Ohio state budget (2011-2013)

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In August 2012, the governor's administration said that it anticipated a surplus of $552 million at the end of fiscal year 2013 due to higher than expected tax receipts and less than expected spending.[1]

A few months earlier, Gov. Kasich said that the state would add an additional $235 million in its rainy day fund at the close of fiscal year 2012, bringing the rainy day fund to a total of $482 million. The increased amount in the fund was due to both higher than anticipated tax revenues and lower than expected spending, particularly in Medicaid.[2]

Midterm budget bill

The Ohio House of Representatives on April 25, 2012 approved a midterm budget bill that trimmed state spending by $69 million through cuts and cost-saving ideas, while setting aside $30 million for high-quality nursing homes and $3 million to establish a "healthy Lake Erie" fund. The midterm budget bill then went to the Senate.[3] Gov. Kasich voiced his displeasure over the Republican additions of the money for nursing homes as well as language in the bill that stopped surplus state budget funds from automatically going into the state's rainy day fund.[4]


On June 28, 2011, the Senate voted 22-11 to accept the conference committee report on a $112 billion state budget that included cuts to schools and local governments.[5] The Republican-led Ohio House on June 30, 2011, voted 59-40 along party lines to send the bill to Gov. John Kasich.[6] Gov. John Kasich signed the 3,262-page bill into law four hours before the start of the fiscal year, after he had vetoed seven items in the budget.[7] The budget can be accessed here.

Cities, townships and other local governments were set to receive $1 billion less in state aid over the next two years through a combination of cuts to state funding and changes to the tax money they receive. The budget also included a $45 million grant program for local governments that share services.[6]

The budget deposited approximately $250 million into its rainy day fund.[8]

The governor told his budget director in August 2011 to monitor revenue collections so any emerging deficit could be avoided, saying, "We’re not going to go back in the hole.”[9]

The state budget accounted for $40 to $45 million to reimburse state employees for the equivalent of four days’ wages plus four sick days because employees agreed not to accrue eight personal days under a 2009 union contract to help balance the budget then. Reimbursement began in August 2011. The Kasich administration did not criticize the reimbursements.[10]

In August 2011, the state announced that it sold only one prison for $72.7 million, and not the five prisons it had hoped to sell for $200 million. To compensate for not selling the other four prisons, the Department of Rehabilitation and Correction reorganized the management and operations of them. Officials said that the privatization fulfilled the goal of reducing overhead costs by saving $13 million annually.[11]

Budget highlights

  • The budget eliminated the state estate tax starting in 2013.[12][13]
  • Provided for the sale of six prisons expected to generate around $200 million.[13][14]
  • Permitted the governor to pursue a long-term lease of the Ohio Turnpike by a private operator as long as lawmakers approve the terms.[13]
  • Raised the threshold at which government must pay union-scale wages on public projects from $78,000 to $125,000 in 2012, $200,000 in 2013, and $250,000 in 2014.[13]
  • Allowed counties and universities to sell buildings to private owners and lease them back.[13]
  • Provided no funding for enforcement of smoking rules in indoor public places and phased out support for the Quit Line.[13]

Legislative proposed budget

After the Senate approved its budget, the House voted 97-0 to reject the Senate changes to the budget, allowing a group of state lawmakers from both Republican-led chambers to work out their differences in a conference committee.[15] The six-member conference committee passed a unified budget on a party-line vote of 4-3 on June 27, 2011.[16] Changes made by the Republican-controlled committee included removing a provision to privatize the lottery and a host of changes in education funding. Those changes included eliminating a controversial merit pay system for teachers, permitting a smaller number of new charter schools to be opened without the current system of direct sponsors, banning new e-schools until 2013, and requiring districts to pay for only two additional years of education for high school dropouts. The committee also inserted a provision specific to Cleveland Public Schools that would permit the mayor to remove collective bargaining rights for employees at public schools being converted into charter schools as long as he files a letter with the Cleveland Board of Education and the state employment relations board saying he is doing so.[17] It also included a last-minute "Invest Ohio" tax credit, a 10 percent income tax credit for investors in small businesses, capped at $100 million for the biennium, added the night of the vote.[5]

On June 28, 2011, the Senate voted 22-11 to accept the conference committee report.[5]

Senate proposal

The Senate passed a $112 billion, 5,000-page budget on June 8, 2011, with 23 Republican "yes" votes, and 10 Democratic "no" votes. It privatized a half-dozen state prisons, state liquor operations, lottery operations and the turnpike. It also cut $2 billion in funding for local governments and schools. It also cut legislator pay by five percent. The Senate budget also contained symbolic efforts to curb abortion, the elimination of the estate tax in 2013 and decentralized e-check testing.[18]

One Senate proposal was the privatization of the state's liquor sales, which would allow local governments to see more cash, but was in contrast with the governor's proposal to use liquor sales to fund JobsOhio.[19] Some of the other Senate provisions included:[20]

  • A push to strip a provision from the House-passed bill that specifically applied a state business tax to all casino wagers without deducting winnings and payouts
  • Also up in the air was the governor's plan to shift two percent of pension contributions from employers to employees. The House-passed budget stripped the idea from the legislation.

Senate Republicans wanted to restore $115 million in funding to spend on the state's schools. They also hoped to restore $100 million to local governments. The additional $100 million for the state's Local Government Fund would still mean a cut of some $455 million to local communities. About $1.3 billion from business taxes would be shifted from local communities and schools to the state's general revenue fund to fuel spending in other areas of state government.[21]

House proposal

On May 5, 2011, the House approved with a vote of 59-40 along party lines a $112 billion, 4,004-page all-funds budget in House Bill 153 for the next two years.[22][23] It was $70 million larger than the governor's proposed budget.[23]

The House budget featured many significant changes to the way the state operates, such as doing away with the estate tax beginning in 2013, privatizing six state-owned prisons, relaxing the rules for charter schools and transferring the state's liquor operations to a privately run job-creation board.[22] New construction projects that cost less than $3.5 million would not be subject to Ohio's prevailing wage law, whereas the threshold used to be $79,000.[24]

The budget made many cuts, including:[22]

  • Up to 20 percent in basic aid for Ohio school districts, approximately $800 million;[25]
  • Reduction of $640 million to local governments over the biennium, but the budget attempted to make it easier for governments to consolidate services or merge townships;[26]
  • Reductions to the Local Government Fund totaling $555 million;
  • Cuts to higher-education funding, reducing state aid to universities an average of 13 percent and capping tuition increases to 3.5 percent each year;
  • Reducing $470 million in payments to nursing homes;
  • A two percent reduction in public pension costs, with public employees paying an additional two percent of their salary toward their pension.[25][26]

The governor said that increasing revenues would not mean that local governments and schools would be spared from the cuts in the House-approved budget.[26]

Although revenue numbers rose higher than those used as the basis for the House budget, the governor's administration said that they would need to pay about $500 million in bills deferred by the previous administration.[22]

Initial House proposal

House Republicans rolled out their first changes to the Governor's proposed budget on April 28, 2011, including eliminating the estate tax in two years.[27]

The House also changed the governor's school-funding proposal to give schools an additional $80 million over the biennium and provided $15 million more for a home-care program for Medicaid-eligible seniors. It cut aid to state agencies by an additional $40 million. Overall, the House budget increased spending by $70 million.[28] Lawmakers rejected a proposal permitting privatization of county jails.[29]

The House Finance Committee approved the biennial $120 billion budget with a party line vote on May 3, 2011.[30]

On June 1 Ohio House Speaker William Batchelder panned a move by the state Senate to strip the budget of a proposal that would more closely tie teachers' wages to how well they and their students do in the classroom. The House version of the budget featured a plan to overhaul teachers' evaluations and how they get paid. Teachers' salaries would be based on their performances and evaluations instead of the current increases based on seniority and level of training. Senate President Tom Niehaus said his chamber wanted to remove the wording to avoid conflict with any union agreements that schools made with teachers as part of federal Race to the Top grants.[31]

The Senate proposal also spent $115 million more than the House on school districts, $100 million more on local governments, and $15 million more on the in-home nursing care program PASSPORT. The bill also opened the door for private management of the state lottery, while protecting the Ohio Turnpike from being taken private without legislative approval, and altered the accountability of charter schools. The legislation proposed by Republican leaders also included $1.7 billion in property tax relief to Ohio homeowners and tax credit expansions for job creation and historic preservation.[32]

Governor's proposed budget

Governor John Kasich presented his fiscal year 2012-13 budget to the Ohio General Assembly on March 15, 2011. He fulfilled his promise to not raise taxes but did make deep spending cuts.[33][34]

On March 15, 2011, the governor proposed a $55.5 billion two-year budget that he called "the most reform-oriented budget in modern Ohio history." Under the budget, total spending was $119.5 billion, down from $120.3 billion in the prior budget; general revenue spending, however, increased from $50.8 billion in the prior budget to the governor's proposed $55.5 billion.[35]

The proposed budget eliminated an $8 billion budget shortfall with program restructuring, budget cuts and privatization of public assets. The governor maintained the $800 million, two-year income tax cut that went into effect in January and added an additional $34 million in tax incentives designed to create jobs.[36]

The proposed budget included a provision for leasing the state's wholesale liquor distribution system to JobsOhio to fund the state's economic development activities.[33]


One of every three state tax dollars is spent financing the Medicaid program which serves 2.1 million Ohioans. Under Kasich's proposed budget, the state would spend $11.8 billion on Medicaid in 2012 and $13.2 billion in 2013, which are a proposed reduction of $1.4 billion over the biennium. Those figures include federal funds, which account for 64 percent of the money that goes into Medicaid in the state. The proposed budget includes a proposal to encourage home health care and community-based services as an alternative to nursing homes.[37]


The governor wants to increase workers' pension contributions by 2% and reduce the government's share by the same amount.[28]

Sale of Prisons

The governor also proposed the sale of five state prisons to private operators to raise $200 million, enough to fill the hole left by expiring federal stimulus dollars.[36]

The governor also wanted to include provisions of Senate Bill 10 to change sentencing into the budget. The bill as introduced would save about $24.9 million a year through FY2015, according to an analysis by the Ohio Legislative Services Commission.[38]

Local Governments

Under the governor's proposed budget, local aid will be reduced 33%, down to $865 million. The money raised from the prison sale could generate between $400,000 to more than $1 million a year in new tax revenues for municipalities. In addition, the proposed budget would also allow local governments to generate new revenue by posting public notices online instead of in newspapers and selling naming rights to their buildings.[35]

Restructuring of Debt

The proposed budget also called for restructuring mostly outstanding state general obligation debt by pushing debt service payments due in fiscal year 2012 into FY2015 through FY2025. Pushing off the debt means $440 million more for the current budget.[39]

The budget also reorganized several agencies and their functions. Overall, the reform measures are expected to save $1.4 billion over the two-year budget. The Department on Aging would lose 90% of its funding but would also transfer responsibility for long-term care and other programs to other departments under the governor's health transformation initiative.[33]

K-12 Education

Overall funding for education would drop 11.5% in the following fiscal year due mostly to the loss of $981 million in federal funds, but the governor proposed doubling the voucher program, lifting the limits on the number of charter schools and permitting parents and teachers to take over failing schools.[33]

Funding Increases

Under the proposed budget, the state's Board of Career Colleges and Schools would see a 12% increase in state funding to promote training and education and the Department of Development will get a 6.6% increase as it revamps economic growth programs and assists in the creation of JobsOhio, a public-private partnership created earlier this year to attract companies to the Buckeye State.[33]

Higher Education

The proposed budget would raise funding for higher education by $67 million, with an increase of 2.7% in fiscal year 2012 and an increase of 0.9% in fiscal year 2013. He proposes giving universities more autonomy in exchange for less state funding and exempting them from union-friendly state rules on construction projects that the governor says increase costs.[35]

The proposed budget also included a cap of 3.5% on tuition increases, creating three-year bachelor's degree programs, and increasing teaching loads for faculty by one new course every two years.[35]

Senate Bill 5 and Union Issues

Ohio voters passed Issue 2, overturning Senate Bill 5 by a margin of 61% to 39% on November 8, 2011.[40] Gov. Kasich warned local leaders after the defeat, "Let me be clear, there is no bailout coming. There's no bailout because frankly, there is no money," Kasich said.[41]

Sen. Shannon Jones introduced Senate Bill 5, the text of which can be found here. The Ohio Senate approved the bill by a vote of 53-44 on March 30, 2011. The House and Senate passed the bill, which was signed into law by Gov. Kasich.[42][43]

In addition to limiting collective bargaining rights, the bill also requires state employees to pay at least 20% of their health insurance premiums, eliminates tenure as a consideration when deciding on layoffs, and institutes merit-based pay for some public sector workers.[44] The bill would also end salary schedules.[45] In addition, under the bill public employees who strike would have two days of wages deducted from their paychecks for each day of a strike, and public employees violating a court injunction against a strike would face additional fines and jail time.[46]

Senate Bill 5 applies top 400,000 public employees[47] including 42,000 state workers in addition to 19,500 workers in the state's university and college system.[48]


On March 2, 2011, the Senate Committee approved the bill with a vote of 7-5. [49] The full Senate passed the bill by a vote of 17-16 vote, with six Republicans voting against it.[50] Ohio Democratic senators could not halt a vote by leaving the state as occurred in Wisconsin because there are enough Republican members to form a quorum in the Ohio Senate and state laws do not require representative of both parties be present to conduct business.[51]

Impact of the bill

While the bill did not completely end collective bargaining, opponents of the bill said it would have the same effect because the provision for elimination of binding arbitration gives the final word in negotiations to state and local government employers.[46][45] On February 24, 2011, Republicans agreed to amend the bill to permit collective bargaining for wages, but it would still prohibit collective bargaining for benefits, sick time, vacation or other conditions. Senate Democrat Joe Schiavoni

The bill is similar to the one that sparked protests in Wisconsin[52]

Protests and Debate

Protest against the bill lasted for more than a week and drew up to 8,500 people [53][54][49]

The Fraternal Order of Police president said on February 23, 2011 that his organization can agree with parts of the bill, such as more transparency in the bargaining process.[55]

Lawmakers supporting the measure said SB5 was necessary. "The reality is, in the state of Ohio, we're out of money," said Sen. Jones. "What we need to do is give management the flexibility to be able to continue to provide the high-quality services that they've come to expect."[44] Proponents of the bill say it could help control spending and provide more flexibility for cash-strapped governments.[56] Gov. Kasich supports the legislation.[57]

Union Provisions in House Budget

The House budget proposal includes provisions on merit pay for public workers similar to those in Senate Bill 5. The House budget includes a measure that would end continuing contracts for new teachers and include criteria for teacher performance evaluations that appear similar to what is in Senate Bill 5. Some questioned whether the inclusion of such provisions is meant to counter the referendum on Senate Bill 5.[58]

Preparations and Requests for fiscal year 2012-13 Budget

The fiscal year 2012-13 budget period took effect July 1, 2011.[59] State agencies submitted initial budget requests on December 1, 2010, many of which predicted dire consequences if budgets were cut.[60] The state Department of Corrections said that even if funding was maintained at 100% of current funding, it would have to cut 339 corrections positions and close prisons due to the expected increase in payroll costs during the next two years.[60]

The state faced an estimated $8 billion shortfall in the $53 billion biennial budget, and to balance it means that lawmakers will have to adjust inflow and outflow approximately 15%.[60][61] GOP leaders warned school districts that they could face cuts of up to 20% in state aid.[62]

The budget submissions by state agencies included new or higher fees as a way to maintain current services with the anticipation of reduced state funding. Kasich has not directly commented on the proposals but he has said that he backs the standard that the anti-tax group Americans for Tax Reform, which maintains that is acceptable to impose certain fees but they are not to be used to increase overall state revenue and spending.[63]

In September 2011 the state was responsible for a $180 million interest payment to the federal government for borrowing for the state's unemployment compensation fund.[64] Medicaid growth would add more than $1 billion to the budget hole over the next two years if caseloads continue to grow at the 9 percent-a-year pace they have since 2007.[64]

See also: Ohio Budget Planning and Management Commission for fiscal year 2012-13.


  1. The Cleveland Plain Dealer, "Ohio budget projection takes a big jump, rosier outlook could prime Gov. John Kasich's tax cut proposal," August 7, 2012
  2. The Cleveland Plain Dealer, "Gov. John Kasich: Rainy day fund to see boost to $482 million, but price tag from health care law looms," July 3, 2012
  3. The Newark Advocate, "House approves budget bill absent tax plan," April 26, 2012
  4. The Cleveland Plain Dealer, "Ohio Gov. John Kasich clashes again with House Republicans over budget," April 25, 2012
  5. 5.0 5.1 5.2 The Cleveland Plain Dealer, "Ohio Senate passes budget deal on near party-line vote," June 28, 2011
  6. 6.0 6.1 Forbes, "Nearly $56B Ohio budget heads to governor's desk," June 30, 2011 (dead link)
  7. The Cleveland Plain Dealer, "Gov. John Kasich signs two-year state budget, but vetoes seven items first," June 30, 2011
  8. The News Star, "Budget turnarounds: Some states socking cash away," Jun 23, 2012
  9. Bloomberg, "Ohio’s Kasich Readies for Spending Cuts If Faltering Economy Clips Revenue," August 4, 2011
  10. The Columbus Dispatch, "State this month will reimburse workers for personal days they gave up," August 11, 2011
  11. The Cleveland Plain Dealer, "Ohio corrections system sells one prison to private operator, reorganizes four others," September 2, 2011
  12. Forbes, "Ohio Repeals Its Estate Tax; Maine And Oregon Tweak Theirs," June 30, 2011
  13. 13.0 13.1 13.2 13.3 13.4 13.5 The Toledo Blade, "Senate OKs budget with harsh cuts," June 9, 2011
  14. The Cleveland Plain Dealer, "Gov. John Kasich signs two-year state budget, but vetoes seven items first," July 2, 2011
  15. Forbes, "Ohio Senate passes $55.7 billion state budget," June 9, 2011 (dead link)
  16. Forbes, "Ohio budget panel sends bill to floor vote" June 28, 2011 (dead link)
  17. The Cleveland Plain Dealer, "State budget conference committee passes unified budget on party-line vote," June 28, 2011
  18. The Cleveland Plain Dealer "Ohio Senate passes sprawling $112 billion state budget along party lines; conference committee next," June 8, 2011
  19. Forbes, "Ohio senators prepare changes to state budget plan," May 26, 2011 (dead link)
  20. Business Week, "Ohio senators prepare changes to state budget plan," May 26, 2011
  21. Cleveland Plain Dealer, "Ohio Senate's version of the budget would restore some money to schools, local governments," May 31, 2011
  22. 22.0 22.1 22.2 22.3 The Cleveland Plain Dealer, "Divided Ohio House passes budget full of cuts on heels of rosy revenue news," May 6, 2011
  23. 23.0 23.1 The Toledo Blade, "Ohio House passes budget, more tax cuts," May 6, 2011
  24. The Marietta Times, "State budget ushers in changes," May 12, 2011
  25. 25.0 25.1 The Mansfield News Journal, "Will state budget avoid higher taxes?" May 8, 2011
  26. 26.0 26.1 26.2 The Columbus Dispatch, "Kasich doesn't expect rising state revenue to ease budget cuts," May 24, 2011
  27. The Columbus Dispatch, "House GOP budget hits the casinos, adds $70 million in spending," April 28, 2011
  28. 28.0 28.1 The Columbus Dispatch, "House GOP likely to seek changes in Kasich budget," April 26, 2011
  29. The Cleveland Plain Dealer, "Ohio House committee approves $120 billion, two-year state budget," May 3, 2011
  30. The Cleveland Plain Dealer, "Ohio House committee approves $120 billion, two-year state budget" May 3, 2011
  31. Forbes, "Ohio House leader takes issue with budget changes," June 2, 2011 (dead link)
  32. Business Week, "Senate budget plan strips new OH union law wording," May 31, 2011
  33. 33.0 33.1 33.2 33.3 33.4 CNNMoney.com, "Ohio governor slashes $8B from budget," March 15, 2011
  34. Reuters, "Ohio governor sees reform, spending cuts in budget," March 8, 2011
  35. 35.0 35.1 35.2 35.3 USAToday.com, "New Ohio gov unveils 'reform-oriented' budget," March 15, 2011
  36. 36.0 36.1 Forbes, "Ohio governor unveils budget proposal," March 15, 2011 (dead link)
  37. State Budget Solutions "Ohio Hopes Medicaid Reforms Bring Savings" June 21, 2011
  38. Bloomberg "Kasich Takes to Airwaves to Pitch Ohio Budget That May Sell State Prisons" January 15, 2011
  39. Reuters AlertNet "Governor unveils cuts to close Ohio budget gap" March 15, 2011
  40. State Budget Solutions "Ohio voters repeal the state's collective bargaining reform law" November 8, 2011
  41. The Cleveland Plain Dealer "Ohio voters overwhelmingly reject Issue 2, dealing a blow to Gov. John Kasich" November 8, 2011
  42. The Cleveland Plain Dealer "Ohio House approves overhaul of collective bargaining law" March 30, 2011
  43. The Atlanta Journal Constitution "Ohio House OKs collective bargaining limits" March 30, 2011 (dead link)
  44. 44.0 44.1 CNN.com "Debate over workers' rights heats up in Ohio" February 18, 2011
  45. 45.0 45.1 WTOV.com "Unions Rallying Against Senate Bill 5 In Columbus Tuesday" February 21, 2011
  46. 46.0 46.1 ABCNews.com "Ohio Public Employee Unions Lose; Wisconsin And Indiana Democrats Seek Deals" March 2, 2011
  47. The Wall Street Journal "Budget Battles Roil Straitened States" February 25, 2011
  48. Reuters "Ohio Republicans may modify state worker union bill before vote" February 25, 2011
  49. 49.0 49.1 Reuters.com "Ohio committee votes to end state worker strike rights" March 2, 2011
  50. MSNBC.com "Ohio bill curbing union rights passes state Senate" March 2, 2011
  51. Cite error: Invalid <ref> tag; no text was provided for refs named teachers
  52. MSNBC.com "Wis. stalemate: Deal struck, cops sent to Dem homes" February 24, 2011
  53. The Dayton Business Journal "Wisconsin protests spill into Ohio" February 21, 2011
  54. Bloomberg "Rev. Jesse Jackson weighs in on Ohio union bill" February 23, 2011
  55. The Columbus Dispatch "Hint of progress amid the protests over Senate Bill 5" February 23, 2011
  56. 10tv.com "Ohio Unions Protest Collective Bargaining Bill" February 22, 2011
  57. The Washington Post "In Wisconsin and Washington, budget battles reshape political landscape" February 20, 2011
  58. The Columbus Dispatch "House GOP budget hits the casinos, adds $70 million in spending" April 28, 2011
  59. Cite error: Invalid <ref> tag; no text was provided for refs named finally
  60. 60.0 60.1 60.2 The Columbus Dispatch "Agencies' budget outlook: Painful" December 2, 2010 (dead link)
  61. The Wall Street Journal "November Winners May Feel Like Losers When the Bill Comes Due" October 25, 2010
  62. The Columbus Dispatch "Budget tactic: Offer savings" December 5, 2010
  63. The Columbus Dispatch "Do fees fit with anti-tax pledge?" December 20, 2010
  64. 64.0 64.1 [The Cleveland Plain Dealer "Ohio's budget shortfall could be as high as $10 billion, lawmaker says" December 24, 2010]