COLUMBUS, Ohio — Last week, Ohio Gov. Mike DeWine signed the state’s $191 billion budget.
The budget is being celebrated as a significant investment for Ohioans statewide. The budget presents major tax cuts to Ohioans and business owners. However, amid the prosperity, economists question the state’s backup plans in case of an economic downturn.
The budget simplifies the state’s income tax system by breaking it into two brackets. This alteration will decrease tax rates for a considerable number of Ohio residents. Also, getting rid of of the Commercial Activity Tax for most businesses will keep more money staying in proprietors’ pockets.
The looming question remains: what fallback plans does Ohio have if the economy takes a downturn?
Guillermo Bervejillo, a PhD researcher from Policy Matters Ohio, illuminated the state’s plan, stating, “We basically have a fund, a Rainy Day Fund, in case things go sour.”
This fund, intended to stash money during favorable economic times, stands prepared to bolster the state during financial slumps. The fund, which hasn’t been accessed for several years, now holds a record of nearly $3.5 billion. The new budget also expands the maximum allowed amount in the fund to 10% of the General Revenue Fund.
Greg Lawson, a research fellow from Buckeye Institute, said the state’s preparedness is prudent.
“We do buy ourselves some time with one of the most robustly funded Rainy Day Funds that the state of Ohio has ever had,” Lawson said. “That’s a sign of prudent budgeting.”
While Bervejillo agreed on the importance of the fund, he warned it wasn’t a catch-all solution.
“I think that the best way to go about this is to solidify our foundations to ensure that for the long term, instead of depending on these rainy day funds,” Bervejillo said.
The 2008 recession, which led to the exhaustion of the entire fund in the past, has served as a reminder of the fund’s limitations.
“It won’t solve all the problems,” Lawson said, “but it will buy time so that critically, you don’t have to do something too draconian, too fast.”
Gov. Dewine also cautioned about the tax cuts’ impermanence, emphasizing that current measures might not be suitable for future budgets. As Ohio’s economy sails through the fiscal year, the state legislature, along with Dewine, will have the opportunity to re-evaluate the budget and possibly rescind some of the tax reductions next year.
