Thursday, March 29, 2001

Economic downturn dogs Ohio

Education's priority over services

By Debra Jasper
Enquirer Columbus Bureau

        COLUMBUS — As Gov. Bob Taft and lawmakers struggle to boost education funding and make up for growing budget shortfalls, economists say Ohio and other manufacturing states are nearing a recession.

        Ohio is already getting hit because of its heavy reliance on the auto and steel industries, said Sophia Koropeckyj, a senior economist at, a Pennsylvania economic consulting company.

Gov. Taft
        “Ohio fits in with other Great Lakes states. It's a lot weaker than the rest of the nation,” she said.

        Ms. Koropeckyj said Ohio isn't in a recession but indicators show it is getting there. For example, she said, the average number of hours logged weekly by Ohio factory workers has dropped from 43 in August to 41.5.

        “That doesn't sound like a lot, but it's quite a steep decline,” Ms. Koropeckyj said. “That means all those people are making less money and contributing so much less in income tax for the state.”

        Ohio officials say income tax and sales tax revenues will fall $288 million short this fiscal year and even further next fiscal year, which starts July 1. Predictions of a recession - combined with projections the state will have $562 million less to fund Mr. Taft's upcoming two-year $44.8 billion budget - have officials scrambling to make cuts.

        While it's still unclear who will be affected, Senate President Richard Finan, R-Evendale, said the cuts will have to be deep if the state is to obey an Ohio Supreme Court order to reform public schools at a time of falling revenues.

    In response to a slowing Ohio economy, Gov. Bob Taft Wednesday ordered state agencies to cut spending by 4 percent over the next three months, on top of $125 million in cuts he made in December.
    Some agencies said they've already cut to the bare essentials and will be pressed to find more room for savings.
    The Ohio Department of Mental Health will cut more services to local mental health departments and consolidate some of its hospitals, moving patients and staff to other locations, department spokesman Sam Hibbs said.
    The Department of Rehabilitation and Corrections, which runs the state's prison system, will have to extend a hiring freeze it began when the first cuts were ordered, spokesman Joe Andrews said. The goal was to reduce the 16,000-employee work force through attrition by 250 workers before May 1.
    In response to the latest cuts, the department is closing its residential treatment unit at Mansfield Correctional Institution.
        “We're going to have pain. Real pain,” Mr. Finan said.

        He said higher education, mental health, mental retardation and all other departments - except primary and secondary education - will be hurt.

        If education is funded at the level the court demands, he said, “the rest of the state will be in deep trouble.”

        The court hasn't set a reform price tag, but Mr. Taft's plan calls for spending $808 million more a year. Senate and House versions would cost more.

        While the governor said Wednesday he will very likely recommend tapping into the state's $1 billion rainy day fund to make up some of the budget shortfall, Mr. Finan said it's too soon to move in that direction.

        “I do not believe we are in an overall recession. We are simply growing less than we became accustomed to when we were fat and happy,” Mr. Finan said. “We got used to having lots of money coming in and having surpluses to send back to taxpayers. Now reality is setting in.”

        Mr. Finan and House Speaker Larry Householder, R-Glenford, said they would be more open to using money from the Family Stabilization Fund instead of the rainy day fund to make up a shortfall.

        The fund, which has $100 million, was set aside in case the state came up short paying for family services.

        Mr. Finan, noting the state has already had to make cuts to pay off a $249 million Medicaid deficit, said taking the money from that account makes more sense. “That's what the money was for,” he said.

        Like Mr. Finan, other lawmakers say they are not convinced Ohio will end up in a full reces sion.

        “I know people who think we'll never see the days we've seen up till now,” said state Sen. Jeff Jacobson, R-Brookville. “It's distressing in the sense we don't know yet if this is a temporary shutdown or a paradigm shift.”

        Jim Coons, chief economist for Huntington National Bank, said the manufacturing sector has clearly entered a significant downturn, but that doesn't mean it will be a broad-based decline.

        “A larger share of Ohio's economy is in manufacturing, so we tend to benefit more in good times and get hurt a little more in bad times,” he said.

        Still, he said, “It's time to break out the umbrellas but it's not time to blow up the life rafts.”


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