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Medicaid sales tax loss slams counties, COTA

Franklin County would have to deal with $12 million in less revenue in 2018 under Ohio Gov. John Kasich’s formula to help counties deal with the loss of sales taxes from Medicaid managed care.

Meanwhile, the Central Ohio Transit Authority, which also collects a dedicated piggy-back sales tax, stands to lose more than $5 million.

The federal government told Ohio last year that it could no longer charge a sales tax on Medicaid managed care services in order to draw down more federal matching dollars.

The change will cost counties and local transit authorities about $200 million per year. It also cost the state about $1.1 billion over two years, and Kasich has proposed a new assessment on Medicaid managed care and private health insurers to cover the state’s losses.

The local losses are trickier to resolve because there is no easy way to keep the same level of sales tax revenue flowing to counties and transit authorities that have been utilizing Medicaid taxes since 2010.

In his new two-year budget, Kasich proposed giving counties and transit authorities enough funding to fully cover their loses through the last three months of this calendar year. After that, he proposes a single $158 million payment distributed under a new formula that is designed to direct the money toward counties that are more heavily dependent on the Medicaid sales tax revenue due to high numbers of Medicaid recipients and fewer local retailers.

For Franklin County, that means $8.9 million to cover 2018 instead of the nearly $21 million the county would normally collect in Medicaid sales taxes. COTA would get $3.2 million instead of the $8.3 million it normally collects from the tax.

“It will have an impact,” said County Administrator Kenneth N. Wilson. “The loss of these funds will impact our capacity to move forward with capital projects and provide grants to community partners.”

Franklin County officials will urge lawmakers to “come up with a permanent solution” rather than “a one-time lump payment,” Wilson said. The lost sales tax revenues, he added, are compounded by previous cuts in state aid to local governments. In Franklin County, local government funding fell to $12.6 million in 2016, down from $22.7 million in 2011.

“If you’re a county that is heavily hit, then prudently you might want to use that money and slowly withdraw it ... to help you manage the impact,” said Kasich’s state Budget Director Tim Keen. “That’s up to them.”

Eight counties, including Delaware and Union, get zero money to handle 2018 losses. That’s about a $900,000 loss for Delaware and $450,000 for Union.

Licking County would get about $820,000, compared to the more than $2 million it has collected from the Medicaid sales tax, while Fairfield would get about $540,000 instead of the $1.3 million it gets from the tax.

This would be a one-time payment. Kasich has no plans to restore funds to counties and transit authorities beyond 2018.

“They’ve only been collecting it since 2010, and I don’t know why we would permanently replace a temporary revenue source that they benefited from,” Keen said.

But many counties and transit authorities have built that money into their budgets, and there was no expectation that it would be temporary.

“And now they’ll have to manage their way off,” Keen said. “We’ve given them a tool to thoughtfully manage their way through this change in law.”

Suzanne Dulaney, executive director of County Commissioners Association of Ohio, urged the General Assembly to toss Kasich’s plan.

“The glaring disparity between the state’s approach to its budget shortfall and that of the counties is shocking. We encourage the legislature to find a more equitable solution,” Dulaney said.

Marty Stutz, spokesman for COTA, said the loss of $5 million next year, and more than $8 million per year after that, is significant. COTA’s total budget is about $130 million.

“We need some longer-term solutions,” he said, noting the loss “represents service on the street. We’d have to be creative and find a way to maintain the high level of service we’re putting out there.”

For some counties, including Franklin, this funding loss is expected to be compounded by a drop in state local government funds. Kasich is proposing to distribute a portion of those funds under a new formula based on local tax capacity, and Franklin County is likely to fare poorly under such a calculation.

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