John Begala saw it coming. The former executive director of the Center for Community Solutions, a Cleveland-based think tank, warned last fall about the presence of SAL at the Statehouse. Now the governor and state lawmakers are wrestling with this mechanism that restricts state spending as they attempt to craft a budget for the coming biennium.
Begala projected the governor and lawmakers would be hard pressed to find the resources to address adequately their priorities. He argued they should be prepared to adjust the restriction, providing the state some room to start making up for a decade of disinvestment, a course Gov. Mike DeWine has placed high on his agenda.
What is SAL, exactly?
In 2006, state lawmakers enacted the State Appropriation Limitation. They did so to preempt something worse, a proposed constitutional amendment to restrict state spending pitched by Ken Blackwell, the Republican candidate for governor. The law limits the growth of most general revenue fund appropriations to the greater of 3.5 percent or the sum of inflation plus population growth. (As it is, the 3.5 percent has applied.)
The measure includes a provision that requires a recasting of the limitation every fourth year. This was added to prevent the buildup of unused appropriation capacity or the potential for large spending increases in some years. More, this is the year for recasting, and thus an opportunity for lawmakers to perform some repair work.
Bear in mind that the baseline for setting the limitation is actual spending or appropriations the previous year. So this isn’t about spending simply climbing at close to 3.5 percent a year. Consider the consequences of the Great Recession shortly after the SAL took effect, when appropriations in fiscal year 2010 ran $4.4 billion below the limit, and then $3.8 billion below the following year. Thus, the limitation was set that much lower, putting a tight squeeze on spending.
Actually, the state has yet to catch up, the distorting effect of the recession rippling through the past decade, John Kasich and the Republican legislative majorities showing little interest in making adjustments. That helps explain the pattern of disinvestment in key areas, for instance, state spending on higher education down 20 percent in real dollars since 2008, and spending on local governments down 46 percent. It sheds light on how the state rainy day fund now stands near its legal capacity.
The state has been spending significantly less than the revenue it raises, even in the wake of more than a decade of tax cuts.
On Thursday, Policy Matters Ohio posted a telling item about the subsequent spending gap. It noted that if the SAL had increased 3.5 percent annually since its start, it would stand at $30.9 billion for the 2021 fiscal year. Instead, the limitation will be $24.4 billion, and $23.6 billion for 2020, which is below the $24.1 billion for the current fiscal year.
In his budget plan, Gov. DeWine presses close to those limits. As a result, if lawmakers want to direct more resources to their own priorities, they must find other areas to cut. They already have traveled this path, routing $70 million in general fund revenue to public transit.
That is a worthy investment, as is the governor’s H2Ohio plan to protect Lake Erie and other waterways. Will H20hio get hit to cover public transit?
What about the additional $1.1 billion that state Reps. Robert Cupp and John Patterson propose for their new school-funding formula? Or, say, lawmakers want to add money for early education or even a fraction of a percentage point to the governor’s proposed 1 percent increase in the state share of instruction for colleges and universities?
Ohio has a SAL problem. The fallout from the recession and the pattern of disinvestment amount to what Policy Matters Ohio describes as a “choke collar on the budget.” Lawmakers acted years ago to ensure they would have the flexibility to deal with trouble along the way. This is the moment to do just that.
Ideally, they would ditch SAL entirely, the limitation arbitrary, lawmakers with the authority and responsibility to put together a budget. At the least, the circumstances call for an overdue correction, not to unleash a gusher of money but to see the state in a better position to invest.
Douglas is the Beacon Journal/Ohio.com editorial page editor. He can be reached at firstname.lastname@example.org.