John Begala was curious. The former executive director of the Center for Community Solutions, a Cleveland-based think tank, had heard the campaign talk about diminished state spending, resources falling short for schools, universities, local governments, transit systems and other services. Was this the typical carping as an election approached? Or more substantial?
Recall that Begala opened eyes two years ago with his comprehensive study “Big City Problems in Ohio’s Small Towns.” He explained how urban and rural communities had many things in common, including a heavy reliance on Medicaid, lower levels of education, higher rates of teen pregnancy and smaller percentages of residents employed.
As he began last summer to look at spending the past decade, Begala assumed the numbers would show a drop during the Great Recession and then a gradual recovery. Actually, he learned the years from 2008 to 2018 have been a period of disinvestment in public services — with the big exception of the Medicaid expansion, which has brought reliable health care to some 700,000 Ohioans just above the poverty level.
Begala lays out the data in an analysis and multiple charts. He notes that total state spending on primary and secondary education spending increased — but just 5 percent for the decade in inflation-adjusted dollars. From there, things get much worse. Consider higher education, total state spending decreasing about 20 percent in constant dollars, a massive decline in view of the state’s need to raise its overall level of education.
State spending on human services, such as cash assistance, decreased 13 percent in constant dollars, another steep fall because it includes most Medicaid dollars from the state general revenue fund. State spending on transportation fell 42 percent in constant dollars. Support for local governments dropped 46 percent.
That last example has received much attention for the strain applied. Begala reminds that many communities, smaller and larger, do not have an easy mechanism for making up the loss. He adds that the state depends on locals to deliver services, employing “nearly four-fifths of the people … who serve Ohioans.”
Which gets to another component of the Begala analysis — the changes in state revenue. Total state and federal revenue increased 3 percent for the decade. State revenue alone declined about 7 percent in constant dollars. So did revenue from major taxes, decreasing about 3 percent. During the decade, the sales tax replaced the personal income tax as the leading source of revenue, reflecting the roughly one-third reduction in income tax rates.
The revenue changes have been particularly tough on local entities. They have seen the repeal of the tangible personal property tax and the estate tax. The state’s commitment to replacing the revenue loss from the former has flagged. Begala notes that originally 85 percent of the revenue from commercial activity tax on businesses went to replacing the loss. Today, the share is 15 percent.
Begala invites the question: Is this the path the state wants to keep taking, neglecting the partnership with local governments that helps repair streets, water systems and other public works, not to mention support schools and universities, transit and libraries? If the answer is no, he cites a formidable obstacle in the way, the State Appropriation Limitation, or SAL.
This measure dates to 2006, when lawmakers responded to a proposed constitutional amendment Ken Blackwell designed to restrict state spending. As a result, most appropriations are limited to the greater of 3.5 percent or the sum of inflation plus the rate of population change. Every four years, the limit is recast, and the next time arrives with the new state budget next year.
Unfortunately, as Begala makes clear, appropriation levels are running below the 3.5 percent. Thus, without some kind of legislative fix, the state won’t be in position to make much progress in correcting its record of disinvestment. Mike DeWine, the governor-elect, may have trouble funding his ambitious plans for improving early education and child care.
For Begala, the moment is right for a well-equipped bipartisan commission to take a serious look at updating the entire structure of state and local taxation and revenue sharing. That makes sense. His analysis also reinforces there is no time to waste charting a new course. Ohio cannot afford to disinvest.
Douglas is the Beacon Journal/Ohio.com editorial page editor. He can be reached at 330-996-3514 or email@example.com.