Highlights from the State budget bill (HB 49) As signed by the Governor SFY

PLATFORM PRIORITIES: Highlights from the State budget bill (HB 49) As signed by the Governor SFY 2018-2019 Replace revenue lost from the elimination of the Medicaid managed care organization (MCO) sales tax An amendment to HB 49 was accepted by both the House and the Senate that aimed at addressing counties and transit authorities lost revenue. It put a process in place to seek federal approval for resetting the franchise fee included in the Executive budget proposal to include revenue for locals, however the Governor vetoed the proposal after its passage. The House voted to override the veto last week, and we are now waiting to see if the Senate will do the same. With the Governor s veto still intact, HB 49 does not provide a replacement mechanism for local revenue losses once this sales tax ends. The Medicaid Local Sales Tax Transition Fund, meant to help counties and transit authorities transition away from this revenue stream, remains in the bill. On or before October 15, 2017 each county and transit authority that had a sales tax in effect as of January 1, 2017 must establish, by resolution, a county and transit authority Medicaid Sales Tax Transition Fund to receive distributions from the state. The payments will be received in 2 allotments - 50% of each county s total transitional aid amount on or before November 1, 2017 and 50% on or after January 1, 2018. Growing pressures from the opiate epidemic on child protection and jails 1. Child protection CCAO advocated for an additional state investment of $30 M per year for child protection. HB 49 provides an additional state GRF investment of $15 M per year to children services agencies. $100,000 will go to each county, with the remainder of the new investment being allocated based on the state child protection allocation formula. Section 307.110 2. County Jails CCAO recommended $12 M per year for ADAMH Boards to provide treatment in the jails, $15 M per year for statewide mental health and addiction stabilization centers and $4 M per year to reimburse county jails for psychotropic drug costs. HB 49 provides $7 million per year to ADAMH Boards to provide treatment, $1.5 million for mental health crisis stabilization centers and $2.5 M per year to reimburse county jails for psychotropic drug costs. Section 5119.19, 337.110, 337.50 Partnership between Ohio and counties to replace voting equipment CCAO recognized that the replacement and funding of this equipment would need to be done over several years. We sought language that would provide some seed money and define how the partnership will be funded going forward, so counties could begin to plan accordingly. Coming out of conference committee, HB 49 provided a $1 M capital appropriation to be used to reimburse counties that have entered into agreements for new voting equipment on or after January 1, 2014. This reimbursement would be for up to 50%, but not more than $250,000, and the $250,000 cap applied only to this specific appropriation. Unfortunately, the Governor vetoed this provision so there is no language in HB 49 that speaks to a state/county partnership on voting equipment. The veto

expressed concerns that the capital dollars could not be used to reimburse counties that have already purchased equipment. Partnership between Ohio and counties to fund indigent defense CCAO advocated for language that guaranteed 50% reimbursement for noncapital cases and 100% reimbursement for capital cases, however the indigent defense provisions were removed in conference committee. As it stands, HB 49 maintains the current 50% reimbursement for all cases subject to proportional reduction if the available appropriation is insufficient to cover 50% of the counties' costs. Based upon the level of funding, a 44-45% reimbursement rate is anticipated over the biennium. Further impacting the counties indigent defense budgets will be the recent action of the Capital Case Attorney Fee Council (CCAFC). Legislation passed last year gives the CCAFC, comprised of five sitting judges of the courts of appeals, the unilateral power to establish the rate counties must pay for lawyers who represent defendants in capital (death penalty) cases. The Council has determined that the hourly rate effective September 25, 2017, will be $125.00 per hour. Since most counties are currently paying in the $60/$75 per hour range, counties should anticipate their costs for indigent counsel in capital cases nearly doubling. Indigent defense reimbursement rates: SFY16 48% SFY17 45% (projected) Executive Budget SFY 18/19 40% House/Senate Budget (enacted version) SFY18/19 44-45% Could be less depending on the fees set for capital cases. Felony 5 offenders - HB 49 proposed a new program, Targeting Community Alternatives to Prison (T-CAP), which required all counties to house offenders convicted of a non-violent, non-sex related, non-mandatory Felony 5 in the county jail rather than send these offenders to prison. This provision was altered in the Senate and remained through the conference committee. Beginning in July 2018 the ten largest counties will be required to participate in the program while the remaining counties may voluntarily participate. The program is a Community Corrections Act grant funded program with DRC awarding grants to the county common pleas courts participating. The counties will be reimbursed from the T-CAP grant funds awarded to the county for their average daily jail cost for any felony 5 offender the common pleas court sentences to serve time in the county jail. A memorandum of understanding is required to be entered into by the commissioners, sheriff and common pleas court that outlines how the T-CAP grant funds will be utilized and establishes the average daily jail cost that will be reimbursed to the county. The ten largest counties are: Franklin, Cuyahoga, Hamilton, Summit, Montgomery, Lucas, Butler, Stark, Lorain, and Mahoning. Section 2929.34, 5120.116, 5149.36, 5149.38 OTHER ITEMS OF INTEREST: Jail Diversion DRC grant funding. The 408 line item Community Misdemeanor Programs is distributed in the form of CCA (Community Corrections Act) grants to counties and cities to operate pretrial release, probation, or other local programs for misdemeanor offenders in lieu of confinement in jail. The budget cut this line item by $5 million in each year from $14.3 million, proposed as a continuation level of funding in the governor s budget as introduced, down to $9.3 million in each year. In FY 2016, this

program funded 141 programs in 84 counties, and provided alternatives to confinement for around 22,340 offenders. Expect your county court and municipal court judges to be seeking increases in funding to cover the CCA grant funding they had been receiving through this line item. This line item provides the local jail grant funding and is the corollary to the 407 line item Community Nonresidential Programs which provides the prison diversion grant funding and is where the T-CAP funding will be coming from. Local sales and use tax rate increments - Allows counties and transit authorities to increase their local sales and use tax levies in increments of 0.1%, rather than 0.25%, and allows such incremental adjustments beginning July 2018. The ability to levy smaller increments was requested by Summit County, so that they could calibrate their rate to replace the level of revenue needed. CCAO will be working with the sponsor of this provision to allow alternative increments in certain circumstances. Section 5739.021, 5739.023, 5739.026, 757.100 Local sales and use tax funding for regional transportation improvement project allows a board of county commissioners or transit authority to levy a sales tax for the purpose of funding a regional transportation improvement project. Section 5739.021, 5739.023, 5739.026 Adult protective services The appropriation for APS saw a minor increase of $100,000. Language from HB 78 was incorporated that would expand the definition of exploitation. R.C. 173.501, 173.521, 173.542, 1347.08, 2317.54, 4715.36, 5101.60, 5101.61, 5101.611, 5101.612, 5101.62, 5101.622, 5101.63, 5101.632, 5101.64, 5101.65, 5101.66, 5101.67, 5101.68, 5101.69, 5101.691, 5101.692, 5101.70, 5101.71, 5101.72, 5101.73, 5101.74, 5101.741, 5101.99, 5123.61, 5126.31, Repealed: 5101.621 MARCS radio subsidy As enacted, HB 49 provides $1 million per year to continue the user fee subsidy to the local governments/emergency responders on the MARCS system. The prior state biennium subsidy was $2 million per year and provided a credit of $10.00 per month against the $20.00 per month user fee charged. This suggests the level of funding would now provide a subsidy of $5.00 per month and result in the user fee paid by local governments being reduced to $15.00 per month per unit. Section 610.70, 610.71 Agricultural use valuation calculations - Prescribes in statute factors that must be considered in computing the current agricultural use value (CAUV) of agricultural land for property tax purposes. Requires the formula used to compute CAUV values to employ a capitalization rate and requires (1) the equity yield rate in the capitalization rate formula to equal the greater of the 25-year average of the total rate of return on farm equity published by the United States Department of Agriculture, or the loan interest rate; and (2) a holding period of 25 years for calculating equity build-up and land value appreciation in the formula. Stipulates that CAUV land used for a conservation practice or enrolled in a federal land retirement or conservation program for at least three years must be valued at the lowest of values assigned on the basis of soil type. Phases in the amendment's changes over two reassessment or update cycles. Specifies that during the first three-year cycle in each county, the tax value of CAUV land will include one half of the difference between its value under the new versus the old formula. Revenue losses would increase each year until tax year 2022 when they would total an estimated

$14 million to each of schools and other local governments. Almost 2/3 of the revenue loss will be attributable to inside millage with the remainder attributable to loss of revenue on voted levies. Some shifting of property tax obligations would occur in heavily agricultural taxing districts as agricultural property would see a reduction in property taxes while residential property within the same taxing district would experience an increase in property taxes. GRF reimbursements of property tax rollbacks and the homestead exemption would increase to an estimated $1 million, as effective tax rates on residential real property subject to tax reduction factors would increase because of lower tax values on CAUV land. R.C. 5715.01, 5713.31, 5713.34 County Treasurer tax collection fees - Revises the schedule for settlement fees that are collected by county treasurers on the value of property taxes collected by increasing the fee amounts, by establishing a minimum fee when collections are less than $5 million per semiannual settlement, by reducing the number of fee brackets, and by causing the fees to be adjusted upward if and as statewide taxes charged on real property and public utility property increase. The initial increase in settlement fee collections is estimated at $1.2 million. In each subsequent year any increase in the property tax settlement would result in additional increases in property tax settlement fees. Treasurer settlement fees are deposited in the county general fund and were last adjusted by the legislature in 1986. R.C. 321.26 Board of County Commissioners organizational meeting - Modifies the date by which a board of county commissioners must annually organize from the second Monday in January to no later than the second Monday in January. R.C. 305.05 Multi-jurisdictional local correctional centers - Specifies that a multi-jurisdictional local correctional center's operational standards and procedures may be amended by agreement of a majority of the voting members of the center's corrections commission or by other means specified in the contract between the contracting counties and municipal corporations and clarifies that items required for the standards and procedures also are required for the amendments. R.C. 307.93 Soil and Water Districts The General Revenue Funds allocated to Soil and Water Conservation Districts were reduced moderately over the biennium. Increases in fees for scrap tires and other items that the Districts had requested were not provided. Allows the Department of Agriculture to pay any soil and water conservation district an annual amount not to exceed $40,000 upon receipt of request and justification from the district and approval by the Ohio Soil and Water Conservation Commission. This is in addition to already-allocated funds for SWCDs. Section 211.20, budget lines 700-428, 700-509, 700-661,725-660 Extension, OARDC and Sea Grant funding OSU Extension was funded at a slight reduction less than 1% each year of the biennium. OARDC and Sea Grant were level funded for the biennium. Sections 381.230, 381.290, 381.20 Budget lines 235-511, 235-535 and 235-402

Family and Children First Flexible Funding Pool Permits a county family and children first council to create a flexible funding pool to assure access to services by families, children, and seniors in need of protective services. Section 307.120 Sales tax exemption for amusement device transactions The exemption is limited to digital music purchased from and played by a single-play commercial music machine (jukebox). R.C. 5739.02, 812.20 County liability insurance coverage for oil and gas wells - Authorizes a board of county commissioners of a county that is an owner of an oil and gas well to comply with the oil and gas well liability requirements by participating in a joint self-insurance pool in accordance with the law governing such pools. R.C. 1509.07 Investment of inactive moneys by counties - Increases the percentage of a county's inactive moneys and money in the public library fund that may be invested in certain commercial paper notes and bankers acceptances, from 25% to 40% of a county's total average portfolio. The conference committee report also limits investments in certain commercial paper notes of a single issuer to 5%, in the aggregate, of interim moneys available for investment at the time of purchase. R.C. 135.35 Local sales tax for permanent improvements (limited to Medina County) - Allows community improvements board (CIB) grants to a school district, which are funded by a county sales tax, to be spent for permanent improvements outside the county where the tax is levied so long as the improvements are within the school district and a part of the school district is within the county. Permits a community improvement board to issue grants to a school district provided such grants are not inconsistent with the board of county commissioner s resolution levying the sales tax and the ballot language approved by the voters of the county. Section 307.283, 5739.026, 803.280 ITEMS THAT WERE VETOED/REMOVED: Wind farm setbacks - Provisions that altered the minimum setback for wind turbines of wind farms were removed. Program for Medically Handicapped Children (BCMH) - Reforms to the BCMH program included in the Executive budget were removed. A $3 M appropriation for the program was added. County recorder fees and technology funding The language that would have revised the fees for recording and indexing various types of instruments was removed. Distribution of Local Government Fund money - The executive proposal to change the LGF distribution formula was removed

Sales tax: remittance by motor vehicle dealers Language was vetoed that would permit motor vehicle dealers to remit sales and use tax collected on vehicle sales directly to the state on the dealer s monthly sales or use tax return. Sales tax exemption for prescription optical aids Language was vetoed that would exempt prescription optical aids and their components from sales and use tax beginning July 1, 2019. Limits the exemption to the first $650 of the price of prescription optical aids. Sales tax on electronic devices Language was vetoed that specified that sales of automatic data processing, computer services, electronic information services, and electronic publishing services are not taxable under the sales tax, when such services are provided primarily for the delivery, receipt, or use of another, nontaxable services.