photo by MCT

Gov. Ted Strickland is facing a shortfall of $540 million in the state budget.

Ohio sees new $540M budget shortfall

Staff

Published Thursday, September 11, 2008

COLUMBUS (AP) — Gov. Ted Strickland ordered $540 million in cuts and other budget adjustments Wednesday because of revenue shortfalls but vowed to protect an expansion of children’s health care and a tuition freeze for students attending state colleges.

The latest moves are on top of $733 million in cuts he ordered in late January, meaning the state will be cutting a total of $1.27 billion out of a two-year, $52 billion budget that ends in July 2009.

Strickland, a Democrat, blamed slumping economic conditions in the U.S. for his state’s revenue problems and continued to defend tax reforms made earlier in the decade by then-Gov. Bob Taft, a Republican.

‘‘We are making tough decisions but we are doing that while also protecting the core priorities such as investing in education, providing health care to our children and supporting tax reform that I believe will help revitalize our economy in the long run,’’ Strickland said.

Senate President Bill Harris and House Speaker Jon Husted, both Republicans, said they would work with the governor to make sure the state remains fiscally sound. Husted said the House would evaluate how the cuts would affect Ohio residents and explore alternatives to address the shortfall.

State Auditor Mary Taylor, also a Republican, had the harshest words for Strickland’s budget management, criticizing him for using short-term accounting actions instead of substantively reforming the budget.

‘‘Governor Strickland’s plan is not making real progress toward putting Ohio’s fiscal house in order,’’ said Taylor, who suggested conducting state agency performance audits.

Strickland is asking state agencies to cut 4.75 percent of their budgets, which would save $198 million. He said vital programs such as the tuition freeze and a property tax break for senior citizens will be maintained, as will Taft’s 2005 tax reform package that will lower personal income taxes 20 percent by 2010.

Strickland said the tax reform, which also eliminated a complicated, exemption-riddled business tax with a new low-rate, broad-based tax, was hurting state revenue in the short run.

In the current budget year that began in July, the state will be taking in $1.3 billion less in tax revenue than it would have without the tax reform, said Ohio Department of Taxation spokesman John Kohlstrand.

Strickland promised not to raise taxes, saying it would have a detrimental impact on economic recovery. Still, he said it would be irresponsible to deny the possibility of raising taxes if conditions greatly deteriorated.

The remaining $342 million hole would be plugged by taking more money from interest earned on the state’s share of a national settlement with tobacco companies and other adjustments, including a plan to use $63 million from the state’s rainy-day fund for Medicaid, the federal-state program that helps pay for health care for the needy and disabled.

The state Controlling Board still must approve the Medicaid request, which already has been appropriated by the Legislature.

Strickland said he will not ask the Legislature to tap the roughly $750 million that remains in the rainy-day fund because the money may be needed in the future if the economy continues to worsen.

‘‘I think it’s also safe to say that while it’s rainy now, I fear that there is a much larger storm looming ahead of us,’’ Strickland said.

Earlier this year, Strickland said the state would eliminate 2,700 state jobs through attrition, layoffs and early retirements. He said Wednesday that hundreds of those jobs had been cut but that the state was $6 million behind where it needed to be.

The head of Ohio’s largest state employees union said members were still reeling from the last round of cuts.

‘‘State services and state employees have taken the lion share of cuts recently and historically,’’ said Ohio Civil Service Employees Association Executive Director Andy Douglas.

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