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03/15/2012

First state capital budget in four years proposed by Kasich

Budget a "restrained" $1.74 billion

A "restrained" $1.74 billion state capital improvements budget – the first in four years – was proposed Wednesday by Governor John Kasich.

State Budget Director Tim Keen reviewed the capital plan for fiscal years 2013-14 in testimony to the finance committees of both the Ohio Senate and House of Representatives.

He said the capital bill (HB482), which is crafted jointly by the governor and leaders of the House and Senate, proposes $1.74 billion in appropriations, $1.36 billion of it bond-funded.

That compares to capital budgets in the past decade that ran as high as $3.5 billion, with as much as $2.5 billion in bonded debt.

The capital bill is significantly smaller than usual, Keen explained, due mainly to the governor’s desire to keep the state’s future debt load to a minimum.

“Most capital appropriations are supported by long-term debt issued by the state of Ohio, with the principle and interest payments on that debt funded by General Revenue Fund appropriations made in future operating budgets,” he told the committee.

“As a result, capital bill appropriations directly impact operating budgets. Therefore, consistent with Governor Kasich’s commitment to restrain government spending, it is imperative that the capital bill also be restrained in size.”

Borrowing to fund the budget will take the state's general fund debt service obligations up to about 4 percent of revenue, Keen said, compared to the 5 percent constitutional cap.

As with all capital budget bills, the single biggest chunk of funding goes toward construction of local schools and facilities at state colleges and universities.

The bill proposes an appropriation of $675 million for the Ohio School Facilities Commission, which funds school construction projects around the state. Of that, $425 million is bond-funded, while $250 million will come from license fees from the installation of video lottery terminals at racetracks.

The state's 37 higher education institutions will share in $400 million in capital funds.  Keen said the budget fully funds recommendations issued last month by the Higher Education Capital Funding Collaborative, a group of educators appointed by Kasich to review and prioritize the capital needs of all the institutions collectively, rather than having them compete against each other for funding, as has happened in the past.

The next-largest appropriation is for the Ohio Public Works Commission, which issues bonds to help finance local infrastructure projects through grants, loans and other means. OPWC would receive $365.3 million under the bill.

State agencies would receive about $288 million in capital appropriations. Keen said 95 percent of that amount is devoted to maintenance and renovation of existing facilities, such as:

  • $67.9 million for projects at the state's 28 adult prisons and $15.5 million at juvenile justice facilities;
  • $30 million for the Department of Administration Services, including $15.5 million for the state of Ohio Computer Center;
  • $10 million for the Department of Mental Health to support community housing, treatment and support projects;
  • $14.6 million for the Department of Developmental Disabilities to fund projects at its 10 developmental centers;
  • $51.2 million for the Ohio Department of Natural Resources to do maintenance and improvements at state parks and forests.

New facilities proposed for construction include $18.8 million for a new National Guard armory in Delaware, as part of a broader facility realignment plan, and $11.9 million to build a state-of-the-art crime lab for the Bureau of Criminal Identification and Investigation on the Bowling Green State University campus.

The bill also sets aside $10 million for coal research and development at the Department of Development. Wayne Struble, Kasich's senior policy adviser, said at Wednesday's mid-biennium review press conference that research in carbon sequestration holds the promise of re-pressurizing old, dormant oil fields in the state, bringing them back to production.

Development and implementation of the State Taxation Accounting and Revenue System (STARS) is assigned $20 million in the bill.

Notably, the budget includes no earmarks for local community projects, such as museums, theaters and recreactional facilities, which have been funded to the tune of approximately $100 million in previous capital bills.

During a press conference Wednesday Kasich said the administration will develop a formula for prioritizing deserving community projects in time for the next capital budget.

"It's been too much of a who-can-grab-what process," Kasich said.

Normally the legislature adopts a two-year general fund budget in the odd-numbered years and a capital budget in the even-numbered years.  No capital budget was adopted in 2010, however, because of the state's parlous financial situation.

Keen noted that even though no capital bill was enacted two years ago, nearly $900 million in capital appropriations, primarily for schools, were provided in fiscal years 2011-2012 in several different bills.


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