Legislators in both the Ohio Senate and House voted Monday to approve the operating budget for the biennium, which started July 1st. The finished budget came after a 13-day stalemate that resulted in two interim budgets and left Ohioans wondering when the process would end. The two-year spending plan includes language that allowed the Governor to authorize video lottery terminals (VLTs) at Ohio’s seven horse racetracks. The budget also includes significant cuts to many Ohio departments, as Conferees were forced to fill an additional $3.2 billion shortfall.
The Conference Committee on House Bill 1 reported the bill earlier in the day by a 5-1 vote, with Rep. Amstutz (R- Wooster) voting against the report. He questioned the transparency of the process, since members were only given one half hour to review the 1,000 page document prior to the vote. Later in the day, the House approved the budget by a 54-44 vote, with one Republican joining the Democrat majority. Senate President Bill Harris (R-Ashland) was among five Republicans in the Senate who voted to approve the Conference Committee’s report. The budget passed the Senate by a 17-15 vote. Senate Republicans expressed fear that the budget process was rushed and did not give lawmakers adequate time to read and understand the various amendments to the bill. However, Democrats are confident that the budget will go a long way towards helping Ohioans during difficult economic times.
Republicans berated the budget as a whole, believing it would ultimately lead to more problems than it solved. Sen. Jon Husted (R- Kettering) said the budget, which relies heavily on billions in one-time money and projected gambling revenue, will plague Ohio for years. Republicans were also concerned that the cuts to proprietary schools would make education less accessible, the franchise fee on hospitals would result in lost jobs, and projected gambling and tax revenue would never materialize leading to increased taxes in the future. Meanwhile, Democrats assured their colleagues that this balanced budget had effectively maintained a focus on education and included provisions that would boost economic development.
The compromise between House and Senate leaders and the Governor was formally announced late last week. The agreement came at a time when state leaders were facing mounting pressure to finalize the bill. The drawn-out budget process cost the state nearly $2 million each day in lost revenue, compounding the budget shortfall.
Video Lottery Terminals
The issue responsible for causing the budget stalemate which resulted in two budget extensions was Governor Strickland’s proposal to allow VLTs at Ohio’s seven horse racing tracks. In the end, Governor Strickland agreed to implement the VLT proposal by Executive Order with cooperation from the House and Senate, which adopted supporting legislative language in the budget bill. The agreement will help the state fill some of its $3.2 billion shortfall, as the slots are projected to bring in $933 million in revenue.
Gambling opponents have vowed to file lawsuits challenging the constitutionality of the Governor’s proposal. These groups claim that VLTs do not qualify as lottery devices, and therefore cannot be established by the Ohio Lottery Commission. The groups also claim that, under the Ohio Constitution, all lottery revenue must go towards education, while half of the profits from VLTs will go to the owners of the race tracks. These lawsuits, as well as the normal processes of creating administrative rules to establish such a large new program, are expected to continue through the summer months.
Primary and Secondary Education in the Budget
State funding for primary and secondary education will be cut by an average quarter-percent in each year of the coming biennium. However, when federal stimulus spending is included, funding for primary and secondary education increases 5.8 percent in 2010. Several items in the Governor’s education reform package, which were eliminated in the Senate-passed version, made it into the final bill. School districts will be required to offer all-day kindergarten beginning in the 2010-11 school year, although an optional half-day program would be available. In kindergarten through third grade, classrooms must be no larger than 19 students in the 2010-11 school year and down to 15 students by 2014-15. These requirements were originally rejected by Senate leaders because they were unfunded mandates. Also included was the Governor’s proposal to eliminate the Ohio Graduation Test (OGT) and require instead that students complete the ACT, pass final exams and complete a senior thesis. In exchange, Senate Republicans brokered a deal to appropriate equal funding for charter schools and traditional public schools.
House Speaker Armond Budish (D-Beachwood) said future plans for primary and secondary education were some of the best things to come out of this difficult budget process. Budish called the changes to education, “transformational,” as schools will now receive funding based on student needs. Education advocates also praised the changes to education, saying the new school funding system will be constitutional and fair once the changes are fully phased in. According to OEA President Patricia Frost-Brooks, “The economic vitality of Ohio depends on a well-educated work force that can only come from a strong system of public schools.” Others said that the new system will help students develop the skills and knowledge needed for the jobs of the future.
While funding for Public and Charter schools increased, Parochial schools in Ohio lost $60 million in state aid. Senator Bill Seitz (R-Cincinnati), despite being supportive of the introduction of VLTs, voted against the overall budget bill, citing the cuts to Parochial schools. Sen. Seitz said that dating back to the Celeste administration, there has been a state policy of state aid to parochial schools increasing or decreasing based on state aid to public schools. “We have now totally abrogated that parity principle,” he said.
Higher Education in the Budget
State funding to public colleges and universities was cut by $170 million. As a result of those cuts, the tuition freeze for the 2009-2010 school year was eliminated, which will allow those institutions to increase tuition up to 3.5 percent in each of the next two years. The Ohio State University, along with several other schools, announced it will not increase tuition for the 2009-2010 school year in response to the decrease in state funding. Tuition freezes have been a top priority for the Strickland Administration and Chancellor Fingerhut. However, given the current lack of revenue, sustaining these tuition freezes was not feasible.
The Ohio College Opportunity Grant program was reduced by approximately $225 million over the biennium. Grants for students attending Ohio’s public colleges and universities will remain in place, while grants for students attending private and proprietary colleges will be reduced to zero.
Medicaid in the Budget
Federal draw-down of Medicaid funding will help nursing homes improve their fiscal standing relative to Gov. Strickland’s original budget, but those facilities still face significant reductions. According to House estimates, nursing homes will still receive about $184 million less over the biennium than they had during 2009. Ultimately, this is a five percent cut to an industry that serves the aging and at-risk population in Ohio.
However, nursing homes will see an increase in the per diem rates paid by the state. Instead of billing the government for services such as oxygen and physical and occupational therapy, medical equipment such as custom wheelchairs, over-the-counter medication and transportation, nursing homes will pay for the services out of the per diem increase. The change is intended to draw more federal matching dollars for the state.
Separately, hospitals will face higher fees so that the state can qualify for higher levels of Medicaid funding. According to the Ohio Hospital Association, a new franchise fee on hospitals will cost them $145 million. Rep. David Burke called the franchise fee on hospitals, “a multi-million dollar hole that will cause one of Ohio’s largest industries to shed jobs.”
Pharmacists were also impacted, with the reduction of the Medicaid dispensing fee from $3.70 to $1.80. Ohio will now have the second lowest dispensing fee in the country, with New Hampshire being the lowest at $1.75. The Ohio Pharmacists Association is concerned that access to medicine will be impacted, especially in the rural areas where independent pharmacies are struggling to survive.