2017 Legislative Session Nearing Completion, 2018 Session Preview

By Jason Warner, Manager of Government Affairs

The legislature has been back in session since mid-September working on a number of issues, including some which are still pending from earlier this year.

The most significant of these issues has been the ongoing work related to the state budget. In early July the Ohio House voted to override 11 of the vetoes issues by Governor John Kasich, including a provision which would provide a short-term funding mechanism to assist counties and transit agencies that are losing funding as a result of the elimination of the state sales tax on Medicaid Managed Care Organizations (MCO’s). When the Senate met for a rare summer voting session on August 22, they voted on only 6 of the overrides approved by the Ohio House, not including the MCO replacement funding. In September, the Senate introduced a proposal to compensate counties and transit agencies that does not include a risky request to the federal government to seek in increase in a previously approved fee that is generating revenue for the state.

Under the Senate proposal, $207 million in transitional aid will be paid to counties and transit agencies in two payments in November 2017 and January 2018 (this was previously approved in the budget bill in June). The Senate has proposed to add an additional $50 million to this pot of money in January 2018 and could add an additional $30 million in November 2018 if state generated tax receipts outperform their estimates between July 1, 2017 and October 31, 2018. All of the parties involved in the negotiations have agreed to this compromise, which is awaiting introduction into either bill form or an amendment to another piece of legislation. That is expected to occur before the legislature recesses for holiday break on December 13, as part of a larger piece of legislation intended to make corrections to the budget as a result of the other veto overrides which were approved by the legislature over the summer.

Non-budget related legislation that has seen action over the fall includes a number of bills introduced related to the expansion of broadband services in unserved or underserved areas of the state. Three bills have been introduced, including House Bill 281, sponsored by Rep. Rick Carfagna (R-Genoa Township) which would provide matching funds to municipalities or townships to support the expansion of broadband connectivity to unserved households across Ohio. In addition, two bills, House Bill 378, sponsored by Reps. Ryan Smith (R-Bidwell) and Jack Cera (D-Belmont)  and a companion Senate Bill, SB225, sponsored by Sens. Joe Schiavonni (D-Boardman) and John Eklund (R-Chardon) establish the Ohio Broadband Development Grant Program to build broadband infrastructure in unserved or underserved areas of the state.  Grants awarded under this program would have a maximum value of $5 million. Eligible recipients include businesses, non-profits, co-ops or political subdivisions (including municipalities, townships or counties). The grants cannot cover more than half of the cost of the project.

Also introduced and a priority piece of legislation for Greater Ohio is House Bill 368, sponsored by Rep. Michele Lepore-Hagan (D-Youngstown). Known as the Fair Lending Through Land Contracts Act, HB368 would make much needed changes to the state land contract statute. Land contracts are a form of seller financing. They are similar to a mortgage, but rather than borrowing money from a traditional lender or bank, to buyer makes payments to the real estate owner (or seller) until the purchase price is paid in full.

Land contracts have historically been marketed as an alternative path to homeownership for consumers who have limited income and/or have difficulty establishing traditional lines of credit that make in near impossible to qualify for a typical bank loan or mortgage. Today, these include not only people of color but also immigrant communities. While they do offer opportunity for some individuals to achieve the American Dream of homeownership, a recent increase in the prevalence of land contracts has created a crisis in communities across Ohio. In the wake of the subprime mortgage crisis of 2007-2010, millions of homes across the United States ended up in foreclosure. As a result of the crisis, the Federal National Mortgage Association (Fannie Mae) found itself with a large inventory of homes and a need to dispose of them in an expedited manner. Fannie Mae used the bulk sale program to rid itself of this inventory, and allowed large investment firms to purchase foreclosed homes for pennies on the dollar and turn around and offer them for sale at inflated prices through land contracts with terms that make in next to impossible for the buyers to meet the obligations of the contract.

Among the important changes incorporated into HB368 include requirements that sellers be required to purchase and maintain homeowners insurance policies through the duration of the land contract; requires sellers to be responsible for maintence and repair to the property during the length of the land contract, and that the seller be prevented from having a mortgage or taking out a mortgage on the property once it is subject to a land contract. Other requirements of the bill require home inspections to be carried out before a land contract can be executed in order to ensure that the home is in a livable quality before the buyer takes possession of the property, and that the seller be responsible for the payment of property taxes until the land contract is paid in full. These common sense reforms will ensure that home buyers through land contracts have the same consumer protections as other property buyers or renters under existing law and will do much to prevent the high rate of eviction and occurs under the existing law. HB368 has had a single hearing in the House Financial Institutions, Housing and Urban Development Committee and Greater Ohio, along with other advocates, are meeting with members of the committee to build support for the legislation ahead of any future hearings on the bill in 2018.

Other issues on the plate for 2018 include the introduction and legislative action on a new Capital Budget.

The capital budget provides funding for appropriates money for projects involving the acquisition, construction, equipment, or renovation of buildings and other facilities of state agencies. This does not include the Ohio Department of Transportation – those projects are funded through the state transportation budget that was approved earlier this year. The last capital budget approved in 2016 was valued at $2.62 billion - $337 million of which was cash (set aside from various general revenue funds in the state budget) while the remaining $2.28 billion was supported by state bonds which have been approved by voters in state referendums. The legislature will actually approve two capital budgets next spring – a reappropriations budget which will redirect the spending of monies approved in 2016 for projects that have not yet been completed, and an appropriations budget for new projects which will begin after July 1, 2018.

The legislature will have a busy first few months in 2018 as they work on these and other issues ahead of summer recess, when they will break to campaign for re-election. Voters will elect state legislators as well as a new Governor and other statewide officials in the November 6, 2018 General Election.

Senate Approves 6 Veto Overrides - Delays Vote on Funding for Counties and Transit Agencies

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By Jason Warner, Manager of Government Affairs, Greater Ohio Policy Center

In a rare August session, the Ohio Senate voted on 6 of the 11 veto overrides that the Ohio House of Representatives approved during a special voting session on July 6. They held over five other veto overrides for a possible future vote, including a provision that seeks to provide additional funding for counties and transit agencies.

The proposal would require the state Department of Medicaid to seek permission from the U.S. Center for Medicare and Medicaid Services (CMS) to increase the Health Insurance Corporation (HIC) fee that CMS approved in 2016 that is currently generating $615 million in annual revenue for the state. This fee replaced a previous sales tax on Medicaid Managed Care Organizations (MCO) that CMS disallowed earlier in 2016. The HIC fee covers losses that the state realized through the loss of the MCO sales tax revenue, but does not account for lost revenue that counties and transit agencies received through their piggyback sales taxes. This has resulted in a loss of approximately $207 million annually. The request to CMS would be to raise the HIC fee to a rate substantially high enough to generate the additional $207 million per year to assist counties and transit agencies.

In remarks on the Senate floor during the session yesterday, both Senate Minority Leader Kenny Yuko (D-Richmond Heights) and Senate Finance Committee Chairman Scott Oelslager (R-N. Canton) stated a desire to ensure counties and transit agencies are not left out, but said discussions on the issue are “ongoing”.

The earliest possible date for another vote on the override by the Senate is Wednesday, September 6 when they have a tentative voting session scheduled. Full session is expected to resume the week of September 18. 

GOPC's Successes in the State Budget: An Open Letter

July 5, 2017

To Governor John Kasich and the Members of the 132nd Ohio General Assembly: 

The Greater Ohio Policy Center (GOPC) wish to express our sincere gratitude for all you have accomplished in creating the two-year budget for the State of Ohio. While there may be areas of disagreement, we appreciate the work that went into the document and want to single out a number of policies that House Bill 49 will enact into law.

 

Brownfields

GOPC, working with Senator Bob Peterson and Representative Rick Perales, developed an amendment that changes Chapter 725 of the Ohio Revised Code governing Urban Renewal Projects. In an urban renewal project, a municipality and a developer create a development agreement to mitigate a blighted area. After development begins, the property owner makes service payments in lieu of taxes, based on the increased valuation of the property. Service payments support bonds that have been issued to support redevelopment costs. 

The amendment makes it absolutely clear that environmental remediation is an allowable cost whether the land is publicly or privately owned, and allows the semiannual service payment amount to exceed the foregone real estate taxes on the improvements, if the parties to the development agreement agree. This latter provision would better accommodate the cleanup of very highly contaminated sites. (The difference would be made up with charges passed through to tenants or from other project revenue.)
This permissive amendment will not cost the state any revenue. Rather, this amendment will serve as a revenue and jobs generator for the state, turning vacant, blighted land into profitable parcels of economic growth.


Lead Abatement

The budget creates the Lead-safe Residential Rental Unit Registry, maintained by the director of the Ohio Department of Health. This voluntary, online registry will provide an opportunity for families to more easily find lead-safe homes when looking for places to live. Owners can register qualified properties which have undergone documented lead-safe maintenance practices. 

GOPC supports policies and practices that help to revitalize neighborhoods in Ohio’s cities so that they attract people and thrive economically. We were pleased that House Bill 49 will do much to help to reduce the risks of lead exposure to children.The budget provides $4.8 million in annual funding over the biennium for lead remediation and associated testing services for homes under lead hazard orders, ensuring that more properties are made safe for families, and their children. 

We also thank the legislature for removing a shortsighted proposal which would have overrule municipal home rule authority concerning health and safety standards regarding lead abatement activities. This proposal would have undermined efforts to strengthen standards and ensure more properties are made lead-free. If in the future the state decides that it needs to strengthen state regulations, we would encourage the state to look at local ordinances as a model for statewide reform.


Fuel Transparency

The final budget agreement removed an amendment that would have mandated stickers be affixed to retail service station pumps displaying the rates of federal and state taxes applicable to gasoline and diesel fuels. There was no affixed cost for the program, which would have had to be fully implemented in 14 months. 

GOPC actively opposed the inclusion of this provision in the budget. At a time when the legislature was forced to cut nearly $1 billion in funding across the board, reducing spending and cutting funding to a number of important and crucial programs across the board, GOPC did not believe that it made sense to include a new mandate with no fixed cost associated with it and no clear, defined purpose. Both the Ohio Senate and the Conference Committee eliminated this provision and GOPC would like to single out Senators Matt Dolan and John Eklund, who responded to our requests and drafted amendments to have this provision removed. 

Once again, we wish to thank you for all of the efforts you have put forth in the creation of the two year operating budget for the State of Ohio. These changes, outlined above, create a policy environment that fosters revitalization in Ohio to create economically competitive communities.

Main Operating Budget Moves to Next Stage; GOPC Offers Recommendations

Recently, the Ohio House of Representatives approved a drastically different two-year state budget from the one proposed by Governor John Kasich in January. The House budget included roughly $632 million in reductions due to decreased state revenue collections, and so far for the fiscal year FY2016-17, receipts are $773.7 million, or 4.2 percent, below projections. This followed an announcement in April by state leaders that the budget would need to be revised downward by roughly $800 million for the next biennium (FY2018-19).

With passage of the House version, the budget now moves to the Ohio Senate, where additional reductions will be needed to meet the $800 million in cuts. The deadline to approve the budget is June 30, when the current state fiscal year (FY2017) ends. Greater Ohio Policy Center (GOPC) continues to testify on several changes to be made in HB49, including the following provisions. 

Greater Ohio Supported Provisions:
The budget bill provides $4.8 million in annual funding over the biennium for lead remediation and associated testing services for homes under lead hazard orders, ensuring that more properties are made safe for families. This will be done through the use of federal funding available to the state.  GOPC is pleased by the state’s commitment on this important issue and encourages the Legislature to ensure local lead abatement programs are empowered to utilize the funding.

Greater Ohio Opposed Provisions:
A House amendment would mandate stickers be affixed to retail service station pumps displaying the rates of federal and state taxes applicable to gasoline and diesel fuel. The stickers would be produced and distributed by the Department of Agriculture at an unknown cost. All pumps would be required to have the stickers affixed within 14 months of the bills effective date and would need to be replaced if damaged or if the state or federal tax rates change. 

The House reduced funding for public transportation by more than 11% per year for both FY2018 and 2019. This line item provides funding for the Public Transportation Grant Program and the Elderly and Disabled Fare Assistance Program. This line item has been reduced by more than 68% or $17,969,134, since FY2000. 

Greater Ohio's Proposed Amendments to the Bill:
GOPC proposes an amendment to make it easier for cities to clean up contaminated brownfield sites.  The proposal would modify Ohio law to make it clear that urban renewal projects can recover the costs of environmental remediation. In an urban renewal project, a municipality and a developer create a development agreement to mitigate a blighted area.  After development begins, the property owner makes service payments in lieu of taxes, based on the increased valuation of the property.  Service payments support bonds that have been issued to support redevelopment costs.

The federal Center for Medicare and Medicaid Services has issued a directive that Ohio cannot continue applying state and local sales taxes on the premiums of Medicaid Managed Care Organizations. HB49 provides for a new service fee to be charged to make-up for lost state revenue, while only providing partial, temporary financial relief to counties and transit agencies. GOPC supports the inclusion of a provision in HB49 that will extend greater financial relief to counties and transit agencies.