The Ohio state budget bill is the biennial appropriations law that funds state government for two fiscal years, drafted by the governor, rewritten by the House and Senate, and signed into law by June 30 of odd-numbered years. The current bill is House Bill 96, covering fiscal years 2026 and 2027. It directs tens of billions of dollars in state and federal spending and, in practice, carries a long list of policy changes alongside the numbers.
When the Budget Gets Written and Passed
Ohio’s fiscal year runs July 1 through June 30, and every budget covers two consecutive fiscal years. Article II, Section 22 of the Ohio Constitution prohibits any appropriation lasting longer than two years, which is why the cycle repeats.1Justia Law. Ohio Constitution Article II Section 22 – Appropriations
Work begins inside the executive branch. Under Ohio Revised Code 126.02, the Director of Budget and Management must compile revenue and expenditure estimates for every state fund and submit them to the governor by January 1 of the year the General Assembly convenes.2Ohio Legislative Service Commission. Ohio Revised Code 126.02 – Preparation of Budget Estimates The governor then builds the executive budget proposal and must deliver it to the General Assembly within four weeks of the legislature’s organization. When a new governor takes office, that deadline extends to March 15.3Ohio Legislative Service Commission. Ohio Revised Code 107.03 – Governor Shall Submit Budget and Estimate of Income
Because the General Assembly typically organizes in early January, the governor’s budget usually reaches lawmakers by early February in non-inauguration years. That gives the legislature roughly five months to hold hearings, negotiate, and pass a final bill before the June 30 deadline. Missing that deadline does not automatically shut down state services, but lawmakers have to pass a temporary spending measure to keep the government running. That is what happened in 2019, when the House and Senate approved a short-term extension funding agencies at prior-year levels while negotiations continued.
How the Bill Moves Through the Legislature
The budget bill starts in the Ohio House of Representatives. The House Finance Committee holds weeks of hearings, taking testimony from agency directors, stakeholders, and the public, then approves its version. A simple majority on the House floor sends it to the Senate.
The Senate Finance Committee runs its own review and typically makes substantial changes. Once the Senate passes its version, the bill returns to the House, which almost always votes to reject the Senate’s amendments. That disagreement triggers a conference committee of three members from each chamber, tasked with producing a single compromise version. The conference committee report cannot be amended on the floor. Both chambers must vote it up or down as written.4Legislative Service Commission. A Guidebook for Ohio Legislators – Chapter 8 The Ohio Budget Process
A simple majority in both chambers then sends the final bill to the governor. Conference committees usually work for at least two weeks reconciling differences that can span billions.
The Governor’s Line-Item Veto
Once the budget reaches the governor, the executive holds a power that makes Ohio’s process distinct from many other states. Under Article II, Section 16 of the Ohio Constitution, the governor can strike individual spending items or specific language from the budget without rejecting the entire bill.5Ohio Legislative Service Commission. Ohio Constitution Article II Section 16 – Bills to Be Signed by Governor; Veto Everything the governor does not veto becomes law.
Governors use this power aggressively. Governor DeWine vetoed 67 provisions from the FY 2026–2027 budget bill, striking items that ranged from library content restrictions to local government levy provisions. The legislature can override any individual veto, but the threshold is a three-fifths vote in both chambers, starting in the chamber where the bill originated.5Ohio Legislative Service Commission. Ohio Constitution Article II Section 16 – Bills to Be Signed by Governor; Veto Overrides of budget vetoes are rare in practice.
If the governor neither signs nor vetoes the bill within ten days (Sundays excluded) while the legislature is in session, it becomes law automatically. Once enacted, the Director of Budget and Management certifies the final appropriations, and the new spending authority takes effect July 1.
The Balanced Budget Requirement
Ohio has no single constitutional clause saying “the budget must be balanced,” but several provisions produce that effect. Article XII, Section 4 requires the General Assembly to provide sufficient revenue to cover state expenses each year. Article VIII, Sections 2 and 3 prohibit the state from incurring debt except for voter-approved capital improvements and a few narrow exceptions, capping casual deficit borrowing at $750,000.6Legislative Service Commission. Legal Foundations of the Budget
Enforcement sits in Ohio Revised Code 126.05. If the governor determines that anticipated revenues and available balances in the General Revenue Fund will fall short of appropriations during a fiscal year, the governor must order spending reductions to prevent a deficit. The governor may also declare a fiscal emergency and impose mandatory cost-savings measures, including furlough days for state employees.6Legislative Service Commission. Legal Foundations of the Budget There is no option to simply run a deficit and address it later.
Where the Money Goes
Two categories dominate state spending: Medicaid and K–12 education.
Medicaid
Medicaid is the single largest line item in Ohio’s budget, accounting for roughly 39 percent of total state spending when both state and federal dollars are counted. The federal government has historically covered around 73 percent of Ohio’s Medicaid costs, making the federal match the largest source of non-tax revenue flowing into the state.7USAFacts. How Much Does Medicaid Cost in Ohio Federal maintenance-of-effort rules limit the state’s ability to cut eligibility to save money. When Congress ties enhanced federal matching rates to those protections, tightening enrollment standards risks losing billions in reimbursements. The budget bill sets reimbursement rates, managed care organization contracts, and administrative costs that shape how the program runs day to day.
K–12 Education
Education is the second-largest category. Ohio implemented the Fair School Funding Plan beginning in fiscal year 2022, calculating a base cost per pupil for each district and setting the state’s share based on local property values and household income. Wealthier districts receive less state money; districts with lower capacity to raise local revenue receive more.8Ohio Department of Education and Workforce. Overview of School Funding The FY 2024–2025 budget (HB 33) pushed K–12 spending above $8 billion annually and created universal eligibility for EdChoice scholarships regardless of family income.
Higher Education and Corrections
State universities, community colleges, and need-based financial aid programs such as the Ohio College Opportunity Grant also receive significant appropriations.9Ohio Department of Higher Education. Ohio College Opportunity Grant The Department of Rehabilitation and Correction consumes a substantial share as well, covering personnel, facility maintenance, and programming for tens of thousands of incarcerated individuals. Highway patrol and other public safety functions draw from the General Revenue Fund, though transportation spending moves on its own separate budget cycle.
Where the Money Comes From
The state sales and use tax is the single largest driver of General Revenue Fund income, set at a base rate of 5.75 percent.10Ohio Department of Taxation. State and Permissive Sales Tax Rates by County Counties may add permissive rates on top, but only the state portion feeds the General Revenue Fund.
Personal income taxes contribute a significant share. Ohio has cut income tax rates repeatedly in recent budgets. For tax year 2025, the top rate dropped to 3.125 percent on taxable nonbusiness income above $100,000.11Ohio Department of Taxation. What’s New – Individual Income Tax The steady compression of income tax rates shifts more of the revenue burden onto the sales tax and makes projections more sensitive to consumer spending.
Businesses contribute through the Commercial Activity Tax, a gross-receipts tax on the privilege of doing business in Ohio. Starting in 2025, only businesses with gross receipts above $6 million must register, a sharp increase from the prior threshold that effectively removed many smaller businesses from the tax.
Federal grants and reimbursements account for a large portion of the total budget, driven primarily by the Medicaid match. Federal dollars also support highway construction, social services, and education programs. Because the state cannot run a deficit, inaccurate forecasting of any of these revenue streams forces the governor to cut spending mid-biennium.
The Rainy Day Fund
Ohio maintains a Budget Stabilization Fund, commonly called the rainy day fund, as a cushion against revenue shortfalls. Under Ohio Revised Code 131.44, the Director of Budget and Management must calculate the surplus from the prior fiscal year by July 31 each year and transfer the excess into the fund until it reaches a target balance of 10 percent of General Revenue Fund revenues from the preceding year. Once the fund hits that target, additional surplus flows into a separate expanded sales tax holiday fund. The transfer only happens from the unobligated, unencumbered balance exceeding one-half of one percent of prior-year revenues, so a small operating cushion always stays in the general fund.12Ohio Legislative Service Commission. Ohio Revised Code 131.44 – Transferring Surplus Revenue The reserve gives Ohio more flexibility than the balanced budget rule alone would suggest, because the state can draw down reserves during a recession rather than immediately cutting services.
Policy Riders Attached to the Budget
The budget bill does far more than allocate money. Lawmakers routinely attach policy riders, provisions that change substantive state law, because the bill is a must-pass vehicle with a hard deadline. Recent budgets have included universal school voucher eligibility, restructuring of the Department of Education into the Department of Education and Workforce, career-technical education facility funding, and restrictions on local government levy authority.
The budget functions as an omnibus policy document. Provisions that might struggle to pass as standalone legislation can move through the budget process with less public scrutiny, especially when they are added during the conference committee stage where floor amendments are not permitted. The line-item veto is the final check, as the 67 vetoes in the most recent cycle show, but many policy riders survive because vetoing them could remove attached funding that agencies need. For anyone tracking Ohio law, the budget bill is where many of the biggest policy changes happen each biennium.
One boundary worth noting: the operating budget is separate from Ohio’s capital budget, which funds buildings, roads, prisons, school construction, and university infrastructure and is financed primarily through voter-authorized state bonds. The capital bill moves on its own timeline and does not carry the same policy fights as the operating budget.