There’s a dark cloud looming over the financial horizon of Ohio’s municipalities and it could rain down financial disaster.

Friday, October 19, 2001

There’s a dark cloud looming over the financial horizon of Ohio’s municipalities and it could rain down financial disaster.

With state legislators scrambling to figure out a way to shore up education and pull itself out of financial crisis, city, county and other municipalities may have one financial lifeline cut – local government funds.

Ironton’s finance director, Cindy Anderson, said the fund generates $531,000 in revenue for the city. This year, the fund was froze at last year’s levels and by the middle of next year, the money may be all gone.

Under a plan proposed by Gov. Bob Taft to close the gap on the state’s $1.5 billion budget deficit, state agencies would cut another $600 million, businesses would face new taxes and Ohio would join a multistate lottery.

Taft cited a the national economic recession and the recent economic slowdown since the terrorist attacks of Sept. 11 as reasons for Ohio’s most, "dramatic budget crisis since the early 1990s.”

Taft proposed raising $465 million by eliminating tax exemptions on 800 telephone numbers, trust funds and other previously exempted transactions, $280 million by tapping the state’s rainy day fund and $100 million by borrowing from the state’s share of the national tobacco settlement.

Joining a multistate lottery such as Powerball or the Big Game would raise an additional $41 million, Taft said. He proposed a similar idea in January as part of his two-year budget, but received little support from lawmakers.

Much of the plan requires lawmakers’ approval – including the tax increases and use of the rainy day fund – and Taft’s fellow Republicans haven’t been quick to rally behind the governor.

Taft’s proposal also did not address the possibility the state could be forced to spend millions more for schools based on the final outcome of the Ohio Supreme Court’s Sept. 6 ruling. The court said the state’s school-funding plan must spend more money to be constitutional.

The final cost of the court’s ruling ranges from $450 million to $1.2 billion annually.

”This is a plan to address the budget deficit,” Taft said. ”We plan to address the school-funding situation once the Supreme Court makes a final decision.”

The shortfall has continued to get worse. Just two weeks ago, Taft ordered most state agencies to cut budgets by 6 percent because of a larger-than-expected deficit of $600 million this year.

That number is now at $712 million, said Tim Keen, Taft’s assistant budget director. The revenue deficit is expected to hit $783 million next year, he said.

On Monday, Taft said at least one prison and one mental health hospital will likely be closed because of the worsening budget problems.

The Department of Rehabilitation and Correction has said for weeks that further cuts could mean closing individual prison units or one or more prisons.

The department will announce its plans Wednesday, after receiving new budget numbers from Taft, prisons spokeswoman Andrea Dean said Monday.

State corrections Director Reginald Wilkinson said last week four prisons definitely won’t be considered for closing. They are the state’s supermax prison in Youngstown, the Corrections Medical Center in Columbus, the Southern Ohio Correctional Facility near Lucasville and the Ohio Reformatory for Women in Marysville.