Ohio's sitting on $2 billion; should we spend it?

COLUMBUS - Don't touch the state's $2 billion just-in-case money, Gov. John Kasich keeps saying.

Don't touch those reserves to fight a devastating statewide heroin epidemic or to cover a projected $800 million state budget shortfall. Save that money for a financial crisis – and we're not in one right now. We just have a sluggish economy. That has been Kasich's refrain.

Democrats protest the state's problems are enough of a crisis to justify using the money now. In recent years, they have asked to use the reserved taxpayer money to prevent bullying, help municipalities in fiscal distress, build roads and infrastructure and pay for drug treatment to tackle the state's worst-in-the-nation drug overdose deaths.

Still, Kasich's approach matches the past practices of Ohio's former governors, both Democrats and Republicans. Time after time, Ohio's leaders have drained the state's budget stabilization fund — better known as the "rainy-day fund" — only as a last resort in dire economic times. 

Take Republican Gov. George Voinovich, who left the account with just 14 cents in 1991. The state was facing a $1.5 billion shortfall, one of the highest unemployment rates in the nation and a ballooning welfare roll. So Voinovich did two things that Republicans are loath to do: He raised taxes and dipped into savings.

While unpopular, the decision didn't sound the political death knell it did for Democratic Gov. Ted Strickland nearly 20 years later. In 1991, Voinovich was a newly elected governor with years to build up the reserves. He easily won re-election in 1994 and had restored the rainy-day fund to more than $860 million by his final year in office. 

A decade later, Republican Gov. Bob Taft tapped the rainy-day fund three times in nine months after tax revenue repeatedly fell short of projections. He drained the reserves while also increasing taxes on cigarettes and creating a new tax on trust fund income. Many governors across the nation made the same choice to balance budgets during and after the recession of 2001.

Most recently, Strickland emptied the state's $1 billion reserves, leaving just 89 cents, in 2009. If that number sounds familiar, it's because Kasich and, later, Sen. Rob Portman used it in countless political ads as an example of Strickland's failed financial policies.

Strickland drained the account during his final budget because he faced a projected $7.7 billion shortfall during a devastating national recession.

As long as there has been a rainy-day fund, there have been politicians eager to use it. Strickland, a first-term governor, told reporters that he could tap the $1 billion in reserves only because he had vetoed earlier GOP efforts to use the money as a cash bonus for veterans. 

Now, the requests come from Democrats.

"We’re talking about 10 percent of the rainy-day fund in order to deal with probably the biggest drug crisis in the last 50 years. I don’t know how you argue against that," said Youngstown-area state Sen. Joe Schiavoni, a Democratic contender for governor. He wants to spend some of the state's savings on drug treatment.

Still, none of the requests have been approved by the GOP-controlled state Legislature.

Ohio is one of just six states with no rules on when to withdraw money from the rainy-day fund, which was created in the early 1980s by GOP Gov. Jim Rhodes. Ohio law only sets a goal of how much money should be kept in the just-in-case fund – about 8.5 percent of the state's tax revenues from the previous year. Each governor and Legislature has significant leeway to determine how, or whether, to spend the money. 

"When states don’t have clear guidance, it can create some confusion," said Bob Zahradnik, a policy director for the Pew Charitable Trusts. Credit rating agencies prefer that states have clear guidelines and stick to them, he added. Ambiguous parameters can lead state leaders to withdraw money too frequently or not frequently enough.

Kasich's parameters? "The rainy-day fund should be used in the middle of a fiscal year to put out fires," he told reporters during an April news conference about missing tax collection expectations.

"We don’t think you can use the rainy-day fund to right the budget. That would be what some people would do so then they don’t have to make any choices,” Kasich said.

So don't expect Kasich or GOP lawmakers to touch that money to balance the state's two-year budget, which must be finalized by June 30. Instead, lawmakers are proposing small cuts to state programs and some schools.

© Gannett Co., Inc. 2017. All Rights Reserved


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