Budget Testimony — Executive Director Paul M. Nick, Ohio Ethics Commission (February 19, 2025)

Summary

Budget testimony of Paul M. Nick, Executive Director of the Ohio Ethics Commission, to the Ohio House of Representatives Development Committee on February 19, 2025, on the Main Operating Budget for FY26-FY27. The testimony states that the Commission has operated with 19 total staff, below a staffing ceiling of 21 full-time equivalents. It says that under the Administration's budget recommendation the Commission's Dedicated Purpose Fund will essentially be depleted by the end of FY27, and that the Controlling Board granted $117,225 in additional DPF appropriations. It requests additional GRF funding totaling $239,886 over the biennium.

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Merom Brachman, Chairman                                                         OHIO ETHICS COMMISSION
Mark A. Vander Laan, Vice Chairman                                                     William Green Building
Bruce E. Bailey                                                                      30 West Spring Street, L3
Megan C. Kelley                                                                    Columbus, Ohio 43215-2256
Mary M. Ross-Dolen                                                                   Telephone: (614) 466-7090
Elizabeth E. Tracy                                                                         Fax: (614) 466-8368

Paul M. Nick                                                                                www.ethics.ohio.gov
  Executive Director


                       Ohio House of Representatives – Development Committee
                                         February 19, 2025

                          H.B. No. 96: Main Operating Budget for FY26-FY27
                          Budget Testimony of Executive Director Paul M. Nick


Chairman Hoops, Ranking Member Abdullahi, and members of the Committee, my name is Paul Nick. I
am the Executive Director of the Ohio Ethics Commission, and I appreciate the opportunity to testify
before you about the Administration’s budget recommendation for the Commission for the 2026 to 2027
biennium.

OVERVIEW OF THE COMMISSION

The General Assembly has assigned to the Ethics Commission authority over the approximately 18,700
elected officials and 590,000 public employees across Ohio at all levels of local and state government,
from villages and townships to cities and counties; all officials and employees of each of the public
schools, colleges, and universities in Ohio; each of the constitutionally elected, statewide officeholders
and their staff; and the appointed members and staff of all Ohio boards and commissions.

In addition to these public officials and employees, the Commission also has authority over individuals in
the private and non-profit sectors who are expected to comply with the Ethics Law in doing business with
or being regulated by public agencies throughout Ohio, to avoid potential conflicts of interest and
maintain public accountability.

DUTIES AND RESPONSIBILITIES

The Commission has five main responsibilities: rendering advice and guidance; providing education
sessions; conducting confidential investigations; assisting the General Assembly on ethics-related
legislation; and administering and enforcing the financial disclosure requirement.

Advice: The Commission employs three staff attorneys who collectively handled the 147 written
advisory opinions received by the Commission in 2024. (This number is in addition to the immediate
guidance provided in response to over 1,500 e-mails and telephone calls the Commission received last
year.) Each of these written requests was answered within 30-45 days of their receipt, and in most
instances, much sooner. The median response time for opinion requests was 19 days. The Commission
provides timely legal advice, helpful to public officials and their counsel, at no cost to the requester. In
2024, 18% of the requests were from state officials or employees, and the remaining 82% were from
counties, cities, townships, villages, school districts, and other local government agencies.

Education: The Commission believes that both advice and education help to ensure compliance with the
Ethics Law and to avoid a “gotcha” style enforcement. The Education program has two staff members –
an administrator and one technology-based trainer. In calendar year 2024, more than 58,000 public

                            Promoting Government Ethics in Ohio since 1974
H.B. No. 96 – Ohio Ethics Commission
February 19, 2025

officials and employees from state and local government completed a one hour, online Ethics course and
nearly 7,000 participated in one of the Commission’s webinars. The Commission has also produced
several shorter, on demand e-courses covering specific topics of interest to all public officials and
employees, such as nepotism, revolving door, job seeking, filing financial disclosure statements, and
gifts. We conducted 204 in person educational sessions that reached nearly 20,000 people, including
state, county, and city agencies, public sector associations, and groups of public and private sector
organizations.

Investigation: The Commission’s Investigation program ensures uniform, statewide enforcement of the
criminal provisions of the Ethics Law by investigating alleged violations and referring matters for
criminal prosecution when the facts merit it. This oversight helps fight occurrences of misuse of tax
dollars often coming to light among the hundreds of requests that come to the Commission covering
various sectors of government.

In 2024, the Commission employed three attorneys (one the Chief of the section), four special
investigators, and a case management specialist who received and reviewed the 960 allegation inquiries
we received and carried a docket of 174 active investigations. The Commission also closed 96 cases last
year. Of the newly opened cases in 2024, 85% involved public officials and employees at the local level
and 13% involved allegations against state officials or employees and members of the private sector. In
addition, from 2023 to 2024, the Commission initiated 15 formal complaints against persons who failed
to comply with the financial disclosure requirement (less than 0.5% of the total number of filers). Of
these 15 complaints, 10 were referred for criminal prosecution due to noncompliance.

In conducting these investigations, the Commission frequently partners with the special prosecution units
at the Ohio Attorney General and the Ohio Auditor of State, as well as other local and federal
investigators and prosecutors.

Legislation: The Commission has responded to several recent legislative efforts during the past few
years. Of note, the Commission worked directly with former Speaker Cupp on an amendment to S.B.
288. This amendment to section 102.99 of the Ethics Law enhances penalties for private sector vendors
convicted of promising or giving anything of value to any public official or employee that could
improperly influence them in the performance of their public duties. Now, if convicted, in addition to the
standard penalties for a first-degree misdemeanor, these vendors can be debarred from participating in
any public contract, at the state or local level, for a period of 2 years. The sentencing court may also
impose an additional fine equal to the amount of the things of value improperly provided and may also
assess against the vendor the Commission’s costs of investigation.

Financial Disclosure: The Ethics Law requires approximately 10,000 public officials, high-ranking
public employees, and candidates for elected office from more than 1,300 agencies to file annual,
personal financial disclosure statements with the Ethics Commission. These agencies include each of the
state elected officers and their senior staff; all public college and university trustees and presidents;
members of state boards and commissions, including all five retirement systems; all elected county and
city officials; and board members of public school districts and Education Service Centers, as well as
their superintendents and treasurers. Nearly 2,500 of the statements filed by public officials and
employees are confidential by statute and are individually audited by staff. The Financial Disclosure
program consists of one manager and one analyst (down from two analysts in prior biennia). The
Commission’s IT Administrator is also the manager for the Financial Disclosure program. During peak
filing periods, staff from other sections are tasked to assist this section.
H.B. No. 96 – Ohio Ethics Commission
February 19, 2025


BUDGET REQUEST

The Commission receives funding from two sources: The State General Revenue Fund (GRF) and the
Commission’s Dedicated Purpose Fund (DPF).

The sources of DPF funding are primarily financial disclosure filing fees, penalties for those who file
their forms late, the occasional court-ordered payments for the costs of the Commission’s investigations,
and a nominal fee from the Supreme Court, via an MOU, related to Commission staff helping to operate
their online filing portal. As noted in the LBO Red Book, current filing fees range from $30 to $95 and
were last changed in 2012. Maximum late filing fee penalties of $250 have remained unchanged since
the inception of the Commission in 1975.

During FY24 and FY25, the Commission, working with OBM staff, increased its reliance on funds in the
DPF account to cover our operating expenses from the previous biennium, which directly impacts the
amount of GRF funding we request. Unfortunately, our revenue sources into the DPF are unreliable, for
two primary reasons.

First, there has been a steady drop in the number of persons who file annual disclosure statements.
Previous biennia have seen approximate totals of 11,000 to 11,300 filers each year, depending on election
cycles. Because of several factors, including agency and board consolidations and a reduction in the total
number of state filers, the number of current filers has dropped to an average of only 10,000 to 10,300
filers. (In filing year 2023, the number of statutory filers actually dropped below 10,000). This reduction
in the number of filers (and the loss of filing fee revenues) has diminished the size of the Commission’s
DPF balance. Under the current Administration’s budget recommendation, we project that by the end of
FY27, the Commission’s DPF will essentially be depleted.

Second, since rolling out our online filing portal in 2013, the Commission has seen a substantial reduction
in the amount of late fees assessed and collected. We attribute this revenue decline to the speed with
which staff is now able to electronically notify filers when their statements are late. This reduction in late
fee collections has directly benefited many other state agencies by reducing their expenses, because R.C.
102.02 requires state agencies to pay the late filing fees of its current and past employees. We have
included in our budget request our best projection of anticipated revenue from filing fees based upon our
experiences over the past five years.

However, this cost savings to others has severely reduced the Commission’s revenues and balances in the
DPF account that historically had supported almost one-third of the Commission’s budget.

As with many agencies, our primary expense category is payroll. At the Controlling Board’s first
meeting this year, the Commission, with OBM’s assistance, requested, and was granted, $117,225 in
additional DPF appropriations. This DPF appropriation increase was necessary to cover the remaining
FY25 payroll projections due to COLA increases, effective July 1, 2024, and updates to the Commissions
advisory attorney position descriptions. (In late calendar year 2023, the Commission experienced a 100%
turnover in its advisory section and was unable to successfully recruit qualified candidates. Commission
staff worked with the Department of Administrative Services Office of Talent Management and the
Governor’s Office to reclassify the three advisory attorney positions).

For the past several budget cycles, the Commission has operated with 19 total staff, which is below our
staffing ceiling of 21 full-time equivalents (“FTE”). The Commission appreciates the Administration’s
longtime support of the Commission’s work and its current recommendation to increase our GRF funding
H.B. No. 96 – Ohio Ethics Commission
February 19, 2025

over the prior biennium amounts. At the recommended funding levels, the Commission will be able to
maintain current staffing levels.

However, we are requesting some additional GRF funding to support backfilling one additional staff
position. This FTE will restore a second financial disclosure analyst to work with agency liaisons and
assist in processing annual disclosure statements. This staff member will assist with processing the
roughly 2,500 confidential financial disclosure statements that the Commission must individually audit
each year.

A fully supported funding request would provide $2,598,544 in GRF funding for FY26 and $2,725,228
for FY27. Further, we project that this will be supplemented by funds in the 4M60 account of $649,781
in FY26 and $670,793 in FY27. This funding will support our projections and result focused budgeting
in providing services at the staffing levels of 20 FTE, and also fund needed equipment hardware and
software updates, maintain a case management software subscription, provide funding for leases of
vehicles provided by DAS Fleet to carry out statutory investigative and education responsibilities, and
absorb the increase in our building lease agreement.

We project that this will require additional GRF funding in the amounts of $117,800 in FY26 and
$122,086 in FY27 (above the Administration’s proposed appropriation levels) totaling an additional
$239,886 in GRF appropriation over the course of the biennium. The Commission projects that this
increase in GRF funding appropriation and a match in Commission DPF funding appropriation in both
fiscal years, will leave the Commission’s DPF fund in a net positive balance at the end of FY27.
Utilizing the appropriation levels for the Commission from the Administration’s budget proposal would
eliminate the ability to hire a 20th FTE and deplete the Commissions DPF fund by the end of the
upcoming biennium.

CONCLUSION

The bipartisan membership of the Ethics Commission understands that, like all other agencies supported
by taxpayer funds, it must be frugal and diligent in ensuring that taxpayers receive the best service at the
least cost. The Commission further believes that the duties and responsibilities assigned to it by the
General Assembly are crucial to ensuring compliance and enforcement of high standards of integrity and
conduct at all levels of state and local government.

Respected members of the Committee, thank you for the opportunity to testify this morning. I am happy
to answer any questions you may have.


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