COLUMBUS — The infusion of billions in federal funds to pay for expanded Medicaid coverage in Ohio has had the side effect of dramatically increasing the state’s ability to put away money for a rainy day, as well as its power to borrow.
Ohio expects to finish the current fiscal year with a surplus of $970.4 million. It will transfer more than half of that amount at the last minute to help pay for proposed income tax cuts, unemployment compensation interest payments to the federal government, a proposed student debt reduction program, and other items.
But the remaining $374 million would be transferred to the state’s so-called rainy-day fund, budgetary reserves capped by law at no more than 5 percent of the general revenue fund. That would bring the balance in the fund to just under $1.9 billion, well above the current balance of roughly $1.5 billion.
“We are shooting to be at 5 percent at the end of [fiscal year] 2017,” said Tim Keen, Gov. John Kasich’s budget director.
Like the rainy day fund, the state’s debt service, principal and interest payments, cannot exceed 5 percent of the general fund. But the debt cap also counts lottery profits toward that base. Between the two, the state’s debt service capacity is expected to increase by $100 million, according to the budget office. The state is currently at 3.3 percent of the general fund, well below the cap.
Rep. Denise Dreihaus (D., Cincinnati), the ranking Democrat on the House Finance Committee, is less concerned about the higher rainy day fund limit than she is about some of the decisions the Kasich administration made for the rest of the expected surplus.
“I feel it’s responsible for us to hold a certain amount in reserve and to try to hit that 5 percent reserve amount,” she said. “But as the economy continues to grow, we need to continue to invest in that growth. That means investing, in my view, in what matters, i.e. education, transportation, infrastructure, and local communities to continue the growth.
“Investments made in the middle class and working people lead to good wages that pay off in economic growth,” she said.
The state’s budgetary reserves had less than a dollar left when Mr. Kasich took office in 2011. The fund maxed out at 5 percent, then $1.48 billion, at the end of the last fiscal year on June 30, 2014.
“The governor and Director Keen have this as one of the main principles of responsible budgeting,” said Dan Caterinicchia, spokesman for the state budget office. “Their objective is to have the rainy day fund as fully funded as possible.”
The administration has stressed the importance of beefing up its own reserves at the same time that it has pointed to the healthy budget reserves of some school districts that might face cuts in state aid under the budget.
The two-year budget proposal unveiled by Mr. Kasich on Monday calls for increasing total spending by 12.5 percent to $35.3 billion in the fiscal year beginning July 1 and then 4.8 percent to $37 billion in the next.
Mr. Kasich bucked many in his own party in late 2013 when he championed expansion of Medicaid eligibility in partnership with President Obama’s signature health-care law.
Ohio expanded income eligibility to 138 percent of the federal poverty level. He used the quasi-legislative Ohio Controlling Board to draw down $2.6 million to fund the expansion through June 30 after fellow Republicans in the General Assembly balked.
Mr. Kasich’s new budget proposal assumes that the state will continue to accept billions in expansion dollars over the next two years, playing a large role in that 12.5 percent, first-year spending jump.
The federal government will continue to pick up the entire tab for the expansion through Dec. 31, 2016. After that, its share will drop to 95 percent.
p>Contact Jim Provance at: jprovance@theblade.com or 614-<221-0496.
First Published February 6, 2015, 5:00 a.m.
