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House Minority Leader Allison Russo is leaving as leader.

State Democrats will choose their next chair.

And breaking down the Senate budget.

All this weekend, the state of Ohio.

Welcome to the state of Ohio.

I'm Sara Donaldson, in for Karen Kasler.

Ohio Senate lawmakers unveiled hundreds of amendments this week to the biennial state budget.

Senate Finance Committee members tell me they came from thousands of submitted amendments.

Among the biggest changes to the bill the House sent over two months ago are a long debated income tax cut and what is now the third iteration of a framework to fund stadium construction in suburban Cleveland.

There are shifts in K-through-12 public school funding plans and property tax proposals and much more.

I sit down with Senate Finance Chair Jerry Serino later on in the show to break down the basics.

But first, Ohio House Minority Leader Allison Russo is leaving her post, leading the Democratic Party's caucus.

Her colleagues first elected her to that role in 2022. our caucus rules dictate, you know, that if you do decide to run for another office, that you step down.

And I haven't made a decision about that yet.

But I also know, you know, as a strong leader in the importance of smooth and organized transitions, I start at the beginning of the General Assembly and said to my members that wanted to get us through the budget process, we're coming up to the end of that process.

And so it's time to make that transition, to give a new leadership team, time to get organized for the next part of the General Assembly, after the summer break.

And, to prepare for the 2026 election cycle, to grow our caucus.

Russo led the caucus through a brutal battle over legislative redistricting.

She's not leaving the legislature.

She says she's going to stay in her House seat through the end of this general Assembly in 2026, when she hits her term limit.

Russo has not yet said what her next move is, though she's long been considered among potential candidates for Democratic federal or state wide public office.

In May, she said her time serving may not be over.

I don't think that my time in public service is done.

But I have not made a decision about what that means for 2026.

House Democrats have not yet set the date to vote on and fill the vacancy, although the caucus usually votes first behind closed doors and then the House holds a full floor vote.

Both will likely come before the end of the month.

And the Ohio Democratic Party needs a new chair.

Its executive committee is scheduled to select that person this coming week, and more than one candidate has said they want to take over for outgoing chair Liz Walters, who has been at its helm since 2021.

Walters is leaving to become chief executive of Target Smart, a democratic data and analytics firm.

Democrats have weathered back to back bruising election cycles on the statewide ticket.

Among the frontrunners for chair is former state lawmaker Kathleen Clyde, who already clinched a key endorsement in her bid to be the party's chair, that of former U.S.

Senator Sherrod Brown.

Clyde says her unsuccessful run for secretary of state in 2018 prepares her most for this role.

I learned about developing a compelling message and breaking through and, crowded ballot as a down ballot candidate.

And perhaps most importantly, in a way, for this, office that I'm seeking, I broke a record for fundraising.

I was the raise the most money, than any Democratic secretary of state candidate had ever raised.

When I ran for secretary of state and being able to raise those resources, connect with donors in state and nationally is going to be critically important to have a well-funded Ohio Democratic Party.

Stow City Council member Kyle Herman worked in President Obama's administration and then for the National Democratic Institute.

Since coming back to Ohio in 2020, Herman has also been an advocate for ranked choice voting.

He says he's running on his diverse background in international, national, state and local affairs.

levels.

I'm not part of the party insiders old boys club.

I'm coming to this from the perspective of I thought my career was going to be about advancing democracy in the Middle East.

I was working on democracy programs in Iraq and Lebanon, raising millions of dollars in competitive grants to try to democratize those countries.

And I realized after 2020 that we need to democratize Ohio as well, the level of tribalism and corruption and polarization that we have in our state.

None of the issues we care about are going to get solved unless we fix democracy first.

And I want to make sure that the Democratic Party leaders understand that and aren't trying to just treat this as another, transactional coronation for who within their party is going to be in charge.

We need to have serious conversations as a party about how do we empower all Ada County chairs to lead at the local level And Tammy Wilson, who has mounted two unsuccessful congressional bids against Republican Representative Jim Jordan, is also in the race for chair.

She says she believes the Democrats need to focus on strengthening their infrastructure statewide and clarifying their message.

It was a more crowded field before Thursday evening.

Former Ohio Democratic Party executive director and current state Senator Bill Dimora threw his hat in the ring early on but has since bowed out, saying he didn't have the votes to win.

Greene County Democratic Party Chairwoman Kim McCarthy exited shortly after dimora.

Whoever wins will be guiding a political party that hasn't won a governor's race since 2006 statewide.

The party's presence is dwindling with U.S.

Senator Bernie Marino's defeat of Sherrod Brown last year.

Democrats hold only one elected office statewide, a seat on the state's highest court.

And Ohio Supreme Court Justice Jennifer Brunner is up for reelection in 2026.

State lawmakers have less than a month to finish the state budget, which governor Mike DeWine must sign by June 30th.

We sat down with the Senate finance chair to discuss the latest draft released this week.

the Senate's version of the budget totals more than 5500 pages.

Perhaps the most defining part, though, is a measure that would flatten the state income tax.

Your caucus has proposed transitioning down from the current two bracket system to a flat rate for everybody, at 2.75% by tax year 2026, I should say everybody making under $26,000 a year.

Why and why now?

Well, it would be over 26,000 because up to 26,000.

There are no taxes.

Certainly.

So, look, this is, should not be a surprise to anybody.

The the General Assembly, our caucus in both the House and in the Senate, have been reducing the brackets, reducing the rates for over ten years now.

And remember, the income tax was established in 1972.

So Ohio existed for a very long time without a state income tax.

And it doesn't mean that we, you know, we don't have to have it in perpetuity and continue it, the way it's currently structured.

Look, the idea is that we want to support economic growth in the state of Ohio and everything we do is, is to promote that, because unless we have strong, vibrant, growing economy, we can't do the things that we need to do to help people, in their safety net programs, to be able to support them if we don't have the means to do it.

We can't do it to the same extent that we we think we need to.

So this is about putting money back in the hands of taxpayers, who will take the money and spend the money?

And that has a multiplier effect on the state of Ohio's economy.

And so we're excited about it.

We think it's the fair thing to do.

Will be joining 14 other states that have a flat tax.

It makes taxation more predictable, easier to, to deal with.

Easier to project what your liabilities are going to be.

We think it's a very net positive for the state of Ohio.

Sure.

So right now, this would most immediately affect Ohioans who make just over six figures or anything over six figures, if it goes into effect, saving them and costing Ohio more than $1.6 billion over this biennium, according to the Legislative Service Commission.

Now, you mentioned high earners might reinvest their money back into the state.

One senator tells me they were asked to be modest in their budget amendments to account for, you know, a tax cut like this.

What kind of cuts did you have to make from GRF funding to make way for a flat tax?

Well, we had in both the House version, they had it in their budget and we had it in ours.

There's lots of earmarks, lots of requests for special projects, community projects, etc.. And, last year we did the gift budget, where the House and Senate together spent for community type projects, $730 million less than a year ago.

So this time around, we asked our caucus to to be more deliberate in what they were asking for.

When we went through and rationalized our budget, prior to the sub bill being introduced, you know, we took a very dim view of adding lots and lots of things that every member wanted to.

We wanted to have, because we felt it was a proper tradeoff to make so that we could lower the tax rates and do other things that are in the budget.

Also, housing and other places that we can't do everything.

We have a fixed amount of money that we have to, to spend and we have to balance the budget, of course.

So we felt it was worth it to, to, to, diminish the number of special earmark projects in both the House and the Senate in order to be able to do these bold, grand things that we think are good for Ohio.

Now, shifting gears a bit, and this may be the most watched part of this budget, the Senate got rid of the House's debt and bond structure to fund a requested package of $600 million, so the owners of the Cleveland Browns, the Haslam family, could build a domed stadium and a surrounding economic project in suburban Brook Park.

So instead, your caucus has created a performance grant program funded by a percentage of money, $1.7 billion.

I believe it would be 600,600,000,000 for the Browns.

Millions and billions.

And then, you know, more money for potential future projects.

That money is coming from cash managed by the Department of Commerce's Division of Unclaimed Funds.

So how did you land on this proposal?

Well, we were, first of all to get the governor.

The House and the Senate have all agreed individually and under some different circumstance, is that this project in Brook Park to develop not just the stadium, but mixed use development as well, in an area of Cleveland.

And I'm a native Clevelander, so, I know a little bit about Cleveland there in Northeast Ohio, that is kind of an economic dead zone right now.

So it needs to be turned into something that's productive for the state, for the city, and for the county.

So we like the project.

We think it's a good economic development project.

The question was the House, the governor in the Senate had different views on how to, help finance that activity.

So we don't like I personally don't like the idea of floating bonds.

The interest over 25 years of a bond offering would be in excess of $400 million.

That would come out of the General Revenue Fund.

I don't like that.

And and there would be additional, legal costs and so on.

Could be another 10 or $20 million when you do a bond offering that big.

So we were searching for different ways to do this without also, as the governor had proposed, raising taxes, doubling the taxes on gambling.

Okay.

Our caucus really doesn't like to raise taxes, except in very unique circumstances.

So we looked at how could we do a cash deal that's really what it all came down to.

And I was aware we were aware in the Senate of the unclaimed funds number.

Right now, the up to date number is about 4.3 billion sitting in unclaimed funds.

It's what I call lazy money because it's not really being used to to do anything else other than gain some modest interest.

That is accumulating.

So we looked at that and we said, okay, you know, can we tap into that?

By the way, the the the legislature in the administration's in the past have, borrowed money from the unclaimed funds, for certain emergency situations.

Okay.

So this is not without precedent.

I think it has happened about 15 or 16 times.

Other states do this as well.

And our goal here is to, to to use this, this cash in a way that's going to produce, you know, a multiplier effect of other economic, advantages for the state and for the region, where this is located.

So we took a look at that and we said, okay, we would like to negotiate an arrangement with the Browns, with the Haslam family, so that we could deliver $600 million for this project on top of the 1.2, that billion that the Hassam family is putting in.

Right.

And and try to make this, this deal happen, and we set it up as a performance grant.

The performance grant basically is lays out over a 16 year period, that in, in if you can imagine some columns here, one through 16 for the years.

And then we have a projection of incremental taxes that are going to come into the state, as a result of this project.

In the beginning, it would be largely payroll taxes that would come in or income tax, because of the construction, phase of the, of the stadium once they start having games and parking and other things.

So there will be sales tax, there will be income tax, there will be, commercial activity taxes all coming into the state.

It will be verified as incremental.

So we're not double counting money that the Browns are already generating for the state in Cleveland at their current site.

And our plan is over the 16 year period that we will get back in incremental taxes to 600 million plus another about 36 million, because we have an inflator in the targets for each year.

To protect the state even further, we have four true up periods scheduled in this 16 year arrangement.

So at each four year true up period, we would sit down and look at, okay, what are the actual incremental taxes that have come in and how does that compare to the forecast?

And if there are any negative gaps in between those numbers, at the end of each of the four year periods, the Browns are putting in a $50 million, escrow account in place that we will control, that we will be able to tap into and cover the differences should they exist in any of those four year, two up periods.

If during the course of the, let's say, the next, eight years, when we do the true ups, if they are short again and we've already used the first 50 million escrow, they have a line of credit that will be established for another 50 million that we will be able to tap into.

So we think we have $100 million of, of surety basically set up to make sure that if there are any shortfalls in the actual incremental taxes produced, that we will have coverage for that.

And I want to shift gears here, because there's so much in the budget to talk about.

But just a quick follow up.

You know, you mentioned it's not unprecedented to tap into these unclaimed funds, but what do you say to folks who might argue it's not the state's money to claim these assets are coming from dormant bank accounts or, you know, uncashed checks of Ohioans?

Yeah.

Well, and this is an I'll get into the the legal concept of a shipment, which I think most people are probably not familiar with.

But, you know, look, when the, when money is handed over to the state, to the Commerce Department, that is, that goes into unclaimed funds.

It's come from banks, insurance companies, you know, credit card companies, etc., who have also already been searching for rightful owners.

Through various means, for 5 to 10 years, sometimes even longer.

And so by the time it gets to the state, it's already aged a bit.

And what our proposal has a day after it has to sit in the state for ten years, before it becomes, subject to the shipment, which will be including now in the budget bill, language means that the property gets turned over to the state, and then we can tap into it to do whatever we want.

Now, we are not trying to take money from Bill and Betty Buckeye, as the, commissioner or US county executive in Cuyahoga has claimed, because we have almost $300 million every year of new money that is coming into the unclaimed funds that will age ten years before we could, take access to it.

And, and we have plenty of money available to meet the needs of anybody who has a valid claim as they come forward.

The fact of the matter is in the commerce will verify this, that the the, potential for claims, valid claims to be made to draw against those dollars are generally very, very slim, especially after ten years or even longer.

So we are not using taxpayer money.

This is not tax money.

This is these are assets that are unclaimed and unaccounted for in terms of having a relationship with their ultimate owners.

We're also putting $1 million a year into the Commerce Department in their budget to help them do an even better job.

They're already doing a lot of work to find the, the owners of this property.

We want them to redouble their efforts further.

Again, we want to make sure that anybody who makes a claim is is going to be satisfied.

And we are very comfortable that that will happen.

So the formula to fund public schools has triggered a lot of debate this budget cycle.

Much of that has centered on decisions about the final phase of what proponents call the fair school funding plan.

That was a 2021 reform effort by lawmakers to put money toward public schools based on the actual costs associated with educating a student.

How does the Senate's version differ from what the House did with.

Well, yeah, I think the governor's version and the Senate and the House's version are different than ours.

We're all trying to get to the same place, some kind of a formula that makes sense, to fund our very important schools.

We certainly believe in that.

But the Senate's plan is really the true continuation of the fair school funding.

Plan, in its final two year phase.

So we've added dollars, we've added $634 million into that funding.

We've also added parameters that we think are critical in terms of recognizing that there should be some premiums paid for performance, and also for, to account for enrollment changes, you know, school systems that are growing in enrollment, should be properly recognized for that in the formula schools.

Many of our systems have seen steady declines in the number of students, and they shouldn't get the same amount of money, if they get fewer students to take care of.

So, and in my, finance committee, we've been having hearings for the last couple of days, the number of student superintendents and school board members have come in to testify how much they like the funding formula that that we have put into place under our, our method.

No school system will get less than they received in fiscal 21.

Okay, so we've protected them with that flaw.

In a lot of school systems are going to see increases.

A few are going to see some decreases.

But you either have a funding formula or you don't.

If you put artificial guarantees in then you really don't have a formula.

And then one of the biggest additions in the house was this addition of a ceiling, about how many cash reserve schools could hold on to.

They said that at 30%, you guys raised it to 50.

And you also added an overflow allowance.

So tell me a little bit about the decision making behind one of the advantages of going last in the budget process after the governor in the Senate or the, in the House, is that we get we had more a little bit more time to go out and talk to people.

So I went out and I met with superintendents.

Many of them, talked with them on the phone, got a lot of feedback from school board members as well.

You know, it was pretty clear early on that the 30% cap would be would be a problem.

Okay.

Because remember, we want our school systems to be fiscally responsible, and that means that you should have enough set aside as carryover from a prior year, in case you run into some emergency.

So what we did was we raised it to 50%, to provide some accommodation for funds that needed to be kept on their books year over year.

But we also wanted to make an allowance for capital projects that need to happen.

Right.

And so, so our, our, difference with the house is not only the amount, the rate from 30 to 50%, but we are adding we've added language that allows for, funds to be set aside, separate from their operating funds for capital projects that would be, conducted within three years of the time period that we we would start looking at this in this, this next fiscal year.

And so we've had a lot of positive feedback about that.

And so we think it's, we think our, our, our program is the right one to go with, we'll see how it goes in when we get to conference with, with the house.

But, we feel that that's the right thing to do.

And I think a lot of school systems are very happy with our approach.

There are tens of millions of dollars worth of bonus royalties coming from the oil and gas drilling going on under Ohio state parks and public lands, according to budget documents.

The Senate kind of shifted money around it, cut general tax revenue for Parks and recreation, and then fill that hole with those fracking dollars, one conservation advocate tells me.

It's really hard to restore general revenue funding once it's cut in future budgets.

And these fracking royalties are finite.

So why not just release the bonus royalties to Odnr?

Well, I would disagree with whoever that source was that that it's difficult to get things back in the GRF.

We have a very robust process every two years, and we're we're in the thick of it right now, where justifications can be made for additions to GRF.

We're doing it all the time.

Okay.

So I think that's a that's a false narrative.

But in this case what we're taking is we're talking about it's moving the royalties generated from fracking on public lands, which are, by the way, our public lands.

They don't belong to Odnr.

They belong to the people of the state of Ohio.

We're talking about direct redirect.

Those those, royalties back to the general fund, but to the line that supports the operating costs of Odnr.

So it's really not leaving Odnr.

And so, it's just a it's a proper redirection that allows us to, to make up for some other cuts that we had to make in odd budget.

It's simply it's accounting.

And we're not going to deprive Odnr of their basic requirements to, to run their operation.

We they do some great work, and we want to make sure that they continue to do so.

The Senate is scheduled to make final changes to the budget this coming week, with a floor vote on either Wednesday or Thursday.

That's it for this week for my colleagues at the statehouse News Bureau of Ohio Public Media.

Thanks for watching.

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You.

Support for the Statehouse News Bureau comes from Medical Mutual, dedicated to the health and well-being of Ohioans, offering health insurance plans, as well as dental, vision and wellness programs to help people achieve their goals and remain healthy.

More at Med mutual.com.

The law offices of Porter, right, Morris and Arthur LLP.

Porter Wright is dedicated to bringing inspired legal outcomes to the Ohio business community.

More at porterwright.com.

Porter Wright inspired Every day in Ohio Education Association, representing 120,000 educators who are united in their mission to create the excellent public schools.

Every child deserves more at OHEA.org.