In May 2020, Ohio Governor Mike DeWine announced $ 775 million in government spending cuts in view of the expected lower tax revenues due to the economic upheaval caused by the coronavirus pandemic.
The cuts included $ 300 million from K-12 education and $ 210 million from Medicaid, the health program for the poor. DeWine decided to make them instead of dipping into the state’s $ 2.7 billion rainy day fund.
In retrospect, the move is barely supported by a panel of Ohio economists.
In one opinion poll published on Monday by Scioto Analysis, the panel was asked if it agreed that “The DeWine administration’s 2020 decision to cut spending instead of using Rainy Day budget stabilization funds during the pandemic will result in more economic growth for Ohio in the long run. “
Only about a fifth – 5 out of 24 – did. Sixteen disagreed and three said they were unsure or had no opinion.
By the time DeWine announced the cuts, it’s understandable that he expected state tax revenues to be rock bottom.
He was only begin to allow Reopen retail and service businesses. It was still uncertain when bars and restaurants would reopen for office staff. Legions of Ohioans were unemployed.
“If we don’t make these cuts now, the cuts we have to make next year will be more dramatic,” DeWine said at the time, according to The Columbus Dispatch. “These decisions weren’t easy. We have not made it easy for ourselves, but they are necessary. As many of our companies are making adjustments during this difficult time, our government must make adjustments too. “
What is less clear, however, is why the governor was reluctant to step into the Rainy Day fund in the midst of a century of pandemic.
University of Mount Union economist Michael Myler said spending cuts while the economy is shrinking will not help it expand.
“Cutting spending is a contractionary fiscal policy,” he commented on the survey. “Contractive fiscal policy is unlikely to lead to economic growth. Why have a “rainy day” fund when you don’t want to use it on a rainy day? “
Curtis Reynolds, an economist at Kent State University, also disagreed with DeWine’s cuts. He seemed to notice that the cuts were being made on the backs of those affected by the pandemic.
“It’s nice to have a rainy daily budget for future emergencies, but hard to believe there will be anything in the near future like we saw during this pandemic,” he said. “So we saved money, for what exactly? The pandemic is likely to have long-term consequences for companies, workers, children, schools, etc. “
But one economist who agreed to the budget cuts said keeping the Rainy Day fund intact can be an economic goal in itself.
“The ability to raise funds through bond financing for growth opportunities in the future will be enhanced by good fiscal stability strategies,” said Kenneth Fah of Ohio Dominican University.
In any case, the revenue shortfalls on which DeWine assumed the cuts did not appear to have occurred.
The Office for Budget and Administration Annual report for the year ended June 30, 2020, the fund had general fund sales of approximately $ 38 billion – almost the same as last year.
The report for the year ending June 30, 2021 hasn’t come out yet, but in the monthly reports, tax revenues seem pretty healthy since then. On average, they are 3.7% above estimates.
One possible reason for higher income is that the federal government’s COVID aid is likely to be substantial increased individual incomeso that more taxes can be paid.
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