Over the summer the state budget process got officially underway. As we move closer to the deadline for state agencies to submit their budget requests in the second half of October, we are continuing to watch the overall state of the state’s budget. As always, we have been keeping an eye on the monthly financial reports issued by the Ohio Office of Budget and Management (OBM), especially since we saw a few back-to-back months earlier this year where tax revenues were less than projections.
State Fiscal Year (SFY) 2024 tax receipts came in 1.7 percent below estimates.
Tighter margins and increased scrutiny
The September monthly financial report, which reports on financial information from the previous month (August), shows that State Fiscal Year (SFY) 2024 (July 1, 2023- June 30, 2024) tax receipts came in 1.7 percent below estimates. That equals $484 million below estimates, primarily explained by lower-than-expected collection of personal income taxes.
The fiscal-year-end information led OBM to revise the SFY 2025 revenue estimates, which are now expected to be less than was collected in SFY 2024, declining by 1.2% or $348 million. We are currently in SFY 2025, which runs from July 1, 2024 to June 30, 2025.
With these adjustments in place, August tax revenues were slightly above estimates (0.6 percent). It will be important to watch this closely over the next few months, but with the revisions in place, tax revenues should align well with estimates. As agencies submit their budget requests to OBM later this fall and we head into legislative consideration of the state budget in early 2025, those engaged in the state budget process should monitor these reports closely.
After many state budget cycles where revenues exceeded projections, it will be an interesting dynamic to enter 2025 with tighter margins. As a result of this budgeting environment, expect increased scrutiny on spending for programs that has outpaced what was budgeted. Given the budget guidance from OBM, everyone should be prepared with information on the outcomes of state investments as we shift into budget advocacy in the first half of 2025.
Preparing for the state budget process: in-person event
Community Solutions is hosting an event on December 10, 2024 in Columbus, Ohio focused on knowledge of and preparation for the state budget process. We hope you can join us for the event!
