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Capital Bill Passes House

The Ohio House of Representatives today passed the $2.4 billion bricks-and-motar Capital Bill, HB 497, by a vote of 88-2.  The bill now goes to the Senate where speedy action is expected.

 

Capital Bill Hearings Start: Expect Quick Movement & Little Change

Facing an early April target date for enacting the latest capital appropriations measure, House members on Tuesday delved into the nearly $2.4 billion bricks-and-mortar package with an eye toward sending it to the Senate by the end of the month.

 

If it plays out as expected – and like that last capital bill – the latest iteration (HB 497) will be processed quickly with few substantive changes. The project list has already been vetted extensively behind the scenes by Gov. John Kasich’s administration and his fellow Republicans in control of both chambers of the General Assembly.

 

The capital bill’s introduction and first hearing came as the House GOP, as promised, split up the governor’s mid-biennium review budget into separate bills that will be heard in 11 different committees. (See separate story) The two budget packages are expected to consume much of the legislature’s attention during the spring session.

 

Providing introductory testimony to the House Finance & Appropriations Committee, Office of Budget and Management Director Tim Keen said the recommended expenditures for the fiscal year 2015-2016 capital biennium were “made after a careful process that has prioritized the most pressing needs of state government, schools and higher education, with particular emphasis given to each project’s impact on jobs and economic growth.”

 

“Most expenditures are focused on necessary maintenance and upkeep of the state’s current capital assets, while much of the new construction funded in this bill is used to replace existing facilities that are no longer cost-effective to repair,” he said.

 

The bill also contains capital “reappropriations,” or generally noncontroversial provisions that allow for ongoing projects to receive continued funding. Mr. Keen explained that the reappropriations are necessary because spending authority is limited to two years.

 

Of the bill’s $2.38 billion in capital appropriations, $2.07 billion is in general revenue fund-backed bonds and the rest – $317.1 million – comes from various sources outside of the GRF, according to the administration.

 

The bill includes:

 

·       $675 million for local school construction projects overseen by the Ohio School Facilities Commission.

 

·       $574.3 million for maintenance and renovations at state-owned facilities including state parks, prisons, mental health facilities and other public buildings.

 

·       $454.5 million for Ohio’s 37 public colleges and universities.

 

·       $369 million for local infrastructure projects administered by the Ohio Public Works Commission.

 

·       $100 million for the Clean Ohio program for outdoor recreation projects and the preservation of open spaces and farmlands.

 

·       $160 million for “community projects.”

 

Mr. Keen said the governor followed the process of the last capital budget (HB482, 129th General Assembly) in crafting the allocation to colleges and universities.

 

"The governor has again asked higher education to take the lead in developing a collaborative capital funding request that prioritizes the needs of the entire university system ahead of the desires of individual institutions,” he told panelists. “The capital bill before you presents, as adopted, the collaborative committee’s recommendations for the funding of campus-level projects.”

 

The OBM director said the majority of the higher education funds – $356 million – are targeted to maintenance and repair of existing campus facilities.

 

Some of the non-GRF funds will go for ongoing work at OSFC, which has already spent billions in matching funds to build and maintain local schools.

 

Of the $675 million appropriated in the bill for K-12 buildings, $575 million is in GRF-backed debt and $100 million is from “lottery profit proceeds attributed to the video lottery terminal licensing fees to be paid by the racetracks,” Mr. Keen said.

 

“These VLT license fees are upfront, one-time fees and therefore represent non-recurring revenue. As a result, we believe it is appropriate to again apply these one-time revenues toward school construction projects, as was done in the current capital budget.”

 

Another non-GRF chunk – $69 million – comes from a Revolving Loan Fund for local infrastructure projects under the PWC that’s part of a total of $444 million in mostly bonds allocated for such work, the OBM director said.

 

In regards to state agency capital needs addressed in the bill, Mr. Keen said, “The governor’s recommended appropriations are necessary to protect our state infrastructure and maintain the physical facilities in which the citizens of Ohio have already made a significant financial commitment.”

 

Among the agency allotments is $130 million for the Department of Rehabilitation and Correction, which is experiencing a jump in the prison population despite extensive measures to divert low-level offenders.

 

“This level of appropriation represents a significant increase from the department’s capital budgets in recent years, but is necessary because prisons constructed 30 years ago are entering a phase that will require more intensive renovations,” Mr. Keen said.

 

One of the larger agency allocations – $236.4 million – would go to the Department of Natural Resources.

 

“As you know, Ohio can take pride in having one of the highest rated, most diverse and most heavily visited state park systems in the nation. But this is also a system that’s showing its age, as recreational facilities built in the 1950s and 60s are past due for long-delayed repairs and renovations,” Mr. Keen said. “Appropriations in HB497 take an important step to remedy that situation in our state parks and other ODNR facilities.”

 

The bill also authorizes two technology projects to be funded with Certificates of Participation, an alternative funding mechanism to GRF-backed bonds under which investors purchase a share of lease revenues of a program rather than bonds being secured by those revenues.

 

The COP projects in the bill include $45 million for the Department of Administrative Services to implement the Enterprise Data Center Solutions project and $10 million for the state treasurer’s office to replace outdated computers with a new Treasury Management System.

 

Mr. Keen said the bill contains a few language updates to go along with the appropriations, mainly clean-up provisions related to the dissolution of the Ohio Bonding Authority and the reinstatement of the Transportation Building Fund.

 

While the administration did not specifically delineate community projects included in the proposed bill, several items requested by eight regional economic development groups and a committee charged with vetting arts projects throughout the state surfaced among the appropriations.

 

For example, the bill includes a $5 million appropriation for restoration of Cincinnati’s Union Terminal – funding which exceeded the $3.2 million requested.

 

The legislation also calls for a $2 million appropriation for the Cleveland Museum of Art, which requested $1 million for an expansion, and a $1.1 million appropriation for the Columbus Museum of Art – the full amount requested.

House To Focus On Capital Bill

The Ohio House is poised this week to turn its attention to a capital appropriations bill that’s expected to move quickly through the General Assembly.

 

Most observers expect to see the capital bill turned around in short order. The bill is slated for introduction during Tuesday’s nonvoting session in the House.

Finance & Appropriations Committee Chairman Rep. Ron Amstutz (R-Wooster) has scheduled Tuesday and Wednesday hearings, pending referral, on the measure, which will contain construction project funding priorities related to state-owned facilities, K-12 school buildings and higher education.

The capital bill is expected to include state debt-backed construction funding for community projects for the first time in six years. The Kasich administration has suggested those initiatives will benefit from a new “bottom up” planning approach.

Under that model, Gov. John Kasich reached out to eight regional economic development groups, as well as the arts community, to create a list of proposed projects to be included in the legislation.

Requests, released by the administration in late December, included: $14 million for the Ohio Veterans’ Memorial project in Columbus and $1 million for an expansion of the Cleveland Museum of Art, among other things. 

However, GOP legislative leaders also planned to put their stamp on the funding list, prompting extensive behind-the-scenes negotiations that pushed back the unveiling of the measure.  Most of those discussions have focused on the community projects, as the administration has taken the lead to enumerate agency building needs, and higher education projects that usually comprise a big chunk of the bonding authority along with K-12 buildings have been worked out.

 

Higher education officials under a cooperative approach announced in late January that they were seeking to incorporate around $405 million for facility projects at all 37 public institutions into the capital bill. 

Keen Presents $2.4 Billion Capital Budget to House

Budget Director Tim Keen presented the first full capital budget in years to lawmakers, saying Gov. John Kasich's administration now feels the state's finances are healthy enough to return to supporting local projects. 
The $2.39 billion budget, introduced by Rep. Ron Amstutz (R-Wooster) as HB497, includes funding for K-12 and higher education building projects, the Public Works Commission, state parks and prisons, the Clean Ohio program and community projects. 

The budget director said in testimony to the House Finance and Appropriations Committee that the administration would like to see the bill passed and signed by April 2 so it can go into effect by July 1, preventing an interruption in ongoing projects funded by re-appropriation of previous capital funds also included in the bill.

Keen said the $2.39 billion package is comparable to the last capital budget introduced under normal circumstances. There was no capital budget in 2010, and Kasich sought a scaled-back budget in 2012 based on the state's financial troubles. Prior to that, capital budgets were inflated by securitization of tobacco settlement payments sought by the Strickland administration, Keen said. 

The biggest chunks of funding in the package include almost $500 million for the Board of Regents and higher education institutions, $675 million for school facilities projects and $444 million for the Ohio Public Works Commission.

Keen said the $236.4 million appropriated for the Ohio Department of Natural Resources is aimed at helping to reduce the significant list of deferred maintenance projects at state parks and forests.

Keen said the budget includes a historically higher amount of money for improvements at state prisons. The $130 million appropriated to the Department of Rehabilitation and Correction is driven by the fact that some decades-old prisons are getting to the point of needing extensive renovations, including roof replacements, new HVAC systems and other upgrades. Youth detention facilities get $36.1 million, which among other projects will pay for new housing units at a Circleville facility, with new housing at other facilities slated for future biennia.

The Ohio Department of Transportation also gets a larger-than-usual allocation of $100 million in HB497, which Keen said reflect the development of a multi-year plan for systemically addressing maintenance facility needs.

Keen said the budget also departs from past practice of not funding technology projects via capital spending on two matters: $45 million for cloud-computing and other statewide IT upgrades at the Department of Administration Services and $10 million to replace the banking system at the state treasurer's office. The current system is so old that it can't get security upgrades and could be vulnerable to cyber-attacks, Keen said.

Reps. Denise Driehaus (D-Cincinnati) and Jack Cera (D-Bellaire) brought up local officials' frustrations with their project requests being deemed ineligible for capital funding. Keen said borrowing authority is limited to specified purposes, and said if he could go back he would have emphasized that point more heavily in giving guidance to local officials. Keen said the fact that this is the first normal capital budget in six years might have contributed to the problem. 

Keen told Rep. Debbie Phillips (D-Athens) that he believes funding in HB497 for improvements at the state fairgrounds and Ohio Expo Center will be sufficient to keep the All-American Quarter Horse Congress returning to Columbus. The Expositions Commission is in line for $49 million in the bill, $38 million of which is for an all-purpose exhibition building and a new animal exhibit building.

Cera noted the increase in prison appropriations, along with a burgeoning inmate population, and asked if the state will need to build more prisons. Keen said the administration would prefer to focus on community corrections, noting part of the Department of Rehabilitation and Correction appropriation is for that purpose. 

MBR, Capital Budget Bills on Agenda for Week

The House set plans to hear the first crop of mid-biennium review legislation this week, as well as the capital appropriations budget, following last week's broad introduction to Gov. John Kasich's latest policy push.

Rep. Jeff McClain (R-Upper Sandusky) introduced the whole MBR package as HB472 last week, but it is expected to be parceled out by topic to about a dozen committees. Legislative leaders hope to share full details on how the proposals will be carved up on Tuesday.

House Finance and Appropriations Committee scheduled testimony from the administration at Wednesday's hearing on two yet-to-be-introduced bills addressing MBR topics. Rep. Ron Amstutz (R-Wooster), the committee chairman, will sponsor legislation on the appropriations changes Kasich proposed. Rep. Cliff Rosenberger (R-Clarksville), chairman of the committee's Higher Education Subcommittee, will sponsor the higher education proposals.

The long-awaited capital budget, sponsored by Amstutz, is scheduled for hearings in House Finance and Appropriations on both Tuesday and Wednesday, pending introduction and referral.

Tax reform provisions are expected to stay in House Ways and Means Committee, where Budget Director Tim Keen led off initial testimony on the MBR last week. McClain, that committee's chairman, said last week he foresees tax changes being addressed in up to three bills, one on severance taxes, a second on other taxes, and a third on tax administration changes. McClain said he expects the HB375 (Huffman), House Republican's previous severance tax proposals, to remain the vehicle for oil-and-gas tax measures. 

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