Three veteran state budget observers agreed Wednesday that Ohio’s multiple layers of local government should be on the chopping block as lawmakers seek to close next biennium’s looming budget gap… and one suggested extending the sales tax to services such as architectural services.
Local government consolidation was a recurring theme during a Columbus Metropolitan Club discussion. Matt Yuskevich, chair of the Ohio Society of CPAs Budget Advisory Task Force, John Begala, executive director of the Center for Community Solutions, and Gene Krebs, senior director of government affairs and policy for Greater Ohio, offered suggestions on patching the upcoming $4-8 billion budget shortfall.
While the three generally agreed that a short-term solution would require both budget cuts and tax increases, reducing redundancy in local government emerged as a necessary salve for the state’s long-term budget woes.
“We’re still operating on the governmental model that evolved in the 1800s, where the county seat had to be no more than a day’s stagecoach ride away – that’s why we have 88 counties,” Mr. Yuskevich said. “Do we need 88? Do we need 530-some cities? Do we need 1,700 townships, all of them duplicating services?”
Mr. Krebs said Ohio’s complex system of overlapping local jurisdictions made the state’s cost of living and doing business relatively high.
A previous Greater Ohio report found Ohioans have the country’s ninth highest local tax burden, compared to 34th highest for state taxes, he said. Moreover, the state spends 49% more on school district administration than the national average.
“Ohio has 3,800-plus taxing jurisdictions, which includes counties, townships, cities, school districts, service delivery areas,” he said. “Have we ever given thought to what duties are performed by which entity and whether we can make the system work better?”
Mr. Begala said the combination of municipalities’ authority to levy income taxes and state payments of about $1 billion a year through the local government fund is “pretty extraordinary. What do we get for that in terms of collaboration?”
Mr. Yuskevich said rather than mandating local government consolidation, the state could offer incentives to merge services.
For example, policymakers could withhold about half of the $1 billion local government fund to use as grants for entities that share operations and reduce spending, he said. “It doesn’t get you the whole way there, but that’s something that could be done in the next few years that could have some long-term effect in terms of starting to move that consolidation forward in a practical way.”
Mr. Krebs said policymakers should create a local government commission to recommend far-reaching changes to school districts and local entities.
Although making dramatic changes to local government organization is difficult, it’s less politically risky than raising taxes or cutting programs for the needy, he said. “Governance reform is the less painful answer.”
Mr. Yuskevich said recent polls show public support for reducing government services.
“We still need to cut some more, but there’s probably going to have to be some kind of revenue enhancement on the other side, whether you call that a tax increase, plugging a loophole or something similar to that,” he said.
Mr. Begala said policymakers should impose sunset limits on tax deductions, credits and exemptions to force a periodic review to determine whether they still served a legitimate purpose. Another option is to expand the sales tax to services, he said. “One thing we can do, if we don’t want to raise tax rates, is broaden the base if we’re moving from a goods economy to a service economy.”
He also suggested forming a cooperative to combine the health care purchasing power of Ohio’s Medicaid recipients, state and local government employees, and pensioners.
“There are a lot of businesses – major insurance companies that will scream bloody murder about that. But if you want to approach doing government like a business, that’s the kind of thing that we need to be doing,” Mr. Begala said.
Further delaying action on the state’s budget woes will eventually eliminate any alternatives to raising taxes Mr. Yuskevich said. “It’s going to become the only solution that’s available because it has instantaneous revenue implications.”
The speakers said an equitable solution would require a departure from the usual practice of each constituency fighting to protect its own interests.
“That notion of cover your own back is exactly the theme that all three of our organizations and many others are trying to get beyond or transcend,” Mr. Begala said. “If we’ve got Statehouse politics as usual, if we’ve got pay-to-play… we don’t get through this and it’s going to be an ugly first six months of the next year.”