau of Workers Compensation has developed for subdivisions to provide workers compensation coverage. Finally, HB 225 would permit a subdivision that participates in a risk sharing pool to establish a reserve balance account for the subdivision. While we are unaware of why this limitation was originally placed in the law, CCAO believes that a reserve fund would be a good option for counties that participate in a risk sharing pool. For more information on HB 225, please contact Brad Cole at bcole@ccao.org. CCAO OFFERS SUPPORT FOR HB 14 AMENDMENT CCAO Senior Policy Analyst Josh Hahn appeared before the House Criminal Justice Committee Wednesday morning to offer support for an amendment to House Bill 14 (Sears, R- Sylvania). House Bill 14 in its as introduced version simply would remove breed-specific (pit bulls) legislation from Ohio law. While CCAO opposes this change, the Association recognized that the removal of this language would render Ohio s dangerous/ vicious dog law dangerously ineffective. This is because the other two triggers to Ohio s dangerous/ vicious dog law are based on penalties due to the maintenance of a dangerous/ vicious dog. These provisions have been found unconstitutional because of due process concerns. The amendment, which was adopted in committee, would eliminate due process concerns by basing penalties on behavior alone. In addition, this also addressed first bite concerns. New language also provides for public safety enhancements by requiring uniform collars, adult ownership, appropriate signage, and dangerous dog registrations. Appropriate violations and penalties are based on behavior. Finally, the amendment provides for an updated cost for replacement tags to cover the actual cost to the county. Joining Hahn in testifying in support of the amendment was Ohio County Dog Warden s Association President and Geauga County Dog Warden Matt Granito and Montgomery County Animal Shelter Director Mark Kumpf. CCAO and the Ohio County Dog Warden s Association worked with Representative Sears and a number of stakeholders in drafting and supporting this language. For more information on House Bill 14, please contact CCAO staffer Josh Hahn at jhahn@ccao.org. HOUSE PASSES SENATE BILL 22 (EPA BILL) On Tuesday, the House passed unanimously Senate Bill 22 to require the Ohio Environmental Protection Agency to work within flexibility granted by federal law to consider local financial impacts when issuing permits for sewage and long-term storm water control projects. CCAO Senior Policy Analyst Josh Hahn had offered support testimony for SB 22 on behalf of the Association in both chambers. 6

7 Former Holmes County Commissioner and current Representative David Hall (R-Killbuck) said the EPA has mandated certain upgrades of sewer and water systems that have been paid for by businesses and residents and in some cases worked to increase utility rates. "This bill will result in flexibility for local governments in creating and implementing these massive infrastructure improvements and will also be an added benefit in lowering the consumer costs and keeping these prices stable for our local constituents," he said. The changes would bring Ohio in line with current practices in a handful of other states. The measure now returns to the Senate for concurrence on an amendment that clarifies the bill applies to publicly owned sewer systems. For more information on SB 22, please contact Josh Hahn at jhahn@ccao.org. STRONG BIPARTISAN SUPPORT ADVANCES CONSTITUTIONAL REVIEW BILL TO HOUSE FLOOR As reported in Gongwer A proposal from Speaker Bill Batchelder (R-Medina) for creation of a 32-member panel to recommend changes in the Ohio Constitution cleared committee Tuesday with strong bipartisan support, and passed the Ohio House floor Wednesday. President Gordon Gee of Ohio State University and former House Speaker Jo Ann Davidson testified in support of the legislation before the House State Government & Elections Committee reported it on a 21-1 (Young) vote. The legislation, House Bill 188, would establish the Ohio Constitutional Modernization Commission to study the document, discuss potential changes, and consider the problems of constitutional amendment. Any recommendations for amendments would go to the General Assembly, which then would decide whether to place them before voters. The commission would first meet Jan. 1, Its first report to the General Assembly would be due no later than Jan. 1, 2013, with biennial reports thereafter. The bill requires the commission to complete its work on or before July 1, Rep. Batchelder views the commission as an alternative to a separate Constitutional Convention that voters in the November 2012 election will consider. The current constitution provides for asking voters every 20 years whether or not to call a convention; they have never done so. In the event voters approved the ballot question next year, the commission created in the bill would deliver recommendations regarding organization of the convention to the General Assembly, and report to the convention its recommendations regarding amendments. Ms. Davidson, the former House Speaker who now chairs the Ohio Casino Control Commission, said it has been almost 40 years since the last in-depth review of the constitution. "Unbelievable change has taken place... in that period of time. While most of the provisions of our constitution have withstood the challenge of time, others deserve to be carefully reviewed," she said. 7

8 Some of those, mentioned in previous hearings, involved reorganization of local government, merit selection of judges, term limits, and apportionment. "Only an in-depth, truly bipartisan review will result in solid recommendations for the legislature to consider," Ms. Davidson said. The League of Women Voters of Ohio, testifying as an interested party, suggested that if a commission is created, it should meet, organize, and begin its work as soon as the bill takes effect, instead of waiting until Jan. 1, "This will enable the voters to know, when they vote on a Constitutional Convention in November 2012, whether the commission is, in fact, addressing their concerns," said Peg Rosenfield, elections specialist for the league. Rep. Batchelder's bill would provide for caucus leaders in the House and Senate to appoint three members each to the commission. Those 12 then would appoint an additional 20 members, none from the General Assembly, who would serve without compensation. Recommendations in the commission's biennial report of proposed changes in the constitution would require a two-thirds vote of the membership. Please note that the New Bills and Committee Schedule are not included in this week s Statehouse Report as the Summer Seminar necessitated the drafting of this Report prior to their availability. 8