Buckeye Institute: Cuts to Ohio’s Local Government Fund Good Policy

November 6, 2014

Buckeye InstituteI’ve talked to a number of local-government officials in Ohio who are very critical of the state government’s cuts to the state Local Government Fund since Governor Kasich was elected in 2010.  Some of the criticisms are covered in this Columbus Dispatch article, for example.

“State government was balanced by unbalancing a lot of local budgets, and you got stuck with the bill,” FitzGerald told more than a thousand attendees of the Ohio Township Association’s Winter Conference. “And they were not always able to not cut services or not raise taxes or not lay people off.”

The Buckeye Institute, an Ohio conservative think tank that does a lot of work crunching numbers and making information on state and local government spending more publicly accessible, has a new report arguing that the cuts to the Local Government Fund are good policy: “Revenue Sharing Reform: On the Road to Ohio’s Recovery”.

Even before any of the Administration’s revenue sharing cuts, the LGF was less than 5 cents of every dollar in total state support for local governments and a little over 1 percent of total local revenues.

. . . Most local governments in Ohio are again collecting a great deal of revenue, and accumulating relatively large “rainy day” funds. If they exercise fiscal discipline and commonsense, they should use that revenue to fund the local services required or preferred by their communities rather than running to Columbus looking for further state revenue sharing handouts. To help them exercise that much-needed commonsense, the Governor and General Assembly have enacted commonsense reforms in the state’s revenue sharing programs. These reforms have the benefit of promoting economic growth and opportunity for the entire state while also fostering flexibility and fiscal responsibility.

(Read the whole report here.)

Don’t think that the Buckeye Institute is shilling for Governor Kasich; they have repeatedly opposed his push to enact Obamacare’s expansion of Medicaid in Ohio in no uncertain terms (most recently, “Forget Politics and Ideology, Medicaid Expansion is Just Bad Policy” and “Medicaid Expansion: More Spending Will Lead to More Taxes”).  Presumably their conclusions about the LGF result from genuinely independent policy analysis.

The Buckeye Institute introduced its new report with the following e-mail release (entire text reproduced below, hyperlinks in original):

Governor Kasich and the General Assembly have rightly recognized the flaws and dangers of an outdated Depression-era program known as the Local Government Fund (LGF).  Unfortunately, too many of Ohio’s local government officials—the real beneficiaries of the redistributed funds—continue to loudly protest the “draconian” cuts to the program.

The Buckeye Institute’s recent report, Revenue Sharing Reform: On the Road to Ohio’s Recoverydispels the naysayers’ fears and makes clear that cuts to the LGF have limited impact on many counties and cities for several reasons.  First, the LGF represents a small portion of the overall support that local governments receive from the state.  Second, rising revenues from local income and sales taxes are more than offsetting LGF reductions and are a strong indication that an economic recovery is underway as locally-derived revenues become healthier.  And, finally, 9 out of 10 counties and nearly 9 out of 10 municipalities have reserve accounts or “rainy day” funds with balances exceeding (in percentage) the state’s own rainy day reserves.

Far from harming local communities, reducing the LGF redistributions actually helps strengthen local towns and their taxpayers by reducing the tax burden and making local civic leaders more accountable for the decisions they make and the tax dollars they spend.  Economists have long argued the common sense position that it is better to keep political and government spending decisions closer to home.

The Buckeye Institute continues to champion this approach.  Our message has been published recently in the Columbus Dispatch and the Toledo Blade, highlighted by our friends at the Heartland Institute and the Cato Institute, and criticized by our opponents—which is the best sign that the message is making a difference.

Governor Kasich and the General Assembly deserve credit for their brave efforts to reduce redistributive tax-and-spend programs like the LGF.  If anything, more reductions to the LGF, or at least a substantial modification of how it is distributed, should be considered in the upcoming biennial budget.

Click here to support The Buckeye Institute’s work with your tax-deductible contribution.  We are funded by individuals and foundations who share our commitment to advancing free-market public policy, and are able to succeed only with your help!

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Founded in 1989, The Buckeye Institute for Public Policy Solutions is an independent research and educational institution—a think tank—whose mission is to advance free-market public policy.

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