Ohio

State Fiscal Briefs

November 2020

Looking for Ohio data related to the pandemic? We have health, economic, and fiscal data on our new tool, How the COVID-19 Pandemic is Transforming State Budgets.

Ohio’s budget basics

According to the National Association of State Budget Officers (NASBO), Ohio’s total expenditures in fiscal year (FY) 2020 were $74.6 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Ohio’s combined state and local direct general expenditures were $107.3 billion in FY 2017 (the most recent year census data were available), or $9,201 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Ohio’s largest spending areas per capita were public welfare ($2,460) and elementary and secondary education ($2,087). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Ohio’s combined state and local general revenues were $106.6 billion in FY 2017, or $9,142 per capita. National per capita general revenues were $9,592. Ohio does not levy a corporate income tax but reports some revenue because it has a special tax on financial institutions. Ohio’s main business tax is its gross receipts tax. (Census counts gross receipts tax revenue as general sales tax revenue or selective sales tax revenue.) After federal transfers, Ohio’s largest sources of per capita revenue were charges ($1,540), such as state university tuition and highway tolls, and property taxes ($1,316).

Ohio’s politics

Governor Mike DeWine, a Republican, was elected in 2018 with 50 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (60 Republicans to 38 Democrats) and Senate (24 Republicans to 9 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Ohio. All Ohio House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

Ohio’s budget institutions, rules, and constraints

Ohio uses a biennial budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Ohio further limits spending growth with a budget rule based on the previous year’s spending, inflation, and population growth. The rule is binding and requires a two-thirds legislative supermajority to override it. Ohio also limits total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Ohio’s recent fiscal debates

  • In 2019, Ohio enacted its first gas tax increase since 2005. Governor DeWine originally proposed increasing the state’s gas tax rate by 18 cents a gallon, which would have raised an estimated $1.2 billion for transportation projects. The legislature eventually passed legislation that increased the state’s gas tax rate from 28 cents to 38.5 cents a gallon (the new rate took effect in July 2019). The gas tax hike will increase state revenue for transportation by $865 million annually.
  • As part of the transportation funding legislation, the legislature also increased Ohio’s earned income tax credit (EITC) from 10 percent to 30 percent of the federal credit. The legislature also removed a cap that previously limited the Ohio EITC to no more than 50 percent of a taxpayer’s liability if the filer earned more than $20,000. But Ohio’s EITC remains nonrefundable, so it can only offset a filer’s income tax liability. If the credit were refundable, a taxpayer would receive the credit’s excess amount as a payment from the state. Of the 28 state EITCs, only six (including Ohio’s) are nonrefundable.
  • Ohio made several other changes to its individual income tax in 2019 in the state’s budget. In tax year 2018, Ohio had eight income brackets, including a 0 percent (i.e., nontaxed) bracket, for people with $0 to $10,850 in taxable income. The changes (beginning in tax year 2019) reduced the number of brackets to six, expanded the 0 percent bracket to $21,750 in taxable income, and slightly reduced some of the individual income tax rates—for example, the top tax rate was lowered from 4.997 percent to 4.797 percent. The income tax cuts, which will reduce revenue by $340 million in FY 2020 and $380 million in FY 2021, were driven in part by Ohio collecting more than $600 million in tax revenue than originally forecast.

Ohio’s current budget

Governor Mike DeWine released his proposed FY 2020–21 budget in March 2019. The governor’s $1.2 billion transportation plan was the main focus of his budget and 2019 state of the state address. But both the budget and speech also included more targeted spending proposals, such as funding for children’s services agencies, child protective services, and programs to address mental health and addiction recovery.

The legislature passed its budget in July 2019, but it did so a few weeks after the start of new fiscal year. This meant it also passed an interim budget to bridge the gap. One of the disagreements holding up a final budget deal was that different individual income tax plans passed in the House and Senate. The enacted budget generally followed the governor’s recommendations, but Governor DeWine issued 25 line-item vetoes, including some related to education and health care funding.

For more on Ohio’s budget, see