06/24/05 Budget Bill Passes and Awaits Governor's Signature
The FY '06 - '07 Biennium Budget bill (Amended Substitute House Bill 66) has passed the Ohio General Assembly and has been sent to the Governor for his signature. Under Ohio law, the Governor has the opportunity to veto any line item in the budget. The complete budget document is available at http://www.legislature.state.oh.us/Journals.cfm?GenAssem=126 Click on the June 21, 2005 journal entry, (The Ohio General Assembly Web site has encountered technical difficulties in posting the June 21, 2005 journal entry. They are working to post the document.) and the language for the library freeze begins on page 1053 of the document.
The Library and Local Government Support Fund (LLGSF) will not receive the proposed 5% cut. The Ohio Library Council is sending a letter to legislators thanking them for keeping library funding at the current levels. A copy of the letter is available at http://www.olc.org/pdf/BudgetThankYou.pdf .
Below is a summary of the items in the budget that have direct impact on public libraries.
Budget Bill Summary:
1. The LLGSF is frozen at 2004 levels through the end of the biennium (June 2007). The budget language "freezes" the allocation to the LLGSF month-by-month - each month will get the same amount of money received in that month 2004.
The budget language also adopted the language of the previous budget bill which distributes the money freeze dollars, but each June checks to see if the formulary distribution would have provided less. If it would have provided less, then the Department of Taxation will make a "correction" in the July distribution. The OLC has concerns about this language because this budget bill also includes language that reduces the personal income tax. The first personal income tax reduction begins July 2005. The amount of that reduction is 4.2%. Because total income tax revenues are climbing, that will offset the rate cut and so the LLGSF freeze dollars will not exceed the formula distribution through July 2006. However, the personal income tax rates will be reduced by 8.4% beginning July 2006. This reduction could substantially reduce the total income tax revenue to below the freeze distribution, triggering the need for a "correction" in the July 2007 distribution.
The OLC is not recommending any immediate action on this. After six months to a year under the new income tax plan, the OLC will be better able to determine the impact of the tax reform on the LLGSF in the current biennium.
2. The Ohio General Assembly has formed a committee to review the source of funding for the LLGSF and the other two funds that provide money to local governments. This is a new committee comprised of 10 legislators and a representative from each of the five associations that represent the local government fund recipients. The association representatives are non-voting members of the committee. The purpose of this committee is to review and reconsider the funding sources for local governments. For many years the three local government funding formulas were considered "trust funds" and off limits to the legislators and the vagaries of the state budget process. However, local governments have not been on formula since 2001, and it is time to reconsider the effectiveness of these funds. This is of particular importance to public libraries since their statutory formula is based on 5.7% of the personal income tax, and HB 66 provides a 21% cut to the personal income tax by 2008.
This committee is to make its recommendations to the General Assembly by June 2006. The committee will sunset in December 2006. The OLC hopes that the Speaker and the President of the Senate appoint legislators who are familiar and supportive of local government and can also be helpful in getting any legislation recommended by the committee passed in the General Assembly.
3. This budget language includes an additional $100,000 to the OPLIN line item. This money is established to provide for some reimbursement to local public libraries for the costs associated with providing filtered Internet access. This language does not require filtered Internet access.
4. The budget bill permits public libraries to charge fees for non-print materials. This is an amendment that was first offered by Rep. Bill Seitz (R-Cincinnati) in the House version of the budget bill. The Senate eliminated this amendment in their version of the bill, but it was included by the Conference Committee in the final version of the bill. The OLC believes that these fees undermine the commitment to providing FREE public library service. These fees will be subject to sales tax. Although the fee language is permissive and does not actually require fees, there is a concern that legislators believe this newly created revenue stream will provide the General Assembly the opportunity to reduce the state's financial commitment to public libraries. The Ohio Library Council is sending a letter to the Governor requesting that he veto the line item in the budget that permits public libraries to charge fees for non-print materials. A copy of the letter is available at http://www.olc.org/pdf/Veto062305.pdf .
5. The budget bill eliminates the tangible personal property tax and provides funds to hold harmless local governments and public libraries from the impact of this change on local levies through 2018. This is another piece of the major tax reform measures included in this legislation. The current tangible personal property tax (tax on commercial furniture and fixtures, manufacturing machinery and equipment, retail inventory, and manufacturing inventory) will be eliminated over a four-year phase-in period, beginning July 2005. The state will provide money to cover the losses to those political subdivisions that have voted millage approved prior to September 2005. That millage will be held 100% harmless until 2010. Hold harmless funding will continue on a reduced formula through 2018. The existing millage that is renewed or replaced after September 2005 will also be held harmless.
