State Fiscal Highlights
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STATE FUND |
FY 2010 |
FY 2011 |
FUTURE YEARS |
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General Revenue Fund, Local Government Fund, and Public Library Fund |
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Revenues |
Potential annual gain from recaptured grant funds |
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Expenditures |
- 0 - |
- 0 - |
- 0 - |
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Grants for Grads Fund (New Fund) |
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Revenues |
Gain from appropriations and other sources of revenue to be determined |
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Expenditures |
Approximately $2.3 million in grants annually |
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Ohio Housing Finance Agency Operating Expenses Fund (Fund 5AZ0) |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Potential minimal increase for additional payroll costs annually |
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Other Ohio Housing Finance Agency Administrative Accounts |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Potential minimal increase for additional administrative costs annually |
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Note: The state fiscal year is July 1 through June 30. For example, FY 2010 is July 1, 2009 – June 30, 2010. |
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· The bill creates the Grants for Grads Fund in the Ohio Housing Finance Agency (OHFA) to disburse down payment and closing cost assistance grants to college graduates who purchase their first home in Ohio.
· The Grants for Grads Fund could disburse up to approximately $2.3 million in grants in each fiscal year under the program.
· OHFA may incur additional payroll expenses from the OHFA Operating Expenses Fund (Fund 5AZ0) and additional administrative costs from other nonappropriated agency accounts to administer the Grants for Grads Program.
· The GRF, Local Government Fund, and Public Library Fund may experience a gain in revenues from grant funds recaptured from ineligible or noncompliant grantees.
Local Fiscal Highlights
· No direct fiscal effect on political subdivisions.
Detailed Fiscal Analysis
Grants for Grads Program
The bill creates the Grants for Grads Program, to be operated by the Ohio Housing Finance Agency (OHFA). The program is to provide grants toward down payments and closing costs on the first home purchased in Ohio by a graduate who has earned an associate, bachelor's, master's, doctoral, or other postgraduate degree. The bill requires applicants to purchase a first home in Ohio with the intent to live and work in the state for at least five years after graduation. Eligible graduates must apply for the program within 60 days of graduation.
Grants for Grads Fund
The bill creates in the state treasury the Grants for Grads Fund, to consist of all appropriations, grants, gifts, and contributions made from any source to OHFA for deposit in the fund. The bill specifies that moneys in the fund are to be invested by the Treasurer of State in the same manner as moneys in the GRF, and that all investment earnings of the fund are to be credited to the fund.
Awarding of grants
Under the bill, OHFA would award grants through a random lottery drawing that is to take place by January 31 of each calendar year, consisting of applicants who applied during the previous calendar year. The bill requires OHFA to pick 300 grantees to receive grant awards, as well as 100 alternate grantees who would receive awards if additional funding is available after the first 300 grants have been awarded. If there are less than 300 applicants in a given year, the bill specifies that the lottery is to be dispensed with and all eligible applicants are to receive grants. Grant amounts would be based on the type of degree earned by a graduate according to the schedule shown in Table 1.
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Table 1. Grant Amount by Type of Degree Earned |
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Degree Earned |
Amount of Grant |
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Associate |
$2,500 |
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Bachelor's |
$5,000 |
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Master's, doctorate, or other postgraduate degree |
$10,000 |
The bill requires grants to be awarded as a cash payment when the grantee obtains a mortgage loan, and requires that the grant must be applied in full to pay all or a portion of the down payment or closing costs on the purchase of a first home. The bill prohibits a grantee from receiving any cash back at the time of closing in the event that the amount of a grant is larger than the eligible down payment or closing costs. The bill provides for the expiration of grants if they are unused after one year.
Estimate of grant expenditures
According to the Ohio Board of Regents, Ohio's public institutions of higher education awarded an estimated 74,202 degrees in FY 2008. The Association of Independent Colleges and Universities of Ohio reports that its member institutions, consisting of private colleges and universities in the state, awarded 30,455 degrees in FY 2008. Between these estimates for public and private institutions, the total number of degrees awarded in FY 2008 is 104,657. Of this total, 20,646 (19.7%) were associate degrees, 57,934 (55.3%) were bachelor's degrees, and 26,077 (24.9%) were master's, doctorate, or other graduate and professional degrees.
Assuming that graduates apply to the Grants for Grads Program and are eligible for funding in approximately the same proportions as they receive their degrees, Table 2 provides a rough estimate of the number of grants that could be awarded at each of the three levels specified in the bill.
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Table 2. Estimated Grants for Grads Awards at FY 2008 Graduation Levels |
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Degree |
Individual Grant Amount |
Estimated Percentage of Awards* |
Estimated Number of Awards |
Estimated Total Awarded |
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Primary grantees (300) |
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Associate |
$2,500 |
19.7% |
59 |
$147,500 |
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Bachelor's |
$5,000 |
55.3% |
166 |
$830,000 |
|
Graduate/Postgraduate |
$10,000 |
24.9% |
75 |
$750,000 |
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Subtotal – Primary Grantees |
- |
100.0% |
300 |
$1,727,500 |
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Alternate grantees (100, assuming availability of funding) |
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Associate |
$2,500 |
19.7% |
20 |
$50,000 |
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Bachelor's |
$5,000 |
55.3% |
55 |
$275,000 |
|
Graduate/Postgraduate |
$10,000 |
24.9% |
25 |
$250,000 |
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Subtotal – Alternate Grantees |
- |
100.0% |
100 |
$575,000 |
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Grand Total |
- |
- |
400 |
$2,302,500 |
* Percentages may not total exactly 100% due to rounding.
If 300 primary grantees are awarded grants at the estimated proportions above, OHFA could incur grant expenditures from the Grants for Grads Fund of approximately $1.7 million in each fiscal year under the program. Assuming that funds are available for awards to the 100 alternate grantees chosen in the lottery, up to an additional $575,000 could be awarded. This would constitute a total of approximately $2.3 million awarded annually for down payment assistance and closing costs under the Grants for Grads Program.
LSC's estimate of expenditures under the program assumes consistent graduation rates and an equal likelihood for graduates at each degree level to purchase a home. Actual expenditures would likely be influenced by a number of factors, including the actual rates at which recipients of each type of degree apply for the program and meet all eligibility requirements, as well as the overall employment and housing markets in Ohio, which may influence the likelihood of graduates to remain in the state and purchase a first home.
Recapture of grant funds
The bill provides that the state may recapture grant funds awarded under the program if OHFA deems that a grantee is failing to comply with program criteria, is fraudulently participating in the program, or moves to another state within five years of purchasing the first home for which grant funds were used toward the down payment or closing costs. The bill requires that under the first two circumstances, the grantee's state income tax liability for the applicable taxable period is to be increased by any amount necessary for the state to recapture the amount of the grant award. In the third case, that of moving out of state, the increase of a grantee's income tax liability is subject to the following schedule, as shown in Table 3. The bill does not require the recapture of grant funds if a grantee moves to another residence in Ohio within the five-year period after receiving the grant.
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Table 3. Grant Recapture Requirements by Duration of Grantee Residence |
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Months Resided in First Home |
Percentage Recaptured |
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Less than 12 months |
100% |
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12 months and 1 day to 24 months |
80% |
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24 months and 1 day to 36 months |
60% |
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36 months and 1 day to 48 months |
40% |
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48 months and 1 day to 60 months |
20% |
The bill does not specify how recaptured funds are to be collected or deposited. As the recapture of grants under the bill is based on applying them to a grantee's income tax liability, presumably they would be distributed in accordance with the state's statutory formula for income tax revenue. Currently, 94.1% of income tax receipts are distributed to the GRF, 3.68% are distributed to the Local Government Fund, and 2.22% are distributed to the Public Library Fund.
Administrative costs
It is possible that OHFA would incur increased administrative costs to its Homeownership Office for the operation of the Grants for Grads Program. Any additional payroll expenses would be paid from line item 997601, Ohio Housing Finance Agency Personal Services, in the OHFA Operating Expenses Fund (Fund 5AZ0). This fund is capitalized by a portion of OHFA's revenue from various fees and charges it collects for the administration of its homeownership programs and multifamily housing programs. FY 2009 appropriations for this line item are approximately $10.2 million.
The bill requires OHFA to prepare an annual report on the Grants for Grads Program for submission to the Governor, Director of Development, Chancellor of the Board of Regents, President of the Senate, and Speaker of the House. The report is required to include information on the activities of the program, including the number and dollar amount of grants awarded. The costs associated with the publication of this report, as well as other nonpayroll administrative expenses associated with the program, including reviewing grant applications, conducting the award lottery, and monitoring program compliance, would be paid out of other OHFA accounts that are not supported by state appropriations.
