H.B. 110 FY 2022-2023 biennium budget overview and review of first half of 2021
The Ohio General Assembly recently completed an exhaustive and comprehensive first half of 2021. The legislature tackled the state’s two-year operating budget, COVID-19 relief funding, residential broadband expansion, reforms to the Ohio Power Siting Board for wind and solar projects, and much more. Below is an overview of the major policy and funding provisions of the state’s operating budget and a brief summary of impactful standalone legislation, as well as a brief preview of lawmakers’ expected agenda in the fall.
H.B. 110 overview
On June 29, 2021, the legislature finished its work on House (H.B.) Bill 110 after several months of intensive committee hearings featuring hundreds of witnesses, hours of testimony and thousands of amendments. The final legislation totals 2,438 pages.
Formally introduced on February 16, 2021, Governor DeWine’s proposed budget focused on fiscal and economic recovery from the COVID-19 pandemic. Initial priorities included improved public health and infrastructure for local communities, broadband funding and expansion and measures designed to market and position Ohio for economic opportunity.
As both the House and Senate amended the legislation, additional policy priorities emerged, including additional tax cuts, new economic incentives and spending priorities. Overall, H.B. 110 appropriates $161.9 billion during the FY 2022-2023 biennium. For comparison, the previous budget (133-H.B. 166) appropriated $143.27 billion during the 2020-2021 biennium.
The pandemic’s impact to Ohio’s economy initially raised large concerns among the governor and public officials that Ohio would have far lower revenue projections for FY 2021-2022. Many metrics showed the state’s economic activity had dipped substantially during the pandemic. However, Ohio’s revenue projections for FY 2022-2023 were much stronger than anticipated and ultimately surpassed even the most optimistic projections as the state’s economy proved more resilient than anticipated. During the final days of the conference committee, Office of Budget and Management Director Kimberly Murnieks testified that Ohio had $3 billion more in projected tax revenue than originally reported in her testimony in February of 2021. The legislature left $2 billion of revenue unappropriated for the remainder of FY 2022-2023. It remains unclear if there is an intended purpose for those funds or if those funds will be utilized by other legislation later in 2021 or 2022.
Highlights of the budget bill are below. This list is representative of the many larger policy and appropriation items found in the bill. For a full analysis of the bill, including a fiscal review, please visit the Ohio General Assembly’s website.
Appropriation and policy provisions in H.B. 110
The Department of Agriculture animal health programs received an additional $750,000 in FY 2022 and $1 million in FY 2023. The additional funds support staffing and IT at the Department’s Animal Disease Diagnostic Laboratory. The House included a provision to create the Meat Processing Investment Program Fund. This fund will receive $10 million in FY 2022 and the Department of Agriculture will award grants up to $250,000 to meat processing plants for facility improvements and equipment purchases.
One pivotal policy change included in H.B. 110 was the adoption of the so-called Cupp-Patterson school funding formula for FY 2022-2023. Developed by House Speaker Cupp (R-Lima) and former Rep. John Patterson (D-Jefferson) during the 2019 budget process, the Cupp-Patterson plan represents a fundamental overhaul of the state’s method for funding public schools. The formula is a variable per-pupil base cost computed for each school district.
K-12 schools will receive a total of $10.9 billion in each fiscal year. It is estimated the statewide average base cost per pupil will be $7,202; whereas, under the old school funding formula, the per-pupil cost was set at $6,020. Additionally, the bill increased the EdChoice scholarship amounts. The funding formula is only established for FY 2022 through FY 2023, meaning the General Assembly will review the Cupp-Patterson plan’s impact and address school funding again in the next state budget cycle.
The governor and legislature prioritized expanding broadband service early in this general assembly and the budget cycle. After passing standalone legislation in H.B. 2 (Carfagna, Stewart), which created a residential broadband expansion grant program (see more on H.B. 2 below), the legislature then turned to funding the grant program through H.B. 110. The grant program was established to help recruit and fund broadband projects in unserved areas of Ohio. The program’s grant funding helps close funding gaps that make projects in Ohio’s unserved areas otherwise unmarketable for broadband providers. In the final version of the bill, the residential broadband expansion grant program will receive a total of $250 million: $210 million in FY 2022 and $30 million in FY 2023. These funds are in addition to the $20 million that was appropriated to the program during FY 2021 in H.B. 2.
Legislators continued the recent trend of using the state budget to deliver income tax cuts to Ohioans. Lawmakers cut income taxes by $1.65 billion by reducing income tax rates by 3% in 2021, eliminating the highest income tax bracket, and increasing the threshold for the lowest tier of income taxes to $25,000 of income. Legislators also eliminated application of sales taxes to employment services.
The federal American Rescue Plan Act (ARPA), which contained $1.9 trillion in COVID-19 aid, includes a provision that bars states from using federal relief funds directly or indirectly on tax cuts. Ohio received approximately $5.4 billion in ARPA funds. Many observers feared the large income tax cut jeopardizes Ohio’s ability to utilize ARPA funds. Ohio, with 20 other states, sued, arguing the clause violates a state’s right to establish its own tax policy. In late June, U.S. District Court Judge Douglas Cole sided with Ohio, granting a permanent injunction on enforcing the clause limited only to Ohio. Our team is monitoring for further developments and any impacts to Ohio.
During the pandemic, when many Ohio employers shifted to remote work settings, the legislature temporarily authorized withholding of municipal income taxes from an employee’s primary work location, as opposed to that employee’s actual location. As workforces returned to primary workplaces, both employers and employees needed certainty on how municipal income taxes will apply and be withheld. The budget allows employers to continue withholding municipal income taxes from nonresident employees that work from home in 2021, but allows a nonresident employee to apply for a refund during the period of time they worked from home in 2021.
In addition to funding Ohio’s Medicaid and healthcare programs, the budget contained several other notable health care provisions. The bill specifies that the database created for the state’s Vax-a-Million program is not a public record, appropriated $11 million to strengthen cross-system collaboration for mental health, $20 million in funding for drug courts that help address addiction and reduce recidivism, $24.55 million per fiscal year for food assistance programs, and better coordinated care for children with complex behavioral health needs through the new OhioRISE plan.
One controversial provision of H.B. 110 was the inclusion of medical practitioner “conscience” language that permits doctors, nurses, health care institutions, and insurance companies to decline performance or payment for health care services that “violates the practitioner’s, institution’s or payer’s conscience as informed by the moral, ethical or religious beliefs or principles held by the practitioner, institution or payer.” Governor DeWine responded to concerns that the language could result in some Ohioans being denied health care, saying, “People are not going to be discriminated against in regard to medical care. … If there’s other things maybe a doctor has a conscience problem with, it gets worked out, somebody else does those things. So, you know, this is not a problem, has not been a problem in the state of Ohio, and I do not expect it to be a problem.”
H.B. 110 re-authorized the payment-in-lieu-of-taxes (PILOT) for qualifying advanced energy projects. The PILOT, which was slated to expire in 2022, is an often-used economic development tool for wind and solar projects throughout the state. The PILOT now expires in 2024.
This budget continues to fund, for the next two years, the H2Ohio program, created under the last budget in 2019 to strategically address Ohio’s many water issues including algal blooms on Lake Erie, failing drinking and wastewater systems, and aging infrastructure. The final version of H.B. 110 included $170 million for the fund to ensure safe and clean water resources across Ohio by funding best management practices for farmers, watershed planning, scientific research, data collection, wetland maintenance and creation throughout the state, and improvements and protection of state waterways in support of water quality priorities and management. A majority of the $170 million is allocated to the Department of Agriculture—$49.3 million in both fiscal years—to support incentives for farmers adopting practices to curb algal bloom-fueling runoff. The Ohio Department of Natural Resources, the Environmental Protection Agency and the Lake Erie Commission received H2Ohio funding also.
The budget bill also allows the Office of Budget of Management to transfer up to $132 million into H2Ohio from any general revenue fund surplus existing June 30, 2021.
The Development Services Agency is known again as the Ohio Department of Development , thanks to a name change included in H.B. 110.
All four local development districts (LDD) in Appalachian Ohio will receive $170,000 for administrative costs under the Appalachia Assistance line item and project funding for the LDDs was set at $6.5 million for the biennium.
H.B. 110 makes several investments in economic development programming. The Ohio Rural Industrial Park Loan Program will receive $15 million in FY 2022 and 2023. The budget bill also creates the Brownfield Remediation Program, a new mechanism to award grants for remediation throughout Ohio. The bill appropriates $350 million for the program and any unencumbered funds after FY 2022 will transfer to FY 2023. The Department of Development will award the grant dollars to projects that qualify.
Lastly, a new “megaproject” designation in the state’s Job Creation Tax Credit program was created. A megaproject is one with at least $1 billion in capital investment or $7 million per year in new payroll and average wages of at least 300% of the federal minimum wage. A megaproject can receive tax credits for up to 30 years. Additionally, recipients who receive tax credit under the Job Creation Tax Credit program are also permitted to include work-from-home employees in their job creation calculations.
The governor issued fourteen line-item vetoes to H.B. 110. The full list of vetoes can be found here. Some of the notable vetoes included:
Medicaid rates in statutes
The governor’s veto message explained that while the Ohio Department of Medicaid was supportive of the program rates established in H.B. 110, the administration opposes setting program rates in statute, which limits the agency’s ability to establish rates in the future.
Vacating violations and fines of COVID-19 orders
The vetoed language would have forgiven violations and fines of Department of Health Orders during the pandemic. Governor DeWine’s veto message noted the provision sends the wrong message to businesses that worked hard to comply with the orders and protocols during the pandemic and rewards individuals and businesses that failed or refused to comply with the orders designed to protect Ohioans.
Open meetings act
The bill language created a second jurisdictional venue to hear complaints alleging a violation of the open meetings act with the Court of Claims. The governor’s veto message stated the language was duplicative of the remedy already permitted of filing a complaint in the local court of common pleas. Additionally, the language removed the ability of the court to void a decision that was not made in an open meeting, which the governor stated did not contribute to the transparency of government operations.
Notable legislation passed in the first half of 2021
H. B. 2
H.B. 2 was introduced by Representative Rick Carfagna (R- Genoa Township) and Representative Brian Stewart (R- Asheville). The legislation creates the broadband residential expansion grant program. Under the bill, service providers can apply for grants that supply funding for last mile broadband infrastructure. Counties may also petition the Department of Development to solicit applications from broadband service providers for program grants in eligible areas of the county. Since the legislation included an emergency clause, the Department of Development is already working to put the program into action.
H. B. 201
Sponsored by Representative Jason Stephens (R- Kitts Hill), H.B. 201 prevents local governments from prohibiting or limiting natural gas or propane services or use. Governor DeWine signed the bill and it will take effect on September 28, 2021.
H. B. 168
Originally legislation to provide CARES dollars as grants to businesses, local fairs, child care providers and veterans’ homes, legislators amended H.B. 168 into the vehicle to repay Ohio’s $1.5 billion debt in unemployment loans to the federal government. The legislation utilizes ARPA funds the state received in late May 2021. Additionally, the legislation was further amended to appropriate $250 million to establish a water and sewer quality program. The bill also included language to distribute $422 million of the ARPA funds to more than 2,000 local governments that have yet to receive direct funding from the federal government to support recovery from the pandemic.
Senate Bill (S.B) 52
Fueled by local opposition to wind and solar energy projects, legislators sought to create more meaningful local government input and control over the siting process. The final legislation creates the ability for counties to designate the county, or portions thereof, as exclusionary zones for wind and/or solar projects. Developers must engage in a formal process with boards of county commissioners prior to filing an application with the Ohio Power Siting Board that involves a public hearing and permits commissioners to reject the project. Finally, the legislation seats two ad hoc voting members on the Ohio Power Siting Board: a county commissioner and a township trustee from the impacted area. A more detailed analysis is found here. Governor DeWine signed this bill on July 12, 2021.
S.B. 80 (Gavarone, Cirino) requires a candidate for Chief Justice or Justice of the Ohio Supreme Court or judge of a court of appeals to appear on the ballot at the general election with a political party designation. Prior to this legislation, all judicial candidates appeared on the general election ballot without party designation. The legislation will go into effect September 28, 2021, therefore, the Ohio Supreme Court Justice or court of appeals judge candidates for the 2022 general election will appear with their party designation on the ballot.
While the Ohio General Assembly accomplished much during the first half of 2021, work remains for legislators. Primarily, legislators’ focus turns initially to apportionment and redistricting congressional and state legislative districts. In addition, legislators are expected to work on legislation authorizing sports gaming in Ohio. In the coming months, legislative leadership will identify additional priorities for the fall.
Ohio’s redistricting process will look different this year due to the 2015 and 2018 constitutional amendments that alter how the general assembly districts and congressional districts will be drawn.
Ohio’s General Assembly districts, including the 33 Senate districts and 99 House districts, will be drawn by a seven-member Ohio Redistricting Commission, as established in a 2015 constitutional amendment. The commission includes Governor Mike DeWine, State Auditor Keith Faber, Secretary of State Frank LaRose and two appointees from each chamber of the General Assembly. The commission will include five Republicans and two Democrats. A bipartisan vote is required to approve a map. Any legal challenge against the map drawn must be filed at the Ohio Supreme Court.
Ohio's Congressional district boundaries will be drawn by the full General Assembly, as established in a 2018 constitutional amendment. To adopt a map that applies for ten years, lawmakers must approve districts with a sufficient bipartisan supermajority: three-fifths of the legislature’s total membership, including one-half of the minority party members. If the required supermajority is not reached, the process then passes to the Ohio Redistricting Commission. If the commission is unable to adopt a plan with sufficient bipartisan support, the General Assembly is again empowered to draw districts, although a lower majority is required: three-fifths of the legislature, but only one-third of the minority party’s members. If the General Assembly is still unable to pass a map, the majority party may approve districts without minority party support, but the districts only apply for four years. Any legal challenge must be filed at the Ohio Supreme Court.
When the U.S. Census Bureau announced it would not meet the legal deadline of March 31, 2021, to release census data to the states, Ohio Attorney General Dave Yost (R) filed a case in the Sixth Circuit U.S. District Court in the Southern District of Ohio for injunctive relief against Secretary Coggins of the U.S. Department of Commerce (Case No. 3:21-cv-64). The Sixth Circuit U.S. District Court dismissed the case on March 24, 2021, citing the state did not have standing because the state did not establish an injury in fact. However, on appeal, the Sixth Circuit Court of Appeals ruled that the state did in fact meet all three requirements for standing. The court of appeals remanded the case back to the district court and ordered it to treat the matter expediently and hold a hearing to determine what if, any, remedy is appropriate. Days later, Attorney General Yost announced a settlement agreement reached with the U.S. Census Bureau. The settlement agreement requires the bureau to release population data by August 16, 2021. The bureau will also need to provide biweekly updates, confirming that it remains on track to meet the August 2021 deadline.
Ohio is set to receive their census data in mid-August 2021 and the Ohio Redistricting Commission will begin its work to draft the state legislative districts.
Early in 2021, the Ohio Senate established a select committee to review and propose legislation authorizing wagering on athletic contests in Ohio. Neighboring states including Indiana, West Virginia, Michigan and Pennsylvania already authorize sports gaming. S.B. 176 (Antani, Manning) passed the Senate on June 16, 2021, with hopes from Senators that the House would make quick work of the legislation by June 30, 2021. However, with the budget deadline looming, Speaker Cupp kept the House’s focus on the work at hand. The Senate attempted a last minute compromise, placing amended sports gaming language into H.B. 29, but the House elected not to move forward, meaning the chamber will begin its deliberations on the proposal in the fall. Legislators will settle on the types and number of licenses, how online or mobile wagering will occur, and the overall regulatory scheme.
With the budget finished, Ohio’s representatives and senators return to their districts for summer recess. The General Assembly is not expected to return to the statehouse until after the Labor Day weekend in September. However, legislative work continues behind the scenes on priority legislation. Ohio still has around $280 million of the initial round of ARPA funds to spend, so legislators will likely debate and work on legislation to appropriate the remaining funds. Additionally, Ohio lawmakers will be working diligently and efficiently to complete redistricting by the end-of-September deadline.
This is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney-client relationship.Download PDF