Ohio’s FY 2026 – FY 2027 Operating Budget
- Brian Perera
- Jul 10
- 10 min read
The General Assembly passed an on-time and balanced Am. Sub. House Bill 96 (HB 96 – 136th General Assembly), the biennial operating budget for the state of Ohio, on June 25th, giving Gov. Mike DeWine ample time to review the voluminous document (3,154 pages in the Act version) for potential line-item vetoes. And exercise his constitutional authority to line-item veto he did! This being the fourth and final biennial operating budget for term-limited Gov. DeWine, he redlined the highest number of budget items ever since his Administration began: 67 items.
FY 26 commenced in the same fashion as FY 18 did: relief that the budget was enacted coupled with discussions of “veto override” in the air. Back in the early days of FY 18, the House of the 132nd General Assembly reconvened on July 6 to commence an override process of 11 line-item vetoes from then-Governor Kasich. House Journal July 6 2017.
A veto override process has started: The Ohio House is scheduled to be in session July 21, 2025 to potentially override some items from the Governor's veto message.
Back to HB 96: the House voted 59-38 in favor of the conference report; the Senate voted 23-10 in favor. The minority party Democratic members provided no votes in either chamber. They were joined by a smattering of Republican members in their opposition: Reps. Barhorst, Dean. Ferguson, Oelslager, and Teska in the House and Sen. Blessing in the Senate.
How does the Ohio General Assembly override a veto? The Ohio Constitution spells the procedure out: Ohio Constitution Article II Section 16. Three-fifths of the members of each chamber must repass the disapproved item. The vote must commence in the chamber of origin for the bill – in this case, the House. If this supermajority margin is attained in both chambers, the provision will become law “notwithstanding the objections of the Governor” following the second chamber submitting the veto override directly to the Ohio Secretary of State.
The bill can be viewed here: HB 96 136th GA - bill documents
The veto message and boxed text can be viewed here:
Appropriations/Spending
The General Revenue Fund (GRF) portion of the state’s operating budget appropriates $44.4 billion in FY 26 and $46.1 billion in FY 27. This represents an appropriation increase of $889 million in FY 26 compared to FY 25’s estimated spending. FY 27 is $1.66 billion higher compared to FY 26’s appropriations.
When one includes all the other fund groups in the budget bill (federal, state lottery, dedicated purposes, etc.), HB 96 appropriates $99.5 billion in FY 26 and $101 billion in FY 27. A spreadsheet breakdown of the bill’s line items is available here from the Legislative Service Commission (LSC): LSC Budget in Detail spreadsheet FINAL.
The Department of Medicaid’s GRF appropriations, which include federal matching dollars, are the largest of any state agency at $21.1 billion in FY 26 and $22.1 billion in FY 27. Of this department’s GRF appropriations, $14.6 billion in FY 26 and $15.4 billion in FY 27 are from the federal match. The Ohio Department of Education and Workforce has the highest state-only GRF appropriations at $9.97 billion in FY 26 and $10.3 billion in FY 27. According to materials released by the Ohio Legislature, compared to FY 25, 77% of public school districts will receive an increase in state funding in the first year of the budget and 75% will receive an increase in the second year. The state’s FY 21 “guarantee” for each school district remains in place.
Statutory Provisions
In addition to the appropriations, the budget contains hundreds of statutory changes. While all of the items can be viewed in the bill itself or in the LSC comp doc from conference committee, some of the more noteworthy provisions will be described below. This is by no means an exhaustive listing; however, it will provide an overview of items that have generated interest around Capitol Square and around the state of Ohio. The reference numbers used in the items below are taken from the Comparison Document to provide readers with an easy way to search for additional information.
Taxation Personal Income
Tax Rate Reductions (TAXCD103) – Senate leadership included a “Fair Flat Tax” proposal in their version of HB 96, and it was retained and enacted in the final version of the budget. The state personal income tax rate is phased down to 2.75% over two years. The top bracket drops from 3.5% to 3.125% for tax year 25 and to 2.75% for tax year 26. (Taxpayers whose taxable incomes are below $26,050 annually continue to have no state personal income tax liability.) The estimated fiscal effect of this change is a $529 million tax cut in FY 26 and a $1.146 billion tax cut in FY 27.
Real Property Tax Reforms (TAXCD104, TAXCD107, TAXCD91, TAXCD110) – These provisions were line-item vetoed by Gov. DeWine.
Property Tax Levies – Eliminates the authority of political subdivisions to levy replacement property tax levies (renewal levies are unaffected). Also eliminates the authority of school districts to put forward emergency levies, combined school district income tax and fixed-sum property tax levies, renewal and increase combined levies, and substitute levies. Prohibits school districts from putting forward any new levies other than renewals if the district has a carryover cash balance exceeding 100% of its general fund expenditure total from the previous year.
20-Mill Floor Property Tax Limit – Requires that emergency, substitute incremental growth, conversion, and the real property tax portion of combined income and property tax levies be counted towards the school district’s 20-mill floor. Similar provisions are included for Joint Vocation School districts with regards to their 2-mill floors.
School District Property Tax Reductions and 20-Mill Levy Requirement – Requires the county budget commission to determine if a school district’s carryover balance exceeds 40% of its general fund expenditure from the previous year. If the carryover does exceed 40%, requires the county budget commission to reduce real property taxes levied for that school district’s current expenses by the amount of the excess. Exempts school districts whose levies have been reduced in this manner from the 20-Mill requirement to receive state foundation aid.
County Budget Commission (CBC) Authority and Procedures – Among a multitude of changes, allows CBCs to reduce millage on any non-debt, voter-approved levy if the commission finds the rate to be excessive or unneeded. Also allows a reduction by request of the taxing authority. Requires school districts to obtain approval of the CBC prior to adjusting inside millage to increase tax rates.
Selected Sales & Use Tax Exemptions (TAXCD114) –
Repeals the exemption for newspapers. Line-item vetoed by the Governor.
Repeals the exemption for rental payments for cars provided to owners or lessees whose vehicles are being repaired.
Repeals the exemption for copyrighted motion pictures. Line-item vetoed by the Governor.
Repeals the exemption for refrigerated food in vending machines.
Repeals the exemption for advertising materials or catalogs that price and describe goods offered for sale and items used by direct marketers to print advertising materials, and equipment used to accept orders.
Repeals the exemption for telecommunications services used to perform functions of a call center.
Repeals the exemption for tangible personal property used in electronic publishing.
Repeals the exemption for machinery, equipment, and material used in the production/sale of printed materials. Line -item vetoed by the Governor.
Repeals the 25% refund of sales & use taxes on the purchases of equipment used by vendors of electronic information services.
Commercial Activity Tax (TAXCD24) –
Changes a commercial activity tax credit for Net Operating Losses (NOL) from the now repealed corporation franchise tax from refundable to nonrefundable.
Tax Proposals - Cutting Room Floor – many provisions that had been in one version or another of HB 96 were deleted prior to the General Assembly sending the bill to the Governor:
TAXCD020 – Marijuana Tax - Increasing the 10% excise tax approved by voters last year to 20%. Proposed by the Governor; Removed by the House.
TAXCD29 – Tobacco Taxes - Increasing the state cigarette tax from $1.60 per pack of 20 to $3.10. Increasing the “other tobacco products” tax from 17% to 42% of wholesale price. Increasing the tax on premium cigars from 64 cents per cigar to $1.58. Increasing the tax rate on nicotine-based vapor products from 10 cents to 20 cents per milliliter. Proposed by the Governor; Removed by the House.
TAXCD62 – Sports Gaming Tax – Increasing the sports gaming tax rate from 20% to 40% of sports gaming receipts. Proposed by the Governor; Removed by the House.
TAXCD117 – Data Center Exemption - Disallowing a sales & use tax exemption for computer data center tangible personal property taxes. Proposed by the Senate; line-item vetoed by the Governor.
TAXCD61 – Child Tax Credit - Creation of a refundable income tax credit for dependents under the age of 7. Proposed by the Governor. Removed by the House.
TAXCD101 – Taxation of certain trusts - Eliminating a provision where trusts created prior to the enactment of the state income tax in 1972 could elect to be subject to the commercial activity tax or the state personal income tax. Proposed by the Senate; Removed by the Conference Committee.
TAXCD114 – Juke Box & Digital Audio – Removing the sales & use tax exemption for digital juke box and audio purchases. Proposed by the Senate; Removed by the Conference Committee.
A more comprehensive review of ALL tax items in Am. Sub. HB 96 will be available in a separate BUZZ this month.
Grant Program Creation
Ohio Cultural and Sports Facility Performance Grant Fund (OBMCD51) –
Using the Ohio Department of Commerce’s unclaimed funds and interest, creates a $1.7 billion fund for a grant program. The bill appropriates $1.0 billion of the of the planned $1.7 billion. The first $600 million of this program will be used for a publicly owned “transformational major sports facility mixed-use project” in Brook Park that will be used by the Cleveland Browns NFL team. According to media reports, the publicly owned facility of the Cincinnati Bengals NFL team will also seek funding from this grant fund. Performance grants may be used to pay or reimburse up to 25% of the major sports facility’s construction costs upon achieving certain conditions, including meeting a schedule whereby increased tax revenues produced by the facility meet target amounts. The Governor issued a partial line-item veto of this language where a separate process would have allowed for 15% cost shares of smaller projects.
State Purchasing and Administrative Services
Semiconductor Procurement (DASCD41) – Expands the definition of “Buy Ohio” to include any product that includes semiconductors produced by a company with a significant Ohio presence.
Affirmative Action (DASCD48 & DASCD49) – Eliminates requirements for contractors from whom the state or a political subdivision makes purchases to have an affirmative action program. Repeals a requirement that construction contractors receive certificates of compliance for affirmative action programs from Development or ODOT before bidding on or being awarded a contract. With narrowly limited exceptions, also prohibits public authorities hiring subcontractors of construction management from eliminating bidders on the basis of not having affirmative action or DEI programs.
Prohibition of Certain Applications on State Devices (DASCD26) – Changes the statutory references to TikTok and WeChat to any application or service owned by an entity in China and prohibits download or usage of those apps on state equipment.
Board & Commission Changes –
Correctional Institution Inspection Committee (AGOCD41) – Abolishes the CIIC and transfers its duties to a newly created Office of Correctional Facility Inspection Services within the Attorney General’s Office.
Elections Commission (ELCCD2) – Abolishes the Ohio Elections Commission and replaces it with an Ohio Election Integrity Commission to be appointed by the Ohio Secretary of State.
Joint Medicaid Oversight Committee JMOC (LSCCD10) – Transfers oversight of the state’s Medicaid program from JMOC to the relevant standing committees in the Ohio House and Senate and moves the JMOC employees to the legislative Service Commission.
Controlling Board Additional Revenue (CEBCD8) – Modifies the Controlling Board’s authority to approve spending of additional revenue by permitting an increase of up to $100 million per fiscal year for a specific purpose instead of 0.5% of the GRF appropriation for that fiscal year. (Note: MCDCD80 allows an exception to this for transfers from the Health and Human Services Reserve Fund.)
State Board of Education Membership (SBECD2) – Reduces the State Board of Education membership from eight members appointed by the Governor and eleven elected members to a total of five appointed by the Governor.
Format for Bills and Resolutions (LSCCD7) – Transfers the required formats for bills and resolution changes from LSC’s administrative rule to statute.
Tele-vet Veterinary Services (DVMCD1) – Allows for specified veterinary services to be provided by telemedicine.
State Teachers Retirement System Board (PENCD9) – Reduces the number of contributing members on the board from five to two and adds to the board membership the Chancellor of the Ohio Department of Higher Education/designee, one additional Treasurer of State investment expert designee, one investment expert appointed by the Speaker of the Ohio House, and one investment expert appointed by the President of the Ohio Senate.
Regulatory Issues
Age Verification & Fabricated Sexual Images (AGOCD34) – Requires entities that provide materials deemed obscene or harmful to juveniles to use age verification methods. Creates a criminal offense for nonconsensual dissemination of fabricated sexual images.
Sex Recognition (DOHCD40) – Establishes that state policy recognizes only two sexes: male & female.
Fireworks (COMCD38) – Permits licensed fireworks manufacturers and wholesalers to conduct online sales and provide curbside pick-up for certain consumer fireworks.
Notable Program/Appropriation Items
Traditional School District Funding Formula (EDUCD26) – Extends the operation of the school financing system established in the 134th General Assembly with multiple changes.
Joint Vocational School District JVS Funding Formula (EDUCD28) - Extends the operation of the JVS financing system established in the 134th General Assembly with multiple changes.
Community and STEM School Funding Formula (EDUCD29) - Extends the operation of the Community and STEM school financing system established in the 134th General Assembly with multiple changes.
Guaranteed Admission (BORCD88) – Guarantees admission to a state institution of higher education for each high school graduate in the top 10% of the graduate’s graduating class. For those who receive a Governor’s Merit Scholarship, admission to a state university’s “main” campus is guaranteed.
In-State Undergraduate Tuition and Fees (BORCD108) – Limits state universities from charging in-state students a guaranteed tuition and general fee amount of more than 103% of what was charged to the prior academic year’s cohort.
Restrictions on Higher Education Fee Increases (BORCD32) – Authorizes community colleges to increase in-state undergraduate instructional and general fees by no more than $5 per credit hour compared to the prior academic year.
Federal Grant Suspension (OBMCD41) – Allows state programs to be reduced, suspended, or discontinued commensurate with any changes made by the federal government to pass-through funding for those programs.
Federal Medical Assistance Percentage FMAP (OBMCD32) – Requires the Ohio Department of Medicaid to immediately terminate medical assistance for members of the expansion eligibility group known as Group VIII if the federal government drops the FMAP below 90%.
H2Ohio Fund (AGRCD27) – Transfers $165 million from the state’s General revenue Fund (GRF) to the H2Ohio Fund for water quality programs. The Governor had originally proposed $270.3 million.
Public Library Fund (RDFCD2) – Replaces the formulaic amount providing the fund with a percentage of the state’s monthly GRF tax revenue with a direct appropriation.
Brownfield Remediation (DEVCD40) – Transfers $200 million from The All Ohio Future Fund to the Brownfield Remediation Fund.
Residential Development Revolving Loan Fund (DEVCD64) – Creates a loan program to fund improvements to infrastructure necessary to support construction of new, single-family residential homes in rural areas of Ohio. The program is funded at $100 million in FY 26 only.
If you would like to further discuss the contents of Ohio’s FY 2026 - FY 2027 Operating Budget, please reach out to Brian Perera or any of our ZHF Consulting professionals.
[Story originally published in The Hannah Report. Copyright 2025 Hannah News Service, Inc.]