Statehouse Leaders Not "Forced" to Raise Ohioans Taxes
State legislators are spinning Ohioans a tale about the need to increase taxes to balance Ohio’s budget. Their story begins by showing that Medicaid and K-12 education are the only two areas of the budget that are growing. Since Medicaid and K-12 education is just too important to cut, they argue, their hands are tied and taxes need to be increased.
There is, in fact, another side to the story. Medicaid and K-12 education spending are the main cost drivers in the budget, which is all the more reason why they need to be reined in. Concern that these programs are “too important to cut” ignores the research that shows it is possible to slim them down without cutting benefits or quality. Any claim that citizens and policymakers just have to resign themselves to higher taxes in order to fund these programs every budget session is dubious at best.
Take Medicaid, for instance. In March, The Buckeye Institute released Reforming Medicaid in Ohio, a study showing that if Medicaid were not fundamentally overhauled, it would grow to consume the entire state budget.[1] Options for reform were designed to increase efficiency and lower costs while improving the quality of care.
The projected savings from these suggestions came to $1.5 billion annually in the short term. More importantly, reforming Medicaid now would significantly scale down its rate of growth and prevent budget crises in the future.
In education, the questions raised by the DeRolph case over whether Ohio’s system of school funding is constitutional have been largely resolved.[2] The Supreme Court’s decision to return the issue to the legislature means matters of school funding are back in their rightful home. Unfortunately for legislators, this removes the excuse that increases in spending are necessary to satisfy the Court.
If the current Senate biennium budget is passed, state spending on education will exceed what it was just four years ago by 36 percent. Education will then amount to roughly a third of all state general revenue fund spending.[3]
While such dramatic increases may put to rest the arguments that the state needs to spend more to improve education in Ohio, research suggests that more spending does not directly translate into better academic performance.[4] If the desired result is an improvement in educational quality, expanding choice through vouchers or charter schools is likely to have a greater impact on student learning. In light of this, there is little justification for the Senate’s proposal to increase spending.
Even assuming that legislators are wise to place these two budget areas off limits, this should only lead to additional scrutiny for the remaining budget expenses. Ohioans should question the “spend and tax” tale they’re being told by their elected officials. Every legislator should be asked, “What are the least important expenses in the budget and why are they there?”
If education and health care expenditures are the most important funding items in the budget, then that means they are more important than the Ohio Rail Development Commission, or a new ballpark for the people of Eastlake, or funding the research and development of private industry. Setting aside two areas of the budget does not provide cover for a tax hike.
The decision to increase the already high tax burden of Ohioans is by no means insignificant. In the Buckeye Institute study, Grinding To A Halt, Ohio University economist Richard Vedder demonstrated the negative impact that increased taxes have on economic growth.[5] If Ohio is to return to national (or even regional) prominence, its legislators have to cut taxes and reduce spending.
State legislators might like you to believe that the decisions to cut taxes and reduce spending is beyond their control, but they are ultimately the ones signing off on any budget that gets passed. Setting aside federal requirements, they must approve every item in the budget, from education spending to ballpark “pork.” It’s time for the stories to end and responsibility to begin.
Footnotes:
[1] Michael T. Bond, John C. Goodman and Ronald L. Lindsey, Reforming Medicaid in Ohio: A Framework for Using Consumer Choice and Competition to Spur Improved Outcomes (Columbus, OH: The Buckeye Institute and The National Center for Policy Analysis, March 2003).
[2] For more on this controversy, see David Owsiany, “DeRolph v. State, R.I.P.,” (Columbus, OH: The Buckeye Institute, June 2003). Also, David N. Mayer and David J. Owsiany, After DeRolph III: Who Makes Public Policy? The Legislature, or the Courts? (Columbus, OH: The Buckeye Institute, 2001).
[3] “Key State Budget Spending Trends,” State Senator Ron Amstutz's Online Office. Available at: http://www.amstutz.org.
[4] “Study finds school resources unrelated to student performance” Policy Note (Columbus, OH: The Buckeye Institute, November 1998).
[5] Richard K. Vedder, Ph.D., Grinding to a Halt: Ohio’s Tax Policy and its Impact on Economic Growth, (Columbus, OH: The Buckeye Institute, September 2002).
