Ohio’s finances: stronger receipts, committed surpluses and unfinished control repairs

Ohio’s financial picture

Research through October 6, 2026. Audited baseline: fiscal year ended June 30, 2025. Budget monitoring extends through August 2026, with the September revenue forecast, September 22 Medicaid review and October 2 motor-fuel tax guidance. Each newer observation keeps its own reporting date.

Ohio finished FY2026 with tax receipts comfortably ahead of its forecast. That gave lawmakers room for property-tax relief, health spending and capital projects. The next year begins with a less expansive question: how much flexibility remains after those decisions, existing bills and slower expected revenue growth?

The records show meaningful financial resources alongside unfinished administrative repairs. A positive cash balance cannot establish that benefits were paid correctly; an audit finding cannot establish that the state is running out of cash. Both sides matter to the people receiving services and paying taxes.

This is a review of published state-level records, not a professional assurance audit, a credit rating or a claim that every agency and obligation has been examined.

The audited balance sheet is a starting point

The FY2025 accounts report the following balances. The rows overlap and must not be added together. [1]

Cash answers a narrow question: what money is on hand? A fund balance also reflects receivables, bills and accounting rules. Net position goes further, bringing in long-lived assets and long-term obligations. A highway can increase net position without providing money for next month’s payroll.

Ohio’s accounting General Fund includes the General Revenue Fund, its main operating account, plus the rainy-day fund and other activities. The GRF cash figures used in monthly budget reports therefore cannot be compared directly with the larger accounting balance. [4]

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A better revenue year, with much of the surplus spoken for

The Ohio Office of Budget and Management (OBM) July 10 report put FY2026 GRF tax receipts at $30.94 billion, $1.77 billion or 6.1% above estimate. That reported total includes $186.5 million transferred to reimburse the GRF for the sales-tax holiday. Personal income taxes accounted for $1.11 billion of the positive variance. These are budget-monitoring results, not audited FY2026 financial statements. [2]

The same report showed $2.428 billion of unencumbered GRF balance at June 30, after $949 million reserved for outstanding commitments. It also listed $1.891 billion in estimated FY2027 transfers to other funds. A revenue surprise is thus different from a pot of money that remains available for any new purpose. [2]

The June 29 legislative announcement of H.B. 479 identified $350 million for homestead property-tax relief, $320 million for the 2027 expanded sales-tax holiday, $310 million for health and human services, $200 million for capital projects without additional borrowing, and $35 million for budget stabilization. Those five allocations total $1.215 billion. The announcement described the rainy-day fund as rising above $4 billion; it was not an audited statement of completed transfers. [6]

The distinction matters when services face an unexpected cost. A government can have substantial savings and still need a legislative decision, a transfer or a change in plans before using them. Committed money is useful capacity, but it is less flexible than an unrestricted new revenue stream.

The rainy-day fund has a specific job

Ohio’s September 2025 continuing disclosure reported $3.943 billion in the Budget Stabilization Fund at June 30, 2025, compared with $2.692 billion in 2021. The latest figure then represented 8.9% of FY2025 GRF revenue. It is a dated reserve balance, not an October 2026 cash reading. [4]

State law describes a target around 10% of the previous year’s GRF revenue and allows the reserve and GRF to be combined for cash management. Pooling cash does not create a second reserve: the rainy-day money is already included in the broader state accounts. [14]

The statutory definition of surplus also considers a required year-end balance, second-year budget carryover and capital appropriations. That helps explain why collections above forecast and legally available surplus need not be the same number. The budget’s specific transfer provisions must also be considered. [15]

FY2027 starts above estimate, but the forecast is restrained

By August, Ohio had collected $5.266 billion in FY2027 GRF taxes, 7.6% above the same two months a year earlier. OBM’s September report put that result only $29.3 million, or 0.6%, above the revised year-to-date estimate. OBM had reset the forecast after FY2026’s stronger receipts. That reset matters when measuring how much revenue is truly running ahead of plan. [3]

The revised forecast projects $30.7 billion in FY2027 GRF tax revenue, a slight decline from FY2026 receipts on the report’s comparable basis. Its year-end unencumbered GRF balance projection is $745.4 million. Opening cash of $3.377 billion includes $949 million of encumbrances and the $1.215 billion H.B. 479 transfers. These are forecast assumptions and reserved amounts, not additional spendable balances. [3]

August’s preliminary release showed income taxes $55 million above the monthly estimate and the commercial activity tax $31.9 million below it. Sales-tax categories were slightly ahead. Different taxes can move in different directions, so one strong month is not evidence that every part of the economy or tax base is strengthening. [16]

Tax policy is changing the comparison too. For taxable years beginning in 2026, Ohio law replaces the upper individual nonbusiness-income bracket with a 2.75% marginal rate. The statute retains a $26,050 no-tax threshold and a $332 base amount above it; taxable business income has separate rules. Lower rates can reduce receipts relative to an unchanged-law forecast even when underlying income grows. [7]

A later policy change falls outside that September forecast. In an October 2 bulletin, the Ohio Department of Taxation said H.B. 519, signed October 1, temporarily cuts motor-fuel taxes from October 4, 2026, through January 2, 2027. The stated gasoline and diesel rates fall from 38.5 and 47 cents per gallon to 0.0001 cent. The bulletin says the law includes a $725 million transfer from state reserve funds to offset the reduction. It does not identify the reserve accounts or establish completed transfers. That amount cannot simply be deducted from the September GRF forecast or the last verified rainy-day balance. [17]

The operating budget and the cash report answer different questions

The original H.B. 96 appropriations, enacted in July 2025, provided $99.53 billion across all funds for FY2026 and $101.16 billion for FY2027. GRF appropriations were $44.42 billion and $46.08 billion, respectively. The all-funds figures include federal and dedicated funding; they are not solely state tax spending. Subsequent amendments, including H.B. 479, mean these original appropriations are a starting benchmark rather than the current amended total. [5]

An appropriation permits spending. A disbursement records a payment. A commitment can sit between them while an agency waits for work, an invoice or federal approval. Consequently, spending below a monthly estimate may reflect a delay rather than a permanent saving.

That distinction was visible in FY2026 Medicaid. OBM reported $45.6 billion in all-funds disbursements, $3.6 billion below estimate but 5.6% above FY2025. Delayed state-directed payments awaiting federal approval explained much of the shortfall against plan. [2]

Borrowing depends on who promises repayment

The Ohio Sinking Fund Commission’s August 14 report put general-obligation bond principal at $6.876 billion on June 30, 2026, up from $6.365 billion at January 1. During those six months, Ohio issued $884.3 million, refunded $76 million and retired $297.5 million at maturity. The report is explicitly unaudited. General-obligation principal is only one debt category; it cannot substitute for the broader FY2025 carrying amount in the table. [8]

The continuing disclosure distinguishes GRF-supported debt from highway-user-receipt obligations and highway bonds supported by federal transportation grants. It also explains the 5% debt-service cap, its exclusions and possible legislative waiver. A debt limit is a constraint on certain borrowing, not a guarantee that every obligation is affordable. [4]

At June 2025, separate conduit programs carried $205.95 million of bonds: $135.62 million in enterprise financing and $70.33 million in transportation infrastructure. The notes describe program guarantees despite the absence of a general state-tax pledge, with no recorded liability for defaulted enterprise borrowers and no expected call on the transportation guarantee. [1]

In a conduit financing, the state helps another borrower obtain funding. The borrower’s payments normally service the bonds. A reserve or guarantee can still expose public resources if that borrower fails. Counting every conduit bond as direct state debt overstates responsibility; ignoring the guarantee understates it.

At June 2025, commitments included $3.85 billion for highways and $1.099 billion for other primary-government construction. Unfinished contracts are not automatically additional bonds outstanding. [1]

Schools, universities and local governments also have their own accounts. Some receive projects financed with state borrowing; others borrow themselves. A combined “Ohio debt” total would require a clear reporting boundary and elimination of overlaps. This review does not present such a consolidated total.

Retirement obligations run on a different clock

The state allocations use December 2024 pension measurements for public employees and highway patrol, and June 2024 for teachers. The patrol calculation rolls forward a December 2023 valuation. These are not October 2026 obligations measured afresh. [1]

The Ohio Public Employees Retirement System (OPERS) reported an 82% pension funded ratio at December 31, 2025, with an estimated 17-year funding period and a 14.74% defined-benefit investment return for that year. That is newer information about the retirement system as a whole, not a replacement for the state’s employer allocation in the FY2025 accounts. The system also covers employers beyond state government. [9]

Its health-care report provides another useful date distinction. Year-end 2025 health-care assets were $14.8 billion, while the 118.5% actuarial funded ratio came from a December 31, 2024 valuation. OPERS said no Traditional Pension Plan employer contribution was allocated to health care in 2025 and health coverage is not statutorily guaranteed. A benefit fund’s surplus is therefore neither a GRF reserve nor a promise that every future benefit is fixed. [10]

Pension results depend on investment returns, benefits, payroll and actuarial assumptions. A strong investment year helps the funding position, but a funding ratio is not a percentage of benefits guaranteed in cash today. Plan assets should not be added to the state’s spending capacity or whole-system liabilities added to its already-recorded employer share.

Federal funding is both support and a condition

The Ohio Auditor of State’s March release reported $45 billion of FY2025 spending across 371 federal programs administered by 24 federal agencies. Federal awards support a substantial part of Ohio’s services. This federal-expenditure schedule has a different scope and accounting basis from the GRF, so dividing it by GRF receipts would produce a misleading dependence ratio. [12]

FY2026 federal grants supplied $14.05 billion of $45.66 billion in GRF revenue, approximately 31%, on the monthly report’s budget basis. That is a narrower, comparable measure. [2]

Federal money commonly arrives for specified purposes and with eligibility, reporting and matching requirements. A change in reimbursement or an eventual disallowance can put pressure on state-funded resources even when tax collections are sound. The scale of that pressure depends on the particular program and decision; this review does not assume that every federal dollar is at risk.

The same March release described 16.9 million public-benefit alerts sent to county caseworkers. A large volume of automated warnings is not proof that the underlying cases were resolved. It makes the effectiveness of follow-through financially important. [12]

A clean financial opinion coexists with compliance problems

The December 17, 2025 financial-statement audit issued unmodified opinions on all 11 opinion units. The separate FY2025 Single Audit qualified compliance opinions for specified requirements in six major federal programs, including Medicaid and children’s health insurance. Financial presentation and compliance are different tests. [11]

The federal findings numbered 18, including 12 repeats, 14 material weaknesses and two significant deficiencies; categories overlap. Questioned costs totaled $6,789,360. Of that total, $6,511,920 concerned Summer EBT, while the Medicaid and children’s health-insurance finding identified $248,059. These are questioned charges requiring resolution, not a finding that the same amount of state cash disappeared. [11]

In the Medicaid finding, auditors credited recovered or reversed payments rather than counting them as outstanding. The agency disputed part of the eligibility finding; auditors retained it after considering that response. A corrective plan or disagreement is not evidence of completed remediation. [11]

An unmodified financial opinion gives assurance about material presentation within its scope. It does not certify that all transactions were proper, that every control worked or that every future bill is known. Conversely, a compliance failure needs its own financial interpretation before it becomes an estimate of a state budget loss.

September’s Medicaid review shows why follow-through still matters

A separate interim review announced September 22 covered Medicaid’s aged, blind and disabled population. The Auditor reported 49 ineligible people in a 1,500-person sample, with $356,541 in benefits paid on their behalf. Twenty-five of the 49 failed the resource test. Separately, the review identified 3,172 deceased people still enrolled within a population of 498,885, with nearly $1.8 million paid on their behalf. [13]

The announcement linked the problems to eligibility-review processes and said further work would examine the remaining enrollees. These are the Auditor’s reported interim findings, not a completed review of all Ohio Medicaid recipients. The sample and population results should not be added to earlier audit totals as if they were disjoint losses. This review has not verified subsequent recoveries or the final outcome. [13]

The financial consequence turns on what was actually paid, whether it was allowable, what has already been recovered and which level of government bears any final adjustment. Those distinctions protect against both understating a real control failure and overstating its eventual cost.

What remains uncertain

The evidence supports a state with accumulated resources and stronger recent collections, but less uncommitted flexibility than the largest balance-sheet totals suggest. Forecasted spending, reserved cash and the next round of revenue collections will determine how that flexibility develops. The unresolved audit work adds a separate question about how effectively public money is administered.

This edition does not establish audited FY2026 results, an October 2026 rainy-day cash balance, a fully comparable newer state pension allocation, the final outcome of the September Medicaid review or completion of all corrective actions. It also does not value every contingent legal claim or consolidate every local and university obligation.

Substantive revisions will identify the new source, its reporting period and what changed. New audited accounts, monthly budget reports, debt disclosures, retirement valuations and verified audit resolutions can change the assessment. An unchanged forecast, a scheduled payment or the passage of time will not turn an older balance into a current actual figure.

Sources

1. Ohio OBM, FY2025 Annual Comprehensive Financial Report; year ended June 30, 2025; December 17, 2025 audit opinion; basic statements and notes 9, 14–16, 20Official source · PDFBack to text: ↑1↑2↑3↑4
2. Ohio OBM, July 10, 2026 Monthly Financial Report; FY2026 receipts, disbursements and year-end GRF balance, tables 1–5Official source · PDFBack to text: ↑1↑2↑3↑4
3. Ohio OBM, September 10, 2026 Monthly Financial Report; August receipts and revised FY2027 forecast, revenue discussion and table 5Official source · PDFBack to text: ↑1↑2
4. Ohio OBM, September 22, 2025 annual continuing disclosure; financial-reporting scope, reserves and debt sections; balances generally June 30, 2025Official source · PDFBack to text: ↑1↑2↑3
5. Ohio Legislative Service Commission, H.B. 96 appropriation spreadsheet as enacted July 1, 2025; original FY2026–27 appropriations, summary tablesOfficial source · PDFBack to text: ↑
6. Ohio House, June 29, 2026 announcement of H.B. 479 signing and allocations; legislative announcement, not proof of transfer completionOfficial sourceBack to text: ↑
7. Ohio Revised Code 5747.02; effective September 30, 2025, including taxable years beginning in 2026; checked October 6, 2026Official sourceBack to text: ↑
8. Ohio Sinking Fund Commission, August 14, 2026 unaudited semiannual report; January–June 2026 activity and June 30, 2026 GO principal, page 5Official source · PDFBack to text: ↑
9. Ohio Public Employees Retirement System, July 9, 2026 financial-report release; calendar 2025 pension results and valuation datesSourceBack to text: ↑
10. OPERS, 2025 Health Care Report submitted June 30, 2026; calendar 2025 assets and December 31, 2024 actuarial valuationSource · PDFBack to text: ↑
11. Ohio Auditor of State, FY2025 Single Audit; financial statement opinion December 17, 2025; executive summary, compliance opinion and findings 2025-013–014Official source · PDFBack to text: ↑1↑2↑3
12. Ohio Auditor of State, March 27, 2026 Single Audit release; FY2025 federal awards and caseworker alertsOfficial releaseBack to text: ↑1↑2
13. Ohio Auditor of State, September 22, 2026 interim aged, blind and disabled Medicaid eligibility review announcement; sampled and population results distinguishedOfficial releaseBack to text: ↑1↑2
14. Ohio Revised Code 131.43, Budget Stabilization Fund; effective September 30, 2025; checked October 6, 2026Official sourceBack to text: ↑
15. Ohio Revised Code 131.44, surplus-revenue definitions and transfers; effective October 3, 2023; checked October 6, 2026Official sourceBack to text: ↑
16. Ohio OBM, September 8, 2026 preliminary August revenue release; tax-category variancesOfficial sourceBack to text: ↑
17. Ohio Department of Taxation, October 2, 2026, 10:59 a.m. EDT bulletin on H.B. 519; signed October 1, with motor-fuel tax changes beginning October 4SourceBack to text: ↑