The state of Ohio recently enacted a law placing restrictions on how certain local government money may be spent. Senate Bill 91, a measure introduced to prevent waste, fraud, and abuse of any state public funds was amended in the Ohio House of Representatives to include a provision limiting how political subdivisions or taxing authorities may make expenditures.
SB 91 prohibits political subdivisions or taxing authorities from spending funds until the respective fiscal officer certifies that all of the following apply:
The expenditure has been appropriated pursuant to Ohio Revised Code Chapter 5705 which codifies tax levy laws;
The expenditure has been appropriated by the subdivision or taxing unit’s legislative authority;
The expenditure is not compelled by a process authorizing management, control, distribution, or disbursement by a vote of the residents.
These restrictions do not prohibit authorizing a bond issuance otherwise permitted by law, nor do they prevent soliciting public input with regard to making expenditures.
The origin of this concept can be traced back to Senate Bill 158 , a proposal introduced in September of 2023 in response to a Cleveland citizen-initiated charter amendment termed “The People’s Budget” which, if it had been adopted by voters, would have directed 2% of the city’s annual budget to a resident-led steering committee for disbursement. State Senator Jerry Cirino (Kirtland) said in his sponsor testimony for SB 158 that his bill “…simply protects the budgeting powers of municipalities across Ohio by reinforcing their statutory authority to make appropriation decisions…This bill further specifies that a local city council cannot have its statutory appropriation duties circumvented.”
The participatory budget charter amendment put forward in Cleveland appeared on the November 2023 ballot as Issue 38. It was narrowly defeated by voters 51%-49%.
SB 91’s language differs from that of SB 158; however, in the Ohio House Government Oversight Committee that adopted the spending authority amendment, committee members discussed this proposal having the same intent. State Representative Mike Skindell (Cleveland) noted in his opposition to this provision that the language would “preempt” the efforts of the Cleveland People’s Budget issue.
SB 91 was signed into law by Governor DeWine on December 28, 2023. The effective date of the statute change is March 26, 2024.
The nonpartisan Ohio Legislative Service Commission added a comment at the end of the SB 91 bill analysis here. The comment opines that if a challenge is brought, a court may examine this expenditure restriction in light of the state’s Home Rule constitutional amendment (Article XVIII, Section 7). Municipal corporations have home rule authority to exercise “all powers of local self-government.” The comment goes on to say, “If a court finds the provision relates to a matter of local self-government and does not fall under the General Assembly’s authority to limit municipal corporations’ taxing authority, the provision may not apply to any municipal corporations. If a court finds that the provision is a procedural matter of local self-government, rather than a substantive matter, it may apply only to nonchartered municipal corporations.”
Scrutiny is warranted regarding this issue, for any future participatory budgeting proposals that may be proposed.
If you would like to further discuss the contents of this post, please reach out to Brian Perera or any other of our ZHF Consulting professionals.