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Total tax receipts for the first four months of the current budget year are nearly $218 million greater than what had been projected by the state's budget office.

(Associated Press file photo)

COLUMBUS, Ohio -- One-third of the way through the state government's budget year, Ohio's tax receipts are running nearly a quarter of a billion dollars ahead of projections.

Tim Keen

The bounty sets up a scenario in which the biggest challenge in setting a budget proposal for the next two years could be resisting the natural temptation to spend more, said Tim Keen, director of the state's Office of Budget and Management.

Through October, taxes collected by the state were running nearly $218 million ahead of projections, OBM data shows.

The two biggest factors for the extra tax receipts are greater-than-expected revenues from sales tax and income tax -- both of which are due, in part, to an improving economy, Keen said.

"Clearly the economy continues to grow," Keen said. "It is producing tax revenues that are consistent with and modestly above the revenue estimates that we have put into place for this forecast."

Sales tax collections for the state were more than $74.5 million greater than expected.

Collections on sales of automobiles were nearly 30 percent above what was estimated for October, totaling more than $130 million. Collections were $29 million greater than in October 2013.

Income tax receipts were up for a couple of reasons.

As people without jobs found work and those who had jobs found better ones, the tax withholding totals have increased.

And in October, fewer than expected taxpayers claimed a small business income deduction on their individual returns. October was the deadline for taxpayers who sought an extension on their state taxes to file their returns.

The small business income deduction is available to individuals who report small business income on their personal tax returns and is new this year. As such, it was unknown how many business owners would claim it.

One other factor is that the revenue estimates were made conservatively, Keen said.

The stability of the state's bottom line is far different from a few years ago. As Ohio was still battling with the impact of the recession, the state's rainy day fund was all but depleted and budget shortfalls were projected.

The state was able to replenish its rainy day fund in 2013 as part of the two-year spending package that will carry through next June. Figures from OBM showed that the state ended the 2014 budget year, the first of that package, with about an $800 million surplus.

Against this backdrop, Keen and his staff are working on the budget proposal that Gov. John Kasich will unveil early next year as the plan for funding policy initiatives through mid 2017.

And while the additional income is welcome, it remains to be seen if there is a push to open up the wallet and increase spending.

"The biggest challenge we face in the upcoming budget proposal is the level of expectation," Keen said.

"You can't count on overages year after year after year," he said. "The governor is very insistent that we develop budget plans that are consistent with sound and stable state finances."