What are “rainy day funds” and how are they used?

When the doors were shuttered at Moraine, Ohio’s General Motors plant in 2008, 10,000 people immediately lost their jobs. The Ohio economy, along with the rest of the country’s economy, was reeling, struggling to make ends meet under the economic strain. The Great Recession humbled the state of Ohio as then-governor Ted Strickland drained all but 89 cents from the $1 billion fund.

Ohio’s manufacturing industry was hit hard by the Great Recession. Instability in the sector led to mass layoffs, business closures, and declining wages. This created a problem for the state of Ohio because of its reliance on income tax, sales tax, and corporate tax revenues — the recipe for a budget deficit.

The budget stabilization fund was the duct tape holding the state of Ohio’s budget together as it stared down a yawning budget deficit. To close that deficit, Ohio could raise taxes, lower spending, or dip into the budget stabilization fund. Without that fund, the pain would have been a lot worse for the state as a whole.

Unlike the federal budget, which can (and almost always does) finance a deficit through borrowing, nearly all state budgets must be balanced at the end of each fiscal year due to clauses in their state constitutions. There is no room for debt, so budget stabilization funds (often colloquially referred to as “rainy day funds”) provide lawmakers with a tool to balance the state budget. Ohio was not alone drawing from its budget stabilization in 2008 and beyond. Many other states in financial straits have similarly benefited from their budget stabilization funds.

Alaska’s reliance on oil revenue hit a breaking point in the mid-2010s when oil prices crashed. To cover the deficits, Alaska withdrew $14 billion from its budget stabilization fund.

In addition to economic recessions, environmental disasters are frequently cited as reasons for drawing on the fund. Florida withdrew money from its budget stabilization fund repeatedly throughout the 21st century to help the state recover from hurricane damage.

Nearly every state tapped into its rainy day fund during the COVID-19 pandemic. Between 2020   and 2021, California withdrew $9.6 billion to cover the cost of rising unemployment benefits. In 2020, Texas withdrew $1.2 billion to pay for the state’s increased healthcare costs during the COVID-19 pandemic. 

The recent budget cuts announced by President Donald Trump pushed Governor Lamont, of Connecticut, to consider alternative funding options for the state’s critical services. Cuts to Medicaid could eventually create a deficit that would require a draw from the state’s $4 billion budget stabilization fund. 

How do states replenish their budget stabilization funds after they are spent down? Ohio faced a steep climb, from 89 cents in its budget stabilization fund in 2011 to a record-breaking $3.5 billion by 2023. By holding taxes steady and cutting education spending while piggybacking off a slow economic recovery after the Great Recession, Governor Kasich’s administration was able to close the budget deficit. 

After the Great Recession pummeled Ohio’s manufacturing industry, the state’s healthcare, logistics, and finance sectors grew. A more diverse economy will help Ohio avoid a steep economic downturn based on any one sector. 

There are currently debates across the country about whether or not states should spend some of their budget stabilization funds on pressing issues like affordable housing and healthcare. Leaders at the Children’s Defense Fund of Ohio, for example, have made the case that the $3.5 billion could be used to supplement social services like funding a child tax credit and free school meals. Others argue that large reserves are the only thing that saved the country from chaos during crises like the Great Recession and the Covid-19 Pandemic. With recession risk on the rise, we might end up hearing more about budget stabilization funds sooner rather than later.

What would it cost to end poverty in the U.S.?

About $168 billion. That’s how much money it would take to get every household in the United States above the federal poverty line. 

We’ve written in the past about the equity-efficiency tradeoff, and the problem of poverty is the poster child of this phenomenon. We could end poverty in this country overnight. The government could appropriate $168 billion and give it to every household whose income falls below the federal poverty line. This may not be efficient, but it’s important to recognize that poverty is not an inherent property of the economy. It doesn’t necessarily need to exist. 

In order to arrive at the $168 billion number, I looked at data from the American Community Survey. I took the total reported income of each household and saw how far below the federal poverty line each family was. Below is a table showing how much money each state would need in order to end poverty.

State	Amount Needed to End Poverty	Per Capita	Households in Poverty
California	$17,214,506,268	$438.67	1,522,399
Texas	$16,001,075,509	$539.84	1,392,305
New York	$11,322,505,843	$569.76	1,032,499
Florida	$11,132,233,232	$507.65	1,044,689
Ohio	$6,567,602,300	$557.52	623,894
Illinois	$6,494,454,210	$511.67	585,786
Pennsylvania	$6,450,478,080	$496.71	604,820
Georgia	$5,926,791,086	$547.63	517,794
North Carolina	$5,742,585,246	$542.55	537,488
Michigan	$5,488,476,066	$546.03	509,788
Tennessee	$3,942,381,489	$564.32	372,500
Arizona	$3,813,769,244	$524.72	325,868
New Jersey	$3,669,825,896	$396.01	343,018
Virginia	$3,654,968,769	$422.17	331,499
Louisiana	$3,483,011,621	$753.73	329,464
Indiana	$3,465,090,635	$508.69	317,271
Alabama	$3,298,573,345	$652.63	312,509
South Carolina	$3,171,156,723	$608.34	289,916
Missouri	$3,112,352,627	$504.58	307,748
Kentucky	$3,074,362,542	$681.57	289,694
Massachusetts	$3,022,624,611	$432.27	298,893
Washington	$2,961,360,328	$382.56	275,446
Oklahoma	$2,482,808,368	$621.44	227,110
Maryland	$2,479,179,167	$401.76	220,848
Wisconsin	$2,477,475,585	$420.48	246,377
Colorado	$2,348,106,492	$404.10	210,248
Mississippi	$2,341,319,924	$793.28	218,010
Minnesota	$2,042,361,857	$357.45	205,570
Oregon	$1,979,543,462	$467.02	190,419
Arkansas	$1,963,917,073	$647.59	189,809
Nevada	$1,664,073,405	$529.79	142,946
Connecticut	$1,554,699,690	$432.06	144,867
New Mexico	$1,472,476,815	$696.28	138,332
Iowa	$1,444,320,891	$451.92	140,178
Kansas	$1,394,899,517	$474.85	131,739
West Virginia	$1,242,770,474	$696.44	121,901
Utah	$1,071,849,227	$321.76	94,327
Nebraska	$806,337,527	$410.16	81,348
Idaho	$732,766,597	$387.03	69,183
Hawaii	$627,510,580	$434.07	48,899
Maine	$568,495,447	$412.73	63,269
Montana	$506,699,776	$458.52	50,764
District of Columbia	$503,804,437	$749.62	40,961
Rhode Island	$499,944,707	$456.42	49,682
Delaware	$437,231,264	$434.68	38,714
South Dakota	$408,104,275	$453.86	37,611
New Hampshire	$388,590,676	$280.00	41,093
North Dakota	$359,985,008	$461.90	35,831
Alaska	$337,041,950	$459.20	24,983
Vermont	$280,263,620	$434.35	28,707
Wyoming	$262,716,316	$453.15	26,480

Unsurprisingly, the states that would need the most money to end poverty are the states with the largest populations. There is a huge dropoff between Florida and Ohio both in terms of the amount of money needed to end poverty and their population. 

Among the states that would need between $1 billion and $10 billion, Louisiana and Mississippi stand out as the only states whose per capita amount needed to end poverty is over $700. Washington D.C. is the only other place with a per capita amount this high, but naturally the population there is significantly smaller. 

If we actually wanted to go down this path as a country, we’d be looking at a price tag of $1.7 trillion over the next 10 years. While this is a ton of money, it’s not impossible for the federal government to raise this type of revenue. If you wanted to do it without raising the deficit, there are programs we could cut in favor of this massive cash transfer.

Every year, the Congressional Budget Office releases a handful of options that could lower the deficit. There are certainly things that could be cut if lawmakers decided this was more important. 

One option would be to eliminate state and local tax deductions. This would save about $1.6 trillion over the next 10 years. Another option that would get you there would be to impose a new payroll tax between 1% and 2%. This is not to suggest that these particular tradeoffs would be good or bad, it’s just to highlight that eliminating poverty over the next 10 years is not just some pipe dream, it’s a real tangible policy option.

I must note at this point that there are some important limitations to this analysis. First off, while the American Community Survey does an amazing job trying to account for sampling errors, it is still just a survey. One particular group that I imagine is being under reported is people experiencing homelessness (the American Community Survey does survey some homeless people who are currently sheltered, but this is certainly a gap). 

Another issue is that the variable I was using to approximate household size does not always equal the household size that would be used to determine a household’s poverty threshold. From the variable description, the variable I used “reports the number of person records that are included in the sampled unit. These person records all have the same serial number as the household record. The information contained in the household record usually applies to all these persons.”

Despite these limitations, it is interesting to see just how far away we are from living in a world with zero poverty. I should also note that the federal poverty line is not the only measure of social wellbeing we should care about. Lifting everyone out of poverty would not solve every single issue in our country. However, it would solve the problem of people living in poverty, and that is worth something.

CBO: Climate Change will reduce GDP by 6% by the end of the century

Last month, the Congressional Budget Office published a working paper entitled “The Effects of Climate Change on GDP in the 21st Century.” Using historical data, analysts at CBO projected the impact of climate change on The United States' gross domestic product (GDP) in 2100. 

Their findings track with three scenarios: the worst, the less bad, and the silver lining.At its worst, climate change will result in a GDP 21% lower than it would’ve been had global temperatures held steady after the year 2024. Less bad was CBO’s average prediction of a less drastic 6% decrease in GDP relative to historical trends. The silver lining predicted by CBO’s model was the 5% chance of a 6% or greater increase in GDP.

Examples of Climate Change Impacting Economic Growth

In day-to-day life, a 6% reduction in US GDP because of climate change may come from impacts like slower productivity for workers in outdoor occupations like construction who battle the rising temperatures. More workers may miss work due to heat-related medical conditions. Air-conditioners fighting off rising temperatures outside will strain an already overburdened power grid. Businesses must pay higher energy bills, crowding out more productive uses of their resources.

Another cost to the economy from climate change comes from natural disasters. According to the National Centers for Environmental Information, the US sustained 27 climate disasters in 2024 causing losses exceeding $1 billion. The weather events which caused this damage included one drought, one flood, 17 severe storms, five tropical cyclones, one wildfire, and two winter storms.

Figure 1: The United States had 27 weather events costing $1 billion or more in 2024

Long-term, the model’s 21% predicted reduction would have colossal implications. When less money circulates in the economy, the government receives less revenue in taxes. This will result in budget deficits, tax increases, or both, as the government tries to make up for the losses. This could have stronger impacts on budgets in southern states, which some experts project will bear the brunt of the impact of climate change.

With a smaller economic base available to fund the government, there is less money to fund social services like SNAP, rental assistance, Medicare and Medicaid. It could also impact the ability of state and local governments to fund K-12 education, which could have compounding impacts on local economies for decades to come.

All of these factors necessitate targeted, efficient, and effective interventions in the immediate future. 

What does this mean for policymakers, businesses, and citizens?

CBO’s findings confirm, in part, what we have always known: climate change is unpredictable. The National Centers for Environmental Information published the following chart which tallies the rising costs of extreme weather events in the US over time. From 1980 to 2024, the costs associated with severe weather events appear to be rising exponentially. 

Figure 2: Severe weather events have risen in the United States since the 1980s.

Both preventative measures like carbon abatement and adaptive measures like building a healthy reserve fund can help states combat the oncoming volatility brought about by climate change.

Next Steps - What Can States Do?

To effectively address the economic impacts of climate change, states can take steps to prevent and adapt to climate change. Below are four examples.

1. Renewable Portfolio Standards - These policies require a defined share of electricity be generated from renewable sources like solar, water, or wind power. Most of these programs apply to electricity, though some include heating fuels and energy-efficient appliances.

2. Cap-and-Trade - This system sets increasingly strict limits on the amount of pollution one entity can produce. Companies with excess allowances can sell the credits to companies in need of more. This produces an incentive system to reduce excess pollution.

3. Carbon Taxes - This tax incentivizes companies to reduce CO₂ emissions by taxing them per ton of CO₂ emitted.

4. Budget Stabilization Funds - These “rainy day” funds are set aside by governments during relatively good economic times to cover budget shortfalls during lean seasons. These funds can stabilize public services by avoiding sudden tax hikes or spending cuts.

Each of these strategies can help states slow climate change and deal with the economic problems that will come from it. The best action states can take now is to manage the risk of increasing climate disasters and do their best to plan for the long-term economic problems it will create. 

Minnesota Child Tax Credit generates over $930 million in annual net benefits

A cost-benefit analysis released today by Scioto Analysis finds that Minnesota's Child Tax Credit is projected to generate over $930 million in present benefits to the state. Minnesota’s Child Tax Credit is one of the most generous state Child Tax Credits in the country, providing $1,750 in benefits to low-income families with qualifying children. 

“Child tax credits do so much more than just giving resources to families that need them, they are significant investments in the future state economy” said policy analyst Michael Hartnett. “the decreased pressure on the social safety net going forward more than pays for the upfront costs of this program.”

Key Findings:

• Increased Future Earnings: The largest benefit, estimated at $670 million, comes from projected increases in the future earnings of children receiving the tax credit. The added resources from the tax credit support better educational opportunities and health outcomes, leading to higher lifetime earnings.

• Crime Reduction: The tax credit is expected to prevent over $460 million in future criminal justice and victim costs by reducing the likelihood of future crime. This benefit accrues to the whole state, meaning that even those who don’t receive the tax transfer still experience long term gains.

• Excess tax burden: Funding the program to make up lost tax revenue costs the state economy around $180 million.

A Monte Carlo simulation of all the possible outcomes finds that about 86% of the time, the child tax credit will have benefits that outweigh costs. The range of likely outcomes is heavily right-skewed, meaning that there are more extreme positive outcomes than there are extreme negative outcomes. High-end estimates of the value of the child tax credit reach $2 billion in annual net benefits.

Ohio public school spending is economic development

This year’s budget debates have focused heavily on the future of education funding. 

Early in the budget cycle, Ohio House Speaker Matt Huffman came out strong for K-12 budget cuts, saying the current education budget in Ohio is “unsustainable.” The governor’s budget has come under some fire from education advocates for shifting resources away from public schools.

Some in the public have debated whether education funding creates benefits for students or whether it is just wasted by administrative spending in school districts. A couple of years ago, a working paper tackling this question was circulating through academic circles.

Finally published last year in the American Economic Journal, this study was a comprehensive meta-analysis of impacts of school spending on student outcomes. They found when school spending increases by $1,000 per pupil for four years, test scores increase by 0.0316 standard deviations and college matriculation increases by 2.8 percentage points.

Okay, so school spending does help students test better and go to college more often. But is this worth it? This is a question my firm asked in 2023. We conducted a cost-benefit analysis to see whether this increased spending would pay off for the state as a whole.

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The general model looks like this: if a student is at a school with more resources, they will have higher test scores and a higher chance to go to college. Both of these will lead to higher future wages for that student. These wages and the reduced social spending on that student in the future due to higher wages will both increase the size of the state economy. If schools have less resources, students will test worse, go to college less, make less over their lifetime, and the public will spend more money supporting them with social spending down the road.

To analyze what Ohio would look like under different scenarios, we compared Ohio’s current spending (about $14,000 per pupil at the time) to a decrease in per-pupil spending that would put Ohio at about Indiana’s per-pupil spending (about $10,000 per pupil). We also compared an increase to per-pupil spending at Pennsylvania levels (about $16,000 per pupil).

Overall, we found that increased school spending paid off for the state. Conservative simulations of increases in per-pupil spending to Pennsylvania levels put wage and social savings benefits of spending increases outweighing the costs of spending by $23 billion. On the other hand, reducing spending to Indiana levels led to decreases in wages and social spending outweighing savings from the program by at least $30 billion.

Overall, the analysis is clear: from a long-term perspective, increases in school spending within standard limits of what we have seen in the United States lead to economic benefits that outweigh costs. Decreases in school spending lead to economic development costs that outweigh savings benefits. We studied these over a range of discount rates, too, finding that even very short-sighted policymakers should not favor spending cuts if they care at all about future economic development.

To put it short, school spending is an investment. And according to the evidence we have available, it is an investment that will pay off for Ohio.

This commentary first appeared in the Ohio Capital Journal.

Rising housing prices make renters hit the bottle

Last month, the National Bureau of Economic Research published a new working paper examining the relationship between housing expense inflation and household alcohol and tobacco purchases. The researchers used county-level changes in housing regulations to identify how exposed certain groups of renters and homeowners were to the high rates of housing price inflation during the pandemic.

They found that in counties with more stringent housing regulations and greater exposure to housing inflation, renters increased their beer consumption by approximately 15.2% relative to homeowners with lax regulations and less housing inflation when comparing 2022 to 2019. This increase is particularly noteworthy because one might expect that households facing increased housing costs would reduce spending on non-essential items like alcohol due to constrained disposable income.

Instead, the researchers suggest that these increases in beer consumption may be due to the use of alcohol as a coping mechanism for the added financial stress caused by rising housing expenses. They also observed that the increase in spending was primarily on low-cost beer, rather than on wine or liquor. This observation further supports the idea that renters might be turning to more affordable options as a way to manage their financial burdens.

To conduct this research, the authors used a difference-in-difference-in-difference approach. This method compared changes in alcohol and tobacco purchases between renters and homeowners, before and after the housing expense surge, across counties with varying levels of housing regulation. The housing regulation index was constructed using data from the Wharton Residential Land Use Regulation Index.

This approach lets the researchers compare between renters and homeowners across counties. They choose to separate renters from homeowners because renters more regularly enter into new housing contracts, and homeowners are relatively insulated from the increase in housing inflation. They still experienced inflation in the prices of other goods, but people with fixed rate mortgages before the pandemic would have experienced much lower housing cost increases.

This paper offers new insights in a few important ways. First, it looks at how high inflation after the COVID-19 pandemic has impacted people's health habits, especially alcohol and tobacco use. Second, it explores the two-way relationship between financial struggles and substance use by examining how local housing regulations affect housing costs. Finally, it sheds light on how local housing regulations impact the housing market and the financial decisions of households.

The research also highlights the importance of considering the broader public health implications of housing policies. By demonstrating a link between housing affordability, financial stress, and alcohol consumption, the study suggests that addressing housing market supply constraints could not only alleviate high housing costs but also improve household financial security and influence health-related behaviors. The negative impacts of alcohol consumption are well established, and this research underscores the need for policymakers to consider the unintended consequences of housing policies on public health.

This study shows how seemingly disparate aspects of public policy can be intertwined. Housing policy is health policy. These researchers have shown how economic pressures can influence health-related behaviors and how housing policies can be a tool to address public health concerns. This study serves as a reminder of the far-reaching effects of economic stress and the need for policies that support both affordability and well-being.

Intern Perspective: What’s it like to do a cost-benefit analysis?

Over the course of the last several weeks, I’ve had the privilege of interning with Scioto Analysis to conduct a cost-benefit analysis on wildlife crossings, specific infrastructure built to reduce wildlife-vehicle collisions on major roadways. I’ve always been interested in policy analysis, and I was excited at the opportunity to use some of the skills and tools I’ve learned in my coursework in a real-world setting. 

Wildlife crossings, also known as eco-bridges, are overpasses, underpasses, or tunnels that connect two sides of the same habitat to each other. When roadways were originally built in the United States, a lot of habitats and animal migration patterns were disconnected. Wildlife crossings can help animals successfully migrate throughout their habitat once again, leading to a reduction in collisions and improvements in ecosystems. 

Currently, there are a lot of federal, state, and local initiatives to build more wildlife crossings across the United States. Wildlife crossings have proven to be incredibly effective, reducing collisions by up to 90% in certain areas. With that in mind, we weren’t sure if the price tag of building wildlife crossings was worth the benefits they brought. This was a big part of our motivation in writing the cost-benefit analysis about wildlife crossings.

Like many others, I’d heard the term “cost-benefit analysis” thrown around in a lot of contexts prior to this internship, but I didn’t know all of the intricacies that went into conducting a formal cost-benefit analysis until starting this project. 

In the wildlife crossings cost-benefit analysis, we had different goals for each week of the project, and the sequence of those goals was very intuitive. We started off at a high level, researching current literature and brainstorming ways that wildlife crossings could benefit or harm society. After establishing a base of research and ideas, we got into the weeds of the project where we estimated the magnitude of impacts of crossings, monetized those impacts, discounted impacts to present-day values, and performed sensitivity analysis to estimate the precision of our estimates. Finally, we moved into the drafting stage, where we were translated all of the analysis and research we had done into a digestible format.

Because the work was so clearly split into different weeks, it was clear to me when we had a week of work that I excelled at or struggled with. I found myself really thriving during the weeks of analysis and quantitative work. It was exciting to see the research we had performed come to life in estimates, charts, and Excel sheets. Even though this was the more low-level and analytical component of the project, I still had the opportunity to be creative, too. Adjusting our inputs and assumptions to analyze different case scenarios of wildlife crossings was a lot of fun, and it helped us to draw interesting conclusions and inferences about this interesting infrastructure innovation. 

On the other hand, the weeks that were more challenging for me were the high-level brainstorming and ideas stages. It was difficult to start from nothing and create my own roadmap for a cost-benefit analysis. However, I found that using existing literature on wildlife crossings and even other cost-benefit analyses across different subjects helped me find more ideas and stay on track. 

One of our biggest priorities during the wildlife crossings cost-benefit analysis was to find a way to quantify and monetize ecosystem services, which is the term in economics for benefits communities get from healthy ecosystems. Literature on monetizing ecosystem services is a lot more scarce than other impacts in the cost-benefit analysis world, and it was pretty unfamiliar territory for me. It was a learning experience to research and analyze the impacts that wildlife crossings had on ecosystems. Diving headfirst into wildlife crossings and ecosystem services was a great way to become an expert in a new topic fast, and conducting analysis on a topic I had never researched before was a great way to make sure I was being thorough and precise with my research and analysis, not making any jumps of logic or spurious assumptions.

My biggest takeaway from the project is the importance of taking the time to ensure a strong foundation of research, evidence, and analysis. I found I was able to be much more successful and efficient not by taking shortcuts but by staying organized. During the drafting stage of the cost-benefit analysis, I noticed that I made a big oversight in the calculation of some of our estimates. Fortunately, I prepared myself well by having all of my impacts and analysis organized and easily adjustable. What seemed like a big problem ended up being a ten minute fix.  

Ultimately, we found that just one wildlife crossing can yield $13.8 million in net benefits over the course of a 70 year lifespan. For every $1 in social costs created, another $10 would be created in social benefits. We were able to make a lot of valuable conclusions about the impacts of wildlife crossings on topics varying from ecosystem services to human life. 

Reaching these kinds of results and conclusions was a very rewarding experience, and I find myself excited to work on another cost-benefit analysis in the future. I enjoyed getting the opportunity to read and research different literature, reports, and news stories, and I especially liked performing analysis on information that I slowly built up over the course of several weeks. If you find yourself researching political, economic, or social phenomenons in your free time, or you enjoy conducting analysis, drawing interesting inferences, or seeing hard work come to fruition in a meaningful project, I would definitely recommend trying to get involved with the cost-benefit analysis world! It can be incredibly satisfying to see your work and analysis turn into something impactful.

Jacob Strang is a policy analysis intern at Scioto Analysis and a third-year economics and political science student at Ohio State University.

Scioto Analysis releases cost-benefit analysis of wildlife crossings

This morning, Scioto Analysis published a cost-benefit analysis about the impacts of building wildlife crossings in areas with high amounts of wildlife-vehicle collisions. Using conservative estimates, we estimate that a strategically-located wildlife crossing would provide $14 million in net benefits over the lifespan of the structure. This would come about by preventing 60 injuries, one fewer passenger fatality, and 1,200 fewer wildlife deaths.

Wildlife-vehicle collisions currently pose a large risk to humans, animals, and the environment. Each year, one to two million crashes occur between vehicles and wildlife in the United States, causing an estimated 200 passenger fatalities, 26,000 injuries, and more than $8 billion in economic costs including vehicle damage and medical expenses. However, wildlife crossings, which are bridges, tunnels, culverts, fencing, and other infrastructure that allows animals to safely cross roadways, have shown to significantly reduce wildlife-vehicle collisions. 

Across wildlife crossing projects in Washington and Colorado, wildlife crossings have been observed to decrease collisions by more than 90%. By targeting high collision areas over a 70-year lifespan, we estimate that one strategically-placed wildlife crossing can produce the following from reducing collisions:

• $7.5 million in prevented passenger fatalities

• $2.5 million lower medical expenses

• $1.6 million in prevented vehicle damage

• $1.5 million in animal lives saved

Beyond benefits from reduced collisions, we also estimate that one wildlife crossing would result in $2.1 million in improved ecosystem services. By enabling animals to cross roadways safely, wildlife crossings can improve habitat connectivity. Large mammals such as deer, elk, and moose can return to their regular migratory patterns that were interrupted by road construction, which improves biodiversity and ecosystem strength.

We conducted 10,000 simulations of wildlife crossings with different variables and costs to test our model. We find that the benefits outweigh the costs of building a wildlife crossing in a strategic location in 99.7% of instances. In the middle 90% of our simulations, net social benefits are between $11 million and $147 million. Wildlife crossings can be a valuable, and in many cases, a low-cost infrastructure project for state and local governments to carry out to improve the safety and environmental well-being of their communities.

Scioto Analysis also made a calculator available for policymakers and planners interested in estimating the effects of wildlife crossings in their communities. The calculator is free for download here.

What would design changes do to Ohio’s Child Tax Credit?

Earlier this week, my colleague Rob Moore testified before the Ohio House about our recent memo looking at the potential impacts of Ohio’s new Child Tax Credit proposal. During this testimony, he was asked two questions by state lawmakers. The first was what the impact of removing the program’s proposed phase-in would be. The second was what the impact of changing the amount of the credit would be. 

We love talking about active policy proposals and giving people more information to make smart decisions with, so we decided to take a stab at answering these two questions. 

What if we relaxed the phase-in?

Many policies have phase-in and phase-out schedules that can help soften any potential labor market impacts. This is especially important for the phase-out, because otherwise you create a benefits cliff where people can actually lower their total income by increasing their earnings in the labor market. 

On the phase-in side, the opposite effect occurs where the marginal impact of increasing earnings in the labor market is increased, since low-income workers can simultaneously increase their wages and their benefits.

The obvious difference between phase-in and phase-outs is that people on the phase-in part of the income distribution are in more need of money. In its current form, families whose total income is less than $22,500 would not earn the full amount of the credit. That is $1,000 above the federal poverty line for a family of two.

Our current model estimates that families in the first income quintile would receive an average benefit of just under $650 per qualifying child. Removing the phase-in would increase the average per-child benefit by over 50%. 

One limitation of our model is that we assume that benefits accrue to an “average” recipient, so these increased payments only have a linear impact on our estimated outcome. However, it is reasonable to expect that because this money is going to the people who need it the most, it would have a larger marginal impact. 

We expect that removing the phase-in would result in an additional $87 million going to families in the first income quintile. This is almost a 20% increase in the expected cost of the program, but it could lead to large returns for the state in the long run.

What happens if we change the benefit amount?

As mentioned above, our model assumes that most of the outcomes have a linear relationship with the size of the credit. That means if you increase the size of the credit by 50%, you would see a 50% increase in the costs and the benefits. 

The most notable exception to this is the added administrative costs associated with this program. It will take some overhead from the state to make sure that this credit actually ends up with the people who qualify for it. 

However, these administrative costs are orders of magnitude smaller than the other costs and benefits due to the low cost of managing tax benefits, so administrative costs are not significant when the credit amount changes. Technically there are economies of scale at play, and it would be less efficient to increase the proportion of fixed costs by offering a lower amount, but these are negligible. 

What would change with the credit prices is how effective this program is at improving outcomes for low- to middle-income families. As it currently stands, the Child Tax Credit would generate over $700 million worth of value for the state, and families would be able to pay for a couple of months worth of groceries with it. 

Decreasing the benefit amount to $500 would lead to $350 million of benefits compared to the status quo of no credit, and it would reduce the average benefit per child from $815 down to $407. On the other hand, increasing it to $1,500 would lead to over $1.4 billion in benefits for the state compared to the status quo, and it would increase the average per-child benefit to $1,223.

There are many options for policymakers interested in tweaking the state child tax credit. What our model tells us is this: relaxing the phase-in would deliver more benefits to low-income households, decreasing the benefit amount would decrease (but notably not eliminate) overall benefits, and increasing the benefit amount would increase overall benefits.

Scioto Analysis Principal Rob Moore Testifies at Ohio House Committee on Child Tax Credit

Yesterday, Scioto Analysis Principal Rob Moore testified before the Ohio House Ways and Means Committee on a new child tax credit for the state of Ohio.

According to the cost-benefit analyses conducted by Scioto Analysis, the proposed child tax credit is estimated to yield more than $700 million in long-term benefits.

Children raised in poverty frequently suffer from food and housing insecurity, have higher rates of physical and mental health issues, and have higher chances of working low-wage jobs. This child tax credit is estimated to lead to $500 million in higher future wages for the children of recipient families.

Additionally, the proposed child tax credit is projected to save the state $190 million in preventable crime. With more financial stability, families are less likely to incur child protection expenditures, a savings for Ohio to the tune of $120 million. The state is also predicted to save $65 million on future healthcare spending as moving people out of poverty can increase their health outcomes. 

Overall, each $1 spent on the earned income child tax credit is predicted to create $6.64 in social benefit. This short-term expenditure proposed in this budget is likely to have significant long-term benefits for the recipient children. 

These estimates are conservative, though 90% of 10,000 simulations saw a net positive social impact. On the higher end, the estimated benefit of this tax credit is roughly $2 billion. 

HB96, the budget bill that includes the tax credit, has been introduced to the Ohio House of Representatives and is currently within the Ohio House Finance Committee. The bill will need to pass through the House, be introduced and passed in the Senate, and signed by Governor DeWine before it can be enacted.

If the bill passes, eligible recipients should expect to receive their benefits after filing taxes in 2026. 

You can download Rob’s full testimony here and view the hearing at minute 36:27 here. 
You can read Scioto Analysis’ full memo results here.