COLUMBUS, Ohio (WDTN) – Ohio city and local governments get most of their funding from income and sales taxes. With the state’s economy largely shut down because of the COVID-19 outbreak, municipalities are taking a massive hit to their budgets.
U.S. Senator Rob Portman told WDTN.com on Wednesday that four of the top five cities in the country taking the biggest budget hits from the epidemic are in Ohio (Columbus, Cleveland, Cincinnati and Toledo). This is because of the nature of how Ohio cities raise revenue versus the rest of the country.
Portman said 90-percent of cities in the country aren’t allowed to use income taxes to collect revenue. That’s not the case in Ohio.
“Other cities use property tax more, and there are other areas in Ohio that use property tax more, but it’s not as affected (economically),” Portman said. “You’ll have places where the economy is strong but if property values aren’t going up, they aren’t going to be getting more revenue. We are one of the small numbers of states affected by this.”
Portman said the downside is income and sales taxes are consumption taxes and are more affected by economic downturns. The biggest cause for concern is safety. He said some localities in Ohio have projected to layoff 30 to 40 percent of their EMS, Fire and Police personnel due to the lack of funding coming in. But changes in the rules on how states and cities can spend stimulus funding could help remedy that.
“Over the last two days, the Treasury Department has added more flexibility as it relates to public safety,” Portman said. “The question was if you could use that money to pay payroll for fire, police or EMS, because up until a couple days ago you couldn’t. I’m very happy they’ve made that change.”
Portman said Ohio will receive a total of $3.47 billion in COVID-19 aid from the Coronavirus Aid, Relief and Economic Security Act. He said some of that money will be used at the state level, which has also taken a severe hit in funding, while much of it will be given to local governments, which are seeing as much as 45 percent in losses in funding they usually receive from the state. Funds should start going out to states in the next several weeks.
More funding could be coming in the next couple of months as the Senate looks to begin work on another stimulus bill. Senator Sherrod Brown stated in a press release sent on Tuesday that he would like to see Americans receive another round of stimulus checks. Portman said the Senate would likely take a look at worked best with the CARES Act and what didn’t before passing another bill.
“One place we will be looking to help is small business,” Portman said. “We need to see what programs worked well and what hasn’t worked so well. We need to do something about filling the gaps left from the existing package.”
Portman said the country will run a deficit close to 20 percent of the US economy this year. He said the ultimate cure will be gettting people back to work.
“We used to worry when the deficit was 10 percent (of GDP),” Portman said. “When we get people back to work that will ultimate get revenues back to local, state and federal government. That will help the shortfall. We also need to get the economy running because we can’t continue to borrow money continuously, then we’ll have a financial crash that will hurt everyone.”
For information on the CARES Act, visit Portman’s website.
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