SFY26-27 State Operating Budget Finalized – Signed By Governor

On June 25, the Ohio House and Senate passed HB 96, the $200 billion SFY 26-27 state operating budget, and presented the bill to Governor DeWine for review, line-item veto, and signature. The Senate passed the budget 23-10, with Sen. Louis Blessing (R-Colerain Twp.) joining Democrats in opposition.  The House approved it by a vote of 59-38. Joining Democrats in opposition were Rep. Tim Barhorst (R-Fort Loramie), Rep. Levi Dean (R-Xenia), Rep. Ron Ferguson (R-Wintersville), Rep. Scott Oelslager (R-Canton) and Rep. Michelle Teska (R-Centerville). The Governor DeWine then had until June 30 to review, veto, and sign the bill.

The final conference committee bill included the Senate’s proposed 2.75% flat income tax proposal as well as the majority of the upper chamber’s K-12 school funding proposal after removing the performance payment from the base funding formula.  On the property tax issues, the conference committee modified the House’s proposal, which will impact school funding specifically, but will also remove the ability for taxing authorities to use replacement levies after 1/1/26 and expand the authority of the County Budget Committee to make determinations on whether approved tax levies are “reasonably necessary and prudent to avoid unnecessary, excessive or unneeded tax collections”.  While not directly related to behavioral health, these overarching policy issues impact available revenue to fund services at both the state and local levels.

HB 96 also maintains the Senate’s approach to funding sports facilities using unclaimed funds, which is anticipated to draw a legal challenge.  Separately, the conference committee was unable to reach consensus on the adult use cannabis and Delta 8/9 bill under deliberation by both chambers.  As such the decided to retain 36% of the tax revenue for local municipalities that are host communities as passed by the voters but defers distribution pending passage of the marijuana legislation this fall.  The remaining 64% of the adult use cannabis tax is going into the general fund.  The two chambers were also unable to muster support to tax internet gaming, which was anticipated to be a source of revenue for this budget. 

Other key provisions decided by the Conference Committee in HB 96, the SFY26-27 state operating budget, include:

  • Medicaid funding levels (525 line item) amounts set at $20.B and $21.2B respectively, which is a middle ground between the House and Senate passed appropriation proposals.
  • Medicaid trigger language to immediately terminate coverage for Group VIII (expansion group) if there is any change in the FMAP remains. Also requires the Medicaid Director to establish a transition plan to assist individuals that would no longer be eligible to access private insurance subsidies or charity care. (The conflict between “immediately terminate” and develop a transition plan remains)
  • Requirement for Group VIII to complete Medicaid redetermination every six months retained, if permitted by CMS
  • Permits hospitals to continue presumptive Medicaid eligibility but adds an annual reporting requirement on all presumptive eligibility practices annually.
  • Maintains the ODM “hospital package” with regard to provider tax (franchise fee) increases and adopts the Senate modifications on 340B drug program to support FQHCs and compromise language limits state directed payment programs to 50.  This bill requires reporting to the General Assembly on both 340B drug pricing program and state directed payment programs.
  • Permits individuals enrolling in the Medicaid program to select the MCO of their choice and if no choice is made, to randomly assign an MCO without any preference or other criteria for assignment.
  • Requires ODM to submit an 1115 Re-entry waiver
  • Requires ODM to create sub-accounts in the 525 line to identify specific revenue sources by program
  • Eliminates continuous Medicaid eligibility for children through age 3.
  • Incorporates HB 356 that requires the Auditor of State to conduct an audit of all individuals enrolled in the Aged, Blind, and Disabled (ABD) Medicaid program to examine if members exceed the countable assets limits set in federal law and to remove them from the program is they do.
  • Sunsets the Joint Medicaid Oversight Committee (JMOC) now that the House and Senate have standing Medicaid Committees.  Establishes these standing committees will meet jointly and transfers the remaining responsibilities of JMOC to LSC.
  • In the DBH (formerly MHAS) Funding:
    • 988 funding will be $25.5M in SFY26 (increased from Senate $23M) and $23M in SFY 27 (increased from Senate $20.5M).  While we appreciate the added funding, this remains below the current funding of $26M and did not consider increasing call volume or the MRSS policy changes.
    • Reduced Prevention and Wellness Funding (406 line item) to $5.5M each year.
    • Maintained Criminal Justice funding (422 line item) at $28.5M each year, which is $6 more than current, but $6.8M less than the executive proposal and reduces the distribution under the new CJ state block grant from $6.8M to $5.1M and $5M each year respectively while increasing funding for the BH Drug Reimbursement program from $5.25M to $6.5M each year.
    • Reductions to community innovation ($15M for EHRs) and BH Assistance ($20M) retained;
  • Peer recovery support certification transition to the Chemical Dependency Professional Board language was removed.
  • Permits DBH to suspend licensure of a class one children’s residential program without a hearing under specified circumstances.
  • Requires DBH to publish a directory of all licensed residential facilities (rather than ODM)
  • Establishes confidentiality of investigation materials for recovery housing investigations.
  • Creates an Ibogaine Treatment Study Committee and a High THC Cannabis Impact Research Study.
  • Requires state child serving agencies to collaborate and provide a report on data and policy recommendations to serve multi-system youth.
  • Provide $10M to a statewide non-profit organization to provide cannabis prevention. 
  • Permits DCY to conduct an RFP to establish a statewide rate care for foster care placement payment but exempts foster homes and kinship caregivers from the statewide rates established.
  • Requires DCY to adopt specified rules for group homes serving children including revocation of licensure.
  • Retains the kindergarten readiness assessment
  • Creates a Child Care Cred program as proposed by the House allowing cost sharing of childcare with employees, employers, and DCY.
  • Requires DCY, through the Ohio Commission on Fatherhood, to contract with a non-profit to develop and implement the Responsible Fatherhood Initiative.
  • Authorizes $10M each year for DCY to establish regional child wellness campuses. Separately earmarks $350,000 for the Providence House Every Child Ohio Feasibility Study.
  • Restores funding authority for PCSAs to the Executive Budget level but changes the language to specify this is “up to” rather than “not less than”.
  • Permits County Commissioners to decline to establish or maintain a family children first council.
  • Maintains the Ohio Housing Trust Fund and the Ohio Housing Finance Agency as an independent entity
  • Require ODJFS to request federal approval to exclude sugary drinks from SNAP
  • Bans the creation and distribution of fabricated sexual images of another person without their consent and requires customer age verification for any online pornography services/sites.
  • Requires pharmacy benefit managers (PBM) to reimburse pharmacies for the actual acquisition costs but no longer requires a minimum dispensing fee.
  • The Conference Committee did not restore the executive proposal to fund child tax credits, increase eligibility for publicly funded child care, address lead abatement, or funding for libraries. 

HB 96:  As Reported by Conference Committee: Passed by the House and Senate

LSC Resources  (Appropriation Summary, Comparison Documents)

As mentioned prior, Governor DeWine was presented with the budget bill for his review, to issue any vetoes, and ultimately sign the legislation. Accordingly, late in the evening on June 30, Governor DeWine signed HB 96 into law and issued several line-item vetoes. Of note, Governor DeWine maintained the high-profile legislative priorities inserted into the budget, including the Medicaid expansion “trigger” language terminating the program if Congress reduces the 90% FMAP, implementation of a state tax cut, and $600 million in state funding to help the Cleveland Browns build a new domed stadium by using “unclaimed funds” from the state treasury.

Governor DeWine also vetoed several key provisions of importance to our system:

  • DeWine vetoed many of the property tax provisions and restrictions in the budget, including the repeal of “replacement levy.” He also announced the creation of a property tax reform working group with legislators, agency officials, school officials, community members, and property tax experts.
  • DeWine vetoed the repeal of continuous Medicaid enrollment for kids 0-3.
  • A couple of anti-LGBTQ provisions were vetoed: The restriction on funds for youth homeless shelters that "affirm social gender transition" and the prohibition on library display of materials related to sexual orientation and gender identity.
  • Multiple education provisions were vetoed or altered, including a removal of the Educational Savings Account Program to provide public funds to students in non-chartered non-public schools, and a removal of the legislature's authority to oversee SB1 compliance.
  • DeWine vetoed the greater restriction on Controlling Board approval authority, which would have capped authority at $100M/program/FY.
  • DeWine also vetoed the Conference-added provision limiting ODM to only request $250M per FY from the HHS Reserve Fund.
  • DeWine vetoed the increase to the Personal Needs Allowance for technicalities, and ODM will implement this increase via rule.
  • The Governor also vetoes language prohibiting any state employee from working from their place of residence unless an exception applies.

For additional information, please see Governor DeWine’s complete veto messages.

The Ohio Council will continue to monitor activities and share information as it becomes available, including any further developments and how state agencies will begin to implement the new budget provisions, especially with respect to Medicaid funding and OhioMHAS continuum of care efforts.

Finally, we are continuing to monitor the status of the federal reconciliation package, which has the potential to impact the state’s operating budget.  A number of key provisions remain under negotiation, and it may be several days or even weeks before we have a clear picture of the final outcome.