For months, Ohio’s lawmakers have wanted to provide bonuses to Ohioans serving in the current conflicts in Afghanistan and Iraq as well as those who served during the Persian Gulf War, but so far have been unable to agree how to pay for the bonuses.
Governor Ted Strickland (D) wants to fund the bonuses through the sale of bonds, but House of Representatives Speaker Jon Husted (R) wants to appropriate money from the state’s Budget Stabilization Fund, also known as the “rainy day fund.”
Keith Dailey, Strickland’s Press Secretary, said Strickland believes that using bonds would be a more fiscally responsible way to pay for the bonuses, especially given that the state currently has a $640 million shortfall in the current year, with at $7 billion deficit projected for the 2010-11 budget.
“There’s a severe lack of resources in state government,” Dailey said. “The rainy day fund is likely to be needed for its express purpose, which is to aid the state in times of financial crisis … the Governor will certainly be looking to the rainy day fund as a much needed resource to help fill the current budget gap.”
Husted spokesperson Karen Stivers said the Speaker believes appropriations would be “the more prudent” of the two options.
“We should utilize the state’s savings account rather then put this on the state’s credit card,” Stivers said.
Ohio Treasurer Richard Cordray proposed the bonuses nearly a year ago. His plan, which also calls for the bonuses to be funded by the sale of bonds, would provide veterans of the conflicts with $100 for each month of service, up to a $1,000 total. It would also provide $50 for each month of service for Ohioans who served elsewhere during the conflicts up to a total of $500. Families of those killed in action, designated a prisoner of war or missing in action would receive $5,000.
According to Cordray’s testimony before the Ohio Senate Finance Committee in January, the cost of the bonuses could be as much as $105,921,000; however additional funds-as much as $200 million-would be available for anyone qualifying for the bonuses in the coming years.
With the support of Senate President Bill Harris (R), the Senate unanimously approved the plan Jan. 30, which would have put the issue on the November ballot had the House approved it as well.
However the House did not act on the plan until Tuesday, when Representative Jay Hottinger (R) put House Bill 649 on the House Finance and Appropriations Committee’s schedule.
Hottinger’s bill differs from Senate’s because it calls for the appropriation of $150 million from the state’s rainy day fund, with the ability to appropriate up to $200 million should the need arise. The bill would give the same bonuses to veterans as the Senate’s plan.
In testimony before the House Finance and Appropriations Committee Wednesday morning, Hottinger argued against using bonds on the basis that they would contribute to the state’s debt in future years.
“I feel that the responsible way to honor Ohio’s veterans is to pay as we go and not to add to our state’s existing debt … I would offer that using existing resources, even if it makes current financial decisions harder, will better serve Ohioans in future years,” Hottinger said.
Cordray said in his testimony to the Senate Finance Committee that using bonds and spreading the debt over 15 years would reduce both the total and upfront costs to the state.
“It is actually less expensive to pay for this measure with municipal bonded debt because of the triple tax exemption-federal, state, and local-that this bond issuance would enjoy,” Cordray said.
Cordray also pointed out that there is a historic precedent for funding veteran bonuses with bonds.
When the state offered bonuses to veterans of World War I, World War II, the Korean War and the Vietnam War, the bonuses were paid for through the issuance of bonds and approved overwhelmingly in the General Assembly each time.
“This steady consistency suggests there are good reasons why the legislature kept making that same considered judgment,” Cordray said.
Cordray also agrees with Strickland that spending from the rainy day fund would be unwise at this time.
“I am against drawing from the rainy day fund, which is important to maintaining the state’s bond rating and was not intended to be used for these kinds of purposes,” Cordray said.
Lawmakers are running out of time if the issue is to be resolved during the current lame-duck session. If a resolution is not reached soon, veterans will not see any bonuses until the new General Assembly takes action on the issue. The 128th General Assembly will be sworn in Jan. 5, giving the Democrats their first majority in the House since 1994. Republicans will still hold control of the Senate.