Fitch Ratings: Repeal of SB5 to have ‘minimal fiscal impact’ for Ohio

Friday, November 11, 2011 at 12:53 pm

According to credit rating agency Fitch Ratings, Ohio’s decision to overturn its contentious anti-collective-bargaining law will have little effect on its credit rating.

The law, known as Senate Bill 5, would have stripped public-employee unions’ ability to negotiate, giving the ultimate decision-making power to state and local employers, ostensibly in an attempt by Ohio Republicans to stem government spending.

Fitch’s report suggested that, while local municipalities may have stood to save on employee expenses such as pensions and health care, the state would have seen little effect had the law remained on the books, “since state employees already contribute 15% toward their health insurance, the state had not incorporated any savings in its current biennial budget from the changes to collective bargaining rights, and historically, the state has not included pension pick-ups as part of its labor negotiations.”

The report says the state could have picked up some savings from the requirement for employees to pay 15 percent of health-care costs, but it called the $45-million savings “modest,” with respect to the state’s $27-billion budget.

Another hotly contested element of the bill, a requirement for the establishment of a merit-based promotion system for teachers, was not affected by the law’s repeal, as the budget, which passed earlier this year, already provided for such a system.

Fitch, while not expecting the repeal to have an immediate impact on local budgets, did acknowledge that local governments would have a difficult time off-setting the massive cuts the state made to the Local Government Fund, Ohio’s disbursal of sales tax revenues to local municipalities. The cuts, about half of what the state had been paying out before, seem to pose the greatest challenge for Ohioans after SB5, although it is difficult to determine whether the law would have had the effect on employers the administration desired.

Fitch, on the other hand, said its credit ratings did not rely on collective-bargaining laws or even employee costs, but rather governments’ “willingness and ability”  to address fiscal challenges, however they choose to do so.

“Whether solutions are developed through management powers or collective bargaining negotiations is not material to Fitch’s credit analysis; the key is that timely and effective results are consistently achieved,” read the report.

The ratings agency also assigned a “AA+” rating to Ohio’s $146 million in new general-obligation bonds, and reaffirmed its standing ratings of previous bonds, calling Ohio’s rating outlook “stable.”


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