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To Change State Government, You Have to Understand It

A refresher course on finances and more

Many people complain about taxes and spending but few understand how government works.

With a forecast of low tax revenue and high demand for services, Ohio's biennial budget wrangling promises to be a grueling affair this year. It's important for Ohioans to understand how state government operates — what money comes in and how spending decisions are made.

"One of the most effective ways to bring about change is to make sure people advocating have credibility," said Joanne Limbach, AARP Ohio state president and a former tax commissioner. "And you get credibility by understanding how the process works."

With predictions of a budget deficit of up to $8 billion over two years, legislators will be bombarded by competing interests as they consider cuts, tax increases or a combination of both.

"In these budget times, everything is up for discussion," Limbach said.

Here's a snapshot of how the budget is created:

  • Every two years, Ohio must adopt a balanced budget. It must be approved by June 30.
  • Using revenue and expenditure estimates, the governor proposes a budget to the General Assembly in the first quarter of the year.
  • The House gets the first crack at making changes. Then the Senate takes a turn.
  • A House-Senate compromise version of the bill then goes to the governor, who has line-item veto power — 61 items were vetoed in 2009. It takes a three-fifths vote by the General Assembly to override a veto.

Where does the state get the money? Here's a short course about finances:

The current general fund budget is $17.2 billion excluding federal aid.

Most of this budget comes from personal income taxes ($7.2 billion) and sales taxes ($7.1 billion). Cigarette taxes are a distant third ($887 million).

Where does it go? Education eats up half ($9.2 billion), followed by health and human services such as Medicaid and food assistance ($3.5 billion), and courts and public safety ($1.9 billion).

Limbach said misperceptions about spending flexibility abound; such as, "Why is the government using my tax money to fill that pothole when it should be spending it on xyz?"

A large portion of state money is already earmarked for specific uses. For instance, about $1.7 billion in taxes paid at the gas pump can only be used for transportation needs. Lottery profits, about $728 million, must be spent on education. And another chunk of money roughly $400 million, pays off existing debt.

In addition, federal programs such as Medicaid often come with strings attached. Medicaid spending in Ohio this year is $15 billion; the feds pick up about three-quarters and the state pays the rest.

"You're really locked in by federal rules and laws and previously passed state laws," said Joan W. Lawrence, a member of AARP's executive council and a former Republican state representative for 16 years.

But Ohioans can have a voice on how their tax dollars are spent. Finance committee hearings are an ideal place for citizens to express opinions on the budget, Lawrence said. Writing and calling legislators can be very effective, especially when the plea is personal and not just a form letter or scripted response.

"Some people don't want to call because they think their representatives will be busy," she said. "Well, baloney!"

Sarah Hollander is a freelance writer based in Cleveland.

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