Fiscal storm clouds over state, local governments

With Ohio bracing for a major fiscal crisis in 2017 as a result of a federal ban on sales-tax collections tied to Medicaid, local governments and other public entities are facing bleak financial futures.

As Vindicator Reporter Peter Milliken revealed in a front-page story on Aug. 6, Mahoning, Trumbull and Columbiana counties will lose $8.5 million in sales tax revenue distributed by state government.

At the same time, the Western Reserve Transit Authority will suffer an $823,578 hit.

The cuts to local governments and other entities are the result of an expected $1.1 billion hole in the next state biennial budget that goes in effect July 1, 2017.

The projected shortfall is the result of a ruling by the U.S. Centers for Medicare and Medicaid Services, which says that as of July 2017, sales tax will no longer be applied to Medicaid managed-care organizations.

State officials were advised of the ruling two years ago.

As The Vindicator reported last month, Mahoning County will lose $3.7 million a year for a 9.5 percent loss in sales-tax revenue; Trumbull County, $2.7 million for a 10.6 percent loss; Columbiana County, $2.1 million for a 12.7 percent loss.

The WRTA’s $823,578 sales-tax cut represents a 9.6 percent loss.

“It’s a big number for all counties,” said Mahoning County Auditor Ralph Meacham.

Yes, it is. According to the Buckeye Institute, a conservative think tank in Columbus, Ohio’s counties and transit authorities will face a reduction of nearly $400 million.

But the Buckeye Institute, which has long railed against “an inefficient system of local governments,” believes it’s time for them to “skinny up.”

Those words in quotation marks were part of the headline for an article written by Greg R. Lawson of the institute. Here’s what he wrote about the anticipated reaction from counties.

“No doubt there will be full-throated calls for additional taxes at the local level. Public transportation advocates are likely to be particularly vocal since the sales tax is often used as a revenue stream for transit authorities. Those calls should be resisted.”

Compelling message

Lawson also had a message for local governments that commissioners would do well to consider:

“The Buckeye Institute has long maintained that Ohio has an inefficient system of local governments. This leads to duplication of services and frequent inefficiencies that cost taxpayers. Instead of the usual calls for higher taxes, now is an opportunity to find greater savings that will benefit taxpayers and continue to improve Ohio’s economic climate.

“Our call, echoed by the Kasich Administration, for a greater sharing of services needs to be heeded by local officials.”

It is noteworthy that three days after The Vindicator’s front-page story about the expected sales-tax revenue cuts, the Cleveland Plain Dealer published a story with these opening paragraphs:

“Cuyahoga County communities can soon borrow equipment from the county, including an asphalt roller, backhoe and large dump trucks.

“County Council agreed to join Share Ohio, which allows agencies and political agencies to loan or borrow equipment entered into a database.

“The program was established by Ohio Auditor David Yost in 2014 to allow communities to share large and expensive equipment, rather than buying their own.”

Government sharing of services and equipment is fast becoming the norm.

Mahoning County Auditor Meacham had it right when he said that local governments should plan for the worst.

To be sure, officeholders and others will push back at the sales-tax cuts by lobbying the General Assembly and Gov. John Kasich for a portion of the $2 billion budget surplus – the rainy day fund. But there is no guarantee that the bid for replacement dollars from the state will work.

Indeed, Columbiana County Auditor Nancy Milliken noted that the commissioners are bracing for tough times.

“The county commissioners are advising all departments in the general fund of cuts that are coming,” Milliken said.

It’s an advisory public officials on the local and state levels should heed.