New revenue estimates show Senate Republicans were wise to pass a budget on Wednesday that accounted for a $1 billion revenue shortfall.
The Ohio Legislative Service Commission announced Thursday that it is revising its February estimates downward by $1.02 billion for the new two-year budget period that starts July 1. It also projects the state will need to spend $59 million more for Medicaid than what was originally forecast.
State Budget Director Tim Keen is revising down his general revenue fund estimates by a slightly smaller amount, $949 million. However, Keen's projected state share of Medicaid spending increased by $138 million, due to shifts in expected caseloads between programs that receive different federal matching rates.
Sluggish non-auto sales tax and income tax collections are driving the reduced estimates, Keen said.
"The executive budget submitted in February factored in weak revenue performance through January...but did not anticipate the very weak personal income tax filing season," Keen said. "Based on the action of both houses, we are well positioned in this conference committee to put in place a structurally balanced FY18-19 operating budget."
Keen and LSC presented updated revenue and Medicaid spending projections Thursday to a joint conference committee that is tasked with working out budget differences between the House and Senate by the end of next week.
The new estimate stands in contrast to the generally rosier spending and revenue projections lawmakers have heard at this point in the last few budget processes.
Keen's office warned lawmakers in April that they should prepare to adjust the new budget downward by $800 million. As tax revenue collections, particularly from the income tax, continued to fall short of month estimates, Senate President Larry Obhof, R-Medina, said weeks ago that his chamber would pass a budget accounting for a $1 billion shortfall.
Through 11 months of this fiscal year, tax revenues are $841 million below estimates. Keen said under-spending in Medicaid, debt payments, and property tax reimbursements, plus funding moves like raiding unused money from certain funds will allow the budget to finish in the black.
The commission estimates total general revenue fund tax revenue will grow 0.6 percent next year and 3.3 percent in 2019. The lower figure for 2018 is largely a result of the state no longer being allowed to collect sales tax on Medicaid managed care services.