LIMA — Allen County will lose nearly $1 million in revenue due to a federal mandate that eliminates the collection of sales tax from managed care services, county auditor Rhonda Eddy-Stienecker announced Thursday.
Collection of sales tax on Medicaid premiums, which were paid to private managed care companies, will be disallowed in Ohio starting July 1, 2017. For Allen County, that means between $800,000 and $900,000 will be lost each year, based on the current amount of revenue generated by the sales tax of managed care services.
“In 2009, (former Ohio Gov.) Ted Strickland added the sales tax to managed care services, and the federal government said in 2014 that it was not allowed,” Eddy-Stienecker said. “They started shifting that back, and in 2017, they’re going to eliminate that sales tax.”
Though the mandate will begin in the middle of next year, Eddy-Stienecker said local governments will be hit hardest in 2018.
“There will be a slight decline in our sales tax revenue in 2017, but we’ll definitely see a decline in 2018,” she said. “The $800,000 to $900,000 in lost revenue I mentioned will start that year, in 2018.”
Due to falling interest rates and drastic cuts to local government funds, Allen County increased its reliance on sales tax to generate revenue. Sales tax revenue rose from 49 percent to 61 percent of the county budget within the last several years, Eddy-Stienecker reported.
To compensate for the loss in sales tax revenue, she said the commissioners may cut expenses even further. She said interest rates could also start climbing back up, and if new businesses come to Allen County, sales tax revenue would increase.
“Do I see a (sales tax) decrease? Absolutely,” she said. “But if other retail companies come in, we would make up some of that because we would receive sales tax from them. This time next year, we’ll have to see what other retailers we have, and we’ll re-evaluate those numbers.”
