Jill Thompson OCCO

Athens County Auditor Jill Thompson speaks at the Ohio Statehouse.

Athens County Auditor Jill Thompson joined fellow county officials across Ohio at the Statehouse in Columbus late last month to sound a warning about what the loss of Medicaid managed-care, sales-tax revenue will mean to counties.

A federal rules change has the state of Ohio looking at a $1.1 billion loss in sales-tax revenue over the course of its next two-year budget, which begins July 1. The revenue loss comes as a result of a rules change regarding sales taxes collected on services provided through Medicaid managed-care organizations (MCOs). 

An additional $300 million in county sales taxes also would be lost, including almost $1.7 million in sales-tax revenue for Athens County during the two-year budget period, from mid-2017 to mid-2019. In 2016, the MCO sales tax represented $209 million, or 8.2 percent, of all county and transit authority sales-tax collections in Ohio.

In an event at the Ohio Statehouse April 26, Thompson and other members of the Ohio Council of County Officials (OCCO) gathered to express the need for fiscal stability as the state Legislature works on finalizing the next two-year budget.

“OCCO is calling for a plan that provides parity between the state, counties and transit authorities,” Thompson said. “We have been working closely with the (Ohio) House to create a more equitable solution, and we are extremely encouraged by their willingness to tackle this serious issue.”

In provided remarks, Thompson pointed to April being “County Government Month,” noting that in 2014, the federal Centers for Medicare & Medicaid Services declared that applying a tax only to Medicaid MCOs was not allowed.

Thompson said that under Gov. John Kasich’s plan, a health-insuring corporation (HIC) provider assessment would replace the state’s lost revenue, while counties and transit authorities would get a transitional payment ranging from several months to several years’ worth of revenue, depending on the county. 

“When this transitional aid ends, counties and transit authorities will be left with a $209 million hole in their budgets,” she said. “OCCO is calling for a plan that provides parity between the state and counties and transit authorities. The executive budget proposal provides full replacement of state dollars. Counties and transit authorities should be afforded the same treatment.”

Counties in southeast Ohio have among the largest populations of Medicaid recipients and therefore collect some of the highest percentages of their sales taxes from Medicaid Health Insuring Corporations (MHIC).

While counties in Ohio average 7.5 percent, Vinton County, for instance, collects 24.9 percent of its sales taxes from MHICs. Meigs County collects 21.7 percent. Pike and Scioto counties collect 16.3 percent and 16.9 percent respectively. Lawrence, Morgan and Perry counties all collect somewhere between 15.9 percent and 17.8 percent.

Athens County collects 10.2 percent of its sales-tax revenue from MHICs. In 2015, that meant $847,961 out of $8,334,593 in total sales-tax revenue. That amounts to $1.69 million over a two-year period.

Overall, sales-tax revenue makes up more than 50 percent of the county’s total revenue.

Meanwhile, since the Great Recession began in the fall of 2008, counties not only have become more reliant on sales-tax revenue as it has grown and other sources of revenue have largely flat-lined, but the sales-tax increases mostly have come from Medicaid services.

The OCCO noted in provided materials that sales tax is currently the number-one revenue source for both counties and the state of Ohio.

The OCCO has discussed possible solutions that include expanding Ohio’s sales tax to all managed-care organizations and/or expanding the sales tax base to include additional services; giving counties additional piggyback sales authority; recalibrating the percentage of state general revenue funds allocated to the state’s local-government fund; increasing fees in county offices and courts; and closing the limited liability company loophole with respect to the real-estate conveyance fee.

“As we look to a future without the Medicaid MCO sales tax, any plan moving forward must protect counties from further losses to their general revenue fund,” a statement from the group said. “OCCO supports solutions that are permanent, hold all counties harmless, and do not impact funding of other local government programs or increase mandates on counties.

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