The Reasoning Behind Governor DeWine's $775 Million Budget ReductionClient Alert
This week, Governor DeWine announced $775 million in cuts to the state operating budget due to financial repercussions resulting from the COVID-19 pandemic.
The Reductions –The DeWine administration will reduce General Revenue Fund spending by $775 million between now and the end of the state fiscal year (June). The following reductions will be made for the next two months:
- Medicaid: $210 million
- K12 Foundation Payment Reduction: $300 million
- Other Education Budget Line Items: $55 million
- Higher Education: $110 million
- All Other Agencies: $100 million
Recent Timeline – The state is required by statute to have a balanced budget each biennium. As Ohio enters month 11 of its 24-month budget, the motivation to balance the budget is forcing the cuts. In making his announcement, the Governor chronologically broke down how Ohio arrived at its present condition:
- February, the state was running $200 million above budget estimates;
- April, the state was forced to shut down to mitigate COVID-19;
- As of May 6, 2020, the state is $776.9 million in the red; and
- He expects the state to continue to experience budgetary concerns for months.
The Reasoning – Governor DeWine anchored his reasoning to future-facing concerns. He cautioned that, “[w]hile we do not know what the coming months will hold, COVID is here with us and will be here for months to come.” He hedged his possible cautionary actions by pointing to his unwillingness to draw from the Rainy Day Fund for the rest of this fiscal year (two months), but will likely need to tap the budget stabilization fund in the next fiscal year beginning in July.
On Medicaid – The Governor said that cuts to Medicaid will not come at the cost of essential services, and that he believes they will be able to find savings within the system even as the state responds to the COVID-19 pandemic. Subsequently, the Director of the Office of Budget and Management indicated that much of the Medicaid cuts will be achieved as an adjustment to Medicaid managed care plan rates.