Ohio Retirement Study Council Receives Consultant s Report - House Pension Reform Subcommittee Will Begin Deliberations On Report Next Week

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1 July 13, 2012 Ohio Retirement Study Council Receives Consultant s Report - House Pension Reform Subcommittee Will Begin Deliberations On Report Next Week Ohio's pension system structure is solid, but legislative efforts to enact system-approved restructuring plans should be enacted this year to improve financial stability, according to an independent report produced for the Ohio Retirement Study Council by Pension Trustee Advisors/KMS Actuaries. The report supports keeping defined benefit plans for public workers, but also offers other options for future consideration. The report notes that changes proposed by the boards of Ohio's five public employee pension systems are helpful, but four of them will likely need additional updates to ensure future financial soundness and for two of the systems - the Ohio Police & Fire Pension Fund and Highway Patrol Retirement System - will need to make extra adjustments as soon as pension legislation is enacted. The Report: Analyzes the funding status of each of the systems, and offers suggestions on how balance sheets can be shored up for the future. Notes that the system boards should retain the authority to make additional changes to retirement ages, member contributions and cost of living adjustments. Indicates Ohio's current pension laws are generally stronger than other states', and that the systems' revised 30-year funding plans have set the stage for more financial stability. 1

2 Urges quick action on the bills (SB 340, SB 341, SB 342, SB 343 & SB 345) the Senate passed at the end of June and sent to the House for consideration while the Report was still being finalized. Separately, State Representative Kirk Schuring, chair of the House Pension Reform Subcommittee, indicated he will convene the committee next week to re-start its review of potential pension system changes now that the report has been presented. (See: Upcoming Legislative Committee Calendar, below) The report was presented to the Ohio Retirement Study Council on Wednesday by Mr. William B. Fornia, of Pension Trustee Advisors/KMS Actuaries. Responding to questions after presenting the report, Mr. Fornia said boards have a fiduciary duty to manage their finances and adjust for a changing environment, but are also required to balance income and obligations over a 30-year period. He also suggested that lawmakers may want to add automatic triggers that force changes when certain financial conditions exist. Mr. Fornia said lawmakers should take on "low-hanging fruit" like salary spiking, subsidized service credit purchases and minimal earnable salary issues that tend to give public pensions a bad name. Lawmakers could limit the issuance of COLAs and force member contribution increases, but he said he is hopeful that boards would take their responsibility to manage their funds seriously. While acknowledging that COLA changes could bring about legal challenges, he noted the fact that many organized labor organizations have supported plan changes that could minimize those efforts. Fornia also indicated that health care poses an issue for system managers, suggesting that changes to the funding and structure of the non-mandated benefit might be needed. The extensive PTA/KMS report can be reviewed at: For more information on pension matters contact CCAO staff member Cheryl Subler at csubler@ccao.org or Enlightenment on Casino Revenue Estimates Mike Sobul, formerly with the Ohio Department of Taxation and now treasurer of the Grandville City school district, recently offered to share with CCAO research and analysis of future casino revenues that he has completed. His insightful article is attached at the end of this report. Mr. Sobul s analysis estimates the quarterly revenue distributions in per capita amounts through calendar year Note that the distribution of the quarterly revenue to the counties occurs at the end of the month following the quarter so 4 th quarter payments will be received in January which is in the counties next budget year. 2

3 Also, this week the Ohio Department of Taxation posted the first distribution of casino tax revenue. The amounts will be paid directly from the State of Ohio to the counties on July 31, The funds should appear in the same bank account as the Local Government Fund payments. You can view the amount your county is to receive at the following link: nweb_000.pdf Public Health Futures Under Review - Recommendations to be Made by October A legislative committee charged to examine and make recommendations on the future of local public health in Ohio held its inaugural meeting this week. The committee, established in the Governor s main mid-biennium review budget bill (HB 487), has been charged to both review a report issued by the Ohio Association of Health Commissioners (AOHC) on the future of local public health, and also to make its own policy recommendations on the future of local public health, with accompanying explanations. Both deliverables are to be published in a report for the legislature and interested stakeholders by October 31, Ultimately, the committee s recommendations are to be considered as a part of the operating budget for SFY14 and 15, the Governor s version of which should be introduced in the early part of While the scope of the committee is rather large, conversation at the first meeting focused on local health department governance, accreditation, and consolidation. Stakeholders in local public health, including county commissioners, are participating in the committee process; Ashland County Commissioner, and CCAO Board member Kim Edwards is representing CCAO. In addition, two members of the House and two members of the Senate sit on the committee. Senator Dave Burke (R Marysville) was elected Chair of the committee, and Ohio Hospital Association appointee Christopher E. Press (President, Blanchard Valley Hospital in Findlay, Ohio) vice-chair. To review the executive summary or full report issued by AOHC, legislative committee members, meeting dates, and meeting minutes, visit: The meeting schedule of the committee is aggressive given its short time frame. Three meetings have been scheduled for the month of July, with two meetings per month scheduled through the end of October. Commissioners interested in sharing their thoughts on local public health futures are encouraged to do so please contact CCAO staff member Laura Abu-Absi at labuabsi@ccao.org. 3

4 Statehouse Etcetera CCAO/OSWDO Legislative Platform and Ohio Solid Waste Law Priorities Posted on CCAO Website. At a meeting of the CCAO Board of Trustees on June 7 CCAO adopted revisions to the CCAO/OSWDO Legislative Platform and Ohio Solid Waste Law Priorities. CCAO/OSWDO engaged a consultant and formed a special solid waste committee to review the CCAO legislative policy on solid waste and propose revisions to that policy. Ohio EPA is undertaking a comprehensive review of the solid waste law and is reaching out to stakeholders including CCAO/OSWDO to learn from each stakeholder the elements of the solid waste law they wish to change or retain. The revised CCAO/OSWDO Legislative Platform and Ohio Solid Waste Law Priorities is intended to guide CCAO as Ohio EPA conducts its analysis and the legislature ponders possible changes to the solid waste law. For a copy of the report please click on the following link: For more information about the report, please contact Brad Cole of the CCAO Staff at bcole@ccao.org Senator Widener says Legislature took steps to make sure the MARCS radio system would be available to local governments. Senate Finance Committee Chair Chris Widener (R- Springfield) urged local governments to look seriously at joining MARCS in his remarks to those attending CCAO s Second Wednesday Seminar on MARCS. He indicated that new funding provided to upgrade the MARCS system was designed to support local governments joining onto the system. He pointed out that the Legislature believes that the MARCS system offers an outstanding way for the state to collaborate with local communities and share a singular communications resource statewide for public safety forces. Ohio EPA to conduct regional meetings on solid waste law update. Ohio EPA wants to modernize the state s solid waste laws and is hosting 2 open meetings for interested parties and members of the public to provide comments. These meetings will provide a review of what the agency has heard during its 29 appointments with nearly 3 dozen stakeholder organizations and individuals. The meetings also will provide an opportunity for interested parties to communicate directly with each other regarding their thoughts and ideas. The meeting dates are: Monday, July 16th - Lorain County 4

5 Transportation &Community Center 40 East Avenue, Elyria, OH :00 AM to 4:00 PM Monday, July 23 rd Montgomery County National Composite Center 2000 Composite Drive, Kettering, OH :00 AM to 4:00 PM Legislation of Interest HB 526 (Hottinger, J.) & SB 358 (Schaffer, T.) BAIL NOTICES To require the clerk of courts to promptly give written notice to the county sheriff and chief law enforcement officer of the political subdivision in which a person accused of an offense of violence will reside as a condition of bail if the offense was not committed in that political subdivision and to require the Adult Parole Authority to give similar notice to the chief law enforcement officer of the political subdivision in which an inmate who served a prison term for an offense of violence and is on parole or post-release control establishes a residence if not the political subdivision in which that offense was committed. Am and Upcoming Legislative Committee Calendar Wednesday, July 18 House Health: Pension Reform Subcommittee, (Chr. Kirk Schuring, ), Rm. 121, 1:00 pm Presentation from William B. Fornia of Pension Trustee Advisors/KMS Actuaries on retirement systems' 30-year funding plans 5

6 Public Finance Resources, Inc. PO Box 1822 Columbus, Ohio Phone: CASINO REVENUE ESTIMATES FOR COUNTY GOVERNMENTS Mike Sobul, PFRCFO Consultant July 10, 2012 In 2009, Ohio voters approved the construction of four full-service casinos in the state of Ohio. The Constitutional Amendment authorizing gambling set in place a tax of 33 percent of gross casino revenue (GCR, total betting less payouts). A portion of the taxes paid by casinos is to be allocated to county governments as enumerated in the amendment: (a) Fifty--one percent of the tax on gross casino revenue shall be distributed among all eightyeight counties in proportion to such counties' respective populations at the time of such distribution. If a county's most populated city, as of the 2000 United States census bureau census, had a population greater than 80,000, then fifty percent of that county's distribution will go to said city. Two of the four casinos have already opened. The Cleveland casino opened May 14 th and the Toledo casino opened May 29 th. The Columbus casino is currently scheduled to open late this year and the Cincinnati casino in the spring of The first revenue to be received by county governments will be distributed on July 31 st. Revenue allocations from the casino tax are intended to supplement current state aid to counties and cities. It is not supposed to supplant, as described in the passage below from the Constitution: Tax collection, and distributions to public school districts and local governments, under sections 6(C)(2) and (3), are intended to supplement, not supplant, any funding obligations of the state. Accordingly, all such distributions shall be disregarded for purposes of determining whether funding obligations imposed by other sections of this Constitution are met. This is not a guarantee that supplanting will not occur. Supplanting is highly unlikely to happen prior to the enactment of the next state budget in July of The remainder of this article shows revenue implications for counties of the casino money, assuming supplanting does not occur. House Bill 386 is the implementing language for the Constitutional Amendment. It was passed by Conference Committee on May 24 and sent onto Governor Kasich for signing. HB 386 sets payments to counties and cities at four times per year, thirty days after the end of each calendar quarter. So the first payments will be made at the end of July 2012, and will include all revenue collected by the Department of Taxation (ODT) from the opening dates of the casinos through June 30, Payments will be made directly by ODT to counties and cities. The tax revenue to be generated from the casinos was estimated by the Department of Taxation at the time the amendment was on the ballot (I oversaw the development and preparation of the analysis when I was at ODT). The tax revenue is to be paid to the state daily by the casinos. The Department of Taxation analysis estimated GCR under two scenarios, one where there are just four casinos as allowed by the Constitutional Amendment and one where there are also video lottery terminals (VLTs, essentially slot machines) at the seven currently existing horse racing

7 tracks. This analysis only looks at the former scenario, with an adjustment for the VLT facility recently opened at Scioto Downs near Columbus. Once all four facilities are operating at full capacity, ODT estimated that the annual GCR of the casinos would total about $1.95 billion. However, the Cleveland casino will be opening in two phases. The first phase is what opened in May. The second phase will likely not open for several more years. In addition, because of the opening of the Scioto Downs facility, I am assuming the GCR at the Columbus casino will be reduced by 30 percent from the original ODT analysis. Given these assumptions, I anticipate the total GCR once the four facilities are open, with Cleveland only at phase-one, would be about $1.4 billion annually. Toledo Cleveland Columbus Cincinnati Total Adjusted GCR 250,000, ,100, ,400, ,000,000 1,394,500,000 Monthly GCR 20,833,333 26,175,000 33,366,667 35,833, ,208,333 Monthly Counties Share* 3,506,250 4,405,253 5,615,610 6,030,750 19,557,863 *Before adjustments for the 50% going to cities of at least 80,000 as required by the Constitution. The table above shows the estimated monthly county share of the casino tax revenue for a full month of operation in each casino. Using these monthly allocations, the tables below show the estimated quarterly distributions for the remainder of 2012, plus 2013 and 2014, assuming the opening dates outlined earlier and no supplanting of revenue. Calendar Year 2012 Toledo Cleveland Columbus Cincinnati Total Estimated Per Capita Amt. July-12 3,506,250 4,405, ,911,503 $0.68 October-12 10,518,750 13,215, ,734,508 $ Total 14,025,000 17,621, ,646,011 $ Estimated Ohio Population: 11,544,951 Calendar Year 2013 Toledo Cleveland Columbus Cincinnati Total Estimated Per Capita Amt. January-13 10,518,750 13,215,758 5,615, ,350,118 $2.54 April-13 10,518,750 13,215,758 16,846, ,581,338 $3.52 July-13 10,518,750 13,215,758 16,846,830 6,030,750 46,612,088 $4.04 October-13 10,518,750 13,215,758 16,846,830 18,092,250 58,673,588 $ Total 42,075,000 52,863,030 56,156,100 24,123, ,217,130 $ Estimated Ohio Population: 11,544,951 Calendar Year 2014 Toledo Cleveland Columbus Cincinnati Total Estimated Per Capita Amt. January-13 10,518,750 13,215,758 16,846,830 18,092,250 58,673,588 $5.08 April-13 10,518,750 13,215,758 16,846,830 18,092,250 58,673,588 $5.08 July-13 10,518,750 13,215,758 16,846,830 18,092,250 58,673,588 $5.08 October-13 10,518,750 13,215,758 16,846,830 18,092,250 58,673,588 $ Total 42,075,000 52,863,030 67,387,320 72,369, ,694,350 $ Estimated Ohio Population: 11,544,951

8 The three tables show that revenue per capita for counties from casino taxes is estimated at $2.74 in 2012, $15.18 in 2013, and $20.33 in In 2014, the four casinos are assumed to be fully operating (with the exception of the second phase of the Cleveland casino). At that point, assuming there is no supplanting of revenue and that neither the second phase of the Cleveland casino nor any VLT facilities other than Scioto Downs have opened by October 1, 2014, the casino tax is estimated to produce $20.33 per capita. There is one caveat that goes with these estimates. The July 2012 payment may be larger than the estimate indicates, for two reasons. First, the estimates assume that the Cleveland and Toledo casinos were only operating for one month during the quarter ending June 30. However, the Cleveland casino was actually in service for six weeks and the Toledo casino for just over a month. Second, there may be a novelty impact during the first month or two because the facilities are new, which would inflate GCR tax receipts. The table below shows the 2011 population estimates for each county. These will likely be updated in the next couple months to 2012, which will slightly impact allocations. County Population County Population County Population Adams 28,456 Hamilton* 800,362 Noble 14,702 Allen 106,094 Hancock 75,056 Ottawa 41,396 Ashland 53,153 Hardin 32,020 Paulding 19,420 Ashtabula 101,345 Harrison 15,850 Perry 36,303 Athens 64,769 Henry 28,064 Pickaway 55,990 Auglaize 45,838 Highland 43,433 Pike 28,628 Belmont 70,151 Hocking 29,394 Portage 161,624 Brown 44,687 Holmes 42,746 Preble 42,083 Butler 369,999 Huron 59,496 Putnam 34,294 Carroll 28,782 Jackson 33,186 Richland 123,510 Champaign 39,795 Jefferson 68,828 Ross 78,249 Clark 137,691 Knox 61,275 Sandusky 60,734 Clermont 199,139 Lake 229,885 Scioto 79,277 Clinton 41,927 Lawrence 62,489 Seneca 56,469 Columbiana 107,570 Licking 167,248 Shelby 49,307 Coshocton 36,955 Logan 45,688 Stark* 375,087 Crawford 43,389 Lorain 301,614 Summit* 539,832 Cuyahoga* 1,270,294 Lucas* 440,005 Trumbull 209,264 Darke 52,809 Madison 43,401 Tuscarawas 92,508 Defiance 38,884 Mahoning* 237,270 Union 52,764 Delaware 178,341 Marion 66,212 Van Wert 28,601 Erie 76,751 Medina 173,262 Vinton 13,367 Fairfield 147,066 Meigs 23,680 Warren 214,910 Fayette 28,985 Mercer 40,838 Washington 61,755 Franklin* 1,178,799 Miami 102,857 Wayne 114,611 Fulton 42,510 Monroe 14,585 Williams 37,597 Gallia 30,970 Montgomery* 537,602 Wood 126,355 Geauga 93,228 Morgan 15,034 Wyandot 22,692 Greene 162,846 Morrow 34,855

9 Guernsey 39,927 Muskingum 86,237 Total 11,544,951 *The largest city in each of these counties will receive 50 percent of the revenues that would have otherwise gone to the county.