Week in Review: Feb. 12, 2023

FY22-23 BUDGET

State tax collections yielded nearly $140 million more than expected in January, led by a $95.5 million overage in personal income taxes, according to preliminary data from the Office of Budget and Management (OBM) released Wednesday. The income tax generated $1.22 billion in January, compared to expectations of $1.13 billion, an 8.5% difference. Sales taxes were up by a more modest 1.9 percent, bringing in $23.3 million more than expected and reaching $1.24 billion for the month. That was roughly split between a $10 million, 0.9 percent overperformance in the non-auto sales tax, and a $13.3 million, 9.6% bump in the auto sales tax.

FY24-25 BUDGET

House Finance Committee Chair Jay Edwards (R-Nelsonville) described Gov. Mike DeWine's budget Tuesday as "very aggressive, very bold" and said his caucus is looking at adding tax cuts and potentially a faster-than-planned phase-in of the new school funding formula. Edwards also shared the committee's plans for revising and passing both the operating and transportation budget bills – both of which have yet to be introduced although unofficial versions of both are available. For the transportation budget, which usually passes before the end of March, the House Finance Committee looks to adopt a substitute bill on Monday, Feb. 20 and an omnibus amendment sometime later that week, then pass the bill Monday, Feb. 27. The March deadline is driven by the need to allow for the 90-day lag time for the bill to become law which must happen by July 1 to prevent highway projects from being interrupted. For the operating budget, Edwards forecast a first round of changes Friday, April 21, an omnibus amendment on Monday, April 24 or Tuesday, April 25, and full committee passage before the end of April.

Edwards announced the availability of draft budget language, which at more than 4,300 pages dwarfs the typical, 2,000-some pages of an as-introduced spending plan. Edwards said the proposed creation of the Department of Children and Youth is the main reason for having so many additional pages.

Office of Budget and Management (OBM) Director Kim Murnieks stood for about three hours of testimony and questioning Tuesday at the kickoff of House Finance Committee hearings on the FY24-25 executive proposal. She was followed by Legislative Service Commission Director Wendy Zhan, who provided independent but similar forecasts for tax revenue growth and Medicaid spending. Murnieks said OBM "cautiously" opted to adopt an economic forecast calling for a mild recession, given that most professional forecasters are predicting that will happen. OBM projects total tax revenue of $28.7 billion in FY24 and $30.1 billion in FY25, a forecast that takes into account tax policy changes included into the executive proposal, like an income tax deduction for children. LSC's forecasts, which are based on current law and do not reflect those proposed policies, project about $29.1 billion in FY24 and $30.3 billion in FY25.

Murnieks also noted the expected $6 billion cash balance in the General Revenue Fund for the end of FY23. Part of that money is already spoken for, via lawmakers' authorization to use cash instead of borrowing for some projects in the most recent capital budget. That balance is also the funding source for the proposed All Ohio Future Fund for economic development and a proposed $1 billion to be added to the Medicaid reserve fund in anticipation of the phase-out of extra matching funds the federal government has been providing during the pandemic.

BUSINESS/CORPORATE

The Ohio Business Roundtable (OBRT) announced Thursday the formation of the Ohio Grants Alliance (OGA) in partnership with regional business associations across the state. The OGA will "research, identify and promote competitive grant opportunities to Ohio's business, educational, charitable and economic development communities in order to make Ohio more competitive," according to OBRT. Led by Executive Director Michael McLean, formerly OBRT vice president of policy, it will also support applications and help win more grants that transform all communities in the state. Founding partners include OBRT, the Cincinnati Business Committee, Greater Cleveland Partnership, Columbus Partnership, Appalachian Partnership, Dayton Development Coalition and the Regional Growth Partnership in Northwest Ohio. Part of OGA's work will be to facilitate cross-regional coalitions.

ECONOMY

The U.S. Bureau of Labor Statistics (BLS) announced Friday that the nation added 517,000 nonfarm payroll jobs in January, while the federal unemployment rate dropped to 3.4 percent, the lowest it has been since 1969. The unemployment rate was 3.5 percent in December. Among the major worker groups, the unemployment rates for adult men (3.2%), adult women (3.1%), teenagers (10.3%), Whites (3.1%), Blacks (5.4%), Asians (2.8%), and Hispanics (4.5%) showed little change in January. The number of persons jobless less than five weeks decreased to 1.9 million in January. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.1 million. The long-term unemployed accounted for 19.4 percent of the total unemployed in January.

ELECTIONS 2023

Secretary of State Frank LaRose Tuesday issued Directive 2023-03, instructing Ohio's 88 county boards of elections to immediately begin implementing the reforms required under 134-HB458 (Hall) for the May 2023 primary election, although the bill does not become effective until Friday, April 7 -- three days after the April 4 start of early voting. LaRose explained why he is taking this action, noting, "While HB458 does not become effective until April 7, three days after the start of early voting in the May primary, implementing the changes contained within the new law at that time would potentially violate equal protection provisions by conducting the election under two separate processes to cast a ballot, one before the effective date and one after. Another alternative would be to issue a directive making the changes within HB458 effective upon the completion of the May primary; however, this would result in a clear violation of Ohio law.” This directive guarantees "the changes made by HB458 are uniformly implemented across all county boards of elections throughout the entirety of the early voting period and on Election Day."

GAMING/GAMBLING

For the first time since they opened in 2012, Ohio's four casinos took in more than $1 billion in revenue during a calendar year. According to revenue reports released by the Ohio Casino Control Commission (OCCC), the casinos made just over $1 billion in 2022. In calendar year 2021, the casinos made $983.7 million. Hollywood Columbus Casino led the way among the four casinos in 2022, pulling in $263.6 million. That's higher than 2021, when the facility made $260 million.

Total traditional lottery ticket sales for January 2023 were $418 million, up from $359.4 million in January 2022. Draw-based game sales for January 2023 were $202.6 million, up from $175.3 million in January 2022. Net scratch-off ticket sales for January 2023 were $215.4 million, up from $184.1 million in January 2022. Video lottery terminals (VLTs) at Ohio's seven racinos raked in $110.8 million in January 2023, up from $95.6 million in January 2022.

GENERAL ASSEMBLY/STATEHOUSE

The Senate unanimously passed tax conformity legislation SB10 (Blessing) as an emergency measure on Wednesday. "Most people are probably not aware that changes to federal tax law do not become part of Ohio law unless we pass legislation incorporating those changes," chief sponsor Sen. Lou Blessing (R-Cincinnati) said. "In this case, the legislation will prevent some Ohio taxpayers from having to file one amount of taxable income on federal returns and a different amount for state returns." Blessing said the bill incorporates the changes made by the federal Inflation Reduction Act of 2022 and the federal Consolidated Appropriations Act.

In addition to the tax conformity changes, the Senate Ways and Means Committee amended SB10 to address an emergency rental assistance issue caused by lame duck spending bill 134-HB45 (West-Roemer). The spending bill required rent and utility arrearages to have been incurred by Dec. 31, 2021 for the household to qualify for assistance under the program. The amendment to SB10 changes the date to Dec. 31, 2023. Senate President Matt Huffman (R-Lima) told reporters that the date in 134-HB45 was a mistake.

MARIJUANA/HEMP

The Ohio Medical Marijuana Control Program (MMCP) may not survive much longer without passage of remediation legislation SB9 (S. Huffman-Schuring), according to cannabis attorney/consultant Ted Bibart. "This program is dying. The numbers tell us this," Bibart told the Senate General Government Committee during proponent testimony on Tuesday. "From last month's numbers to this month's numbers, we've lost 3 percent of the patient population. Over 4,000 patients are no longer participating in this program who did a month prior." He said many patients have left the program because they are able to buy better cannabis at a lower price in Michigan, so SB9's provision removing the "arbitrary" 70% THC limit could persuade many Ohio patients to return to the Buckeye State's dispensaries.