Thursday, May 23, 2002

State budget plan still elusive

By Spencer Hunt, and Leo Shane III
Enquirer Columbus Bureau

        COLUMBUS — Faced with an unbalanced $44 billion state budget, House Republicans failed early today to find enough votes to triple Ohio's cigarette tax.

        That leaves the fate of a plan that would increase the 24-cent tax on a pack of cigarettes to 74 cents in doubt after a bill stalled in the House Finance Committee.

        The Ohio Senate barely passed the bill Wednesday morning on a 17-15 vote. Four Republican senators, including Middletown's Scott Nein, joined 11 Democrats who voted against it.

        At 12:40 a.m., majority Republicans were still several votes short of the 50 needed to pass the plan. Two Republican Finance Committee members also sent House Speaker Larry Householder, R-Glenford, identical letters stating their willingness to resign from the panel instead of voting for the tax increase.

        “I oppose the tax solution to the current budget process because it does not address the real problem — state government's unprecedented growth, inefficiencies and excesses,” Reps. Timothy J. Grendell, R-Chesterland, and Mike Gilb, R-Findlay, wrote.

        Mr. Householder had offered earlier in the day to make the tax increases on cigarettes and another on trust funds temporary, automatically revoking both on June 30, 2005.

        “This isn't a forever solution,” Mr. Householder said of a temporary tax. “This is just about the current budget hole we have, and us being able to fill that hole and move on.”

        The projected vote in the House was so tight, Mr. Householder's staff called four absent representatives, three of whom had family members in the hospital. Of those four, only Rep. Anne Womer Benjamin, R-Aurora and a candidate in Ohio's 17th Congressional district, returned from a campaign trip to Washington.

        Senate President Richard Finan, R-Evendale, kept the Ohio Senate session open, waiting to immediately approve any changes the House makes. At 11:40 p.m., he sent the senators home.

        Ohio's stagnant economy and plummeting tax revenues created a $1.9-billion hole in state finances over the next 13 months. The search to balance the budget has split moderate and conservative Republicans over tax increases GOP leaders and Mr. Taft held out as the only solution.

        A 50-cent per-pack increase on cigarettes would bring in more than $370 million next fiscal year, which starts July 1.

        The bill also includes a new tax on annual interest income in Ohio trust funds, which would match a federal tax Ohio banks and other trust holding companies must pay each year. The tax increase is expected to add $119 million in new revenues next fiscal year.

        Ohio would also save $175 million by separating Ohio tax law from federal tax changes in the economic-stimulus program.

        Mr. Taft would make another $250 million in spending cuts at state agencies — $100 million of which would come between June 1 and June 30.

        The $607 million left in the state's rainy-day fund would be drained and $60 million in unclaimed lottery prizes and unused Department of Commerce Funds would be transferred to the state's general-revenue fund.

        The plan takes $180 million that would have been used for the state's school construction program. That money will be replaced with bond money authorized this fall in the General Assembly's capital projects bill.

        The search for a bill that could pass led lawmakers to make several broad, last-minute changes to the plan.

        One of the most intriguing is an amendment that would restrict state budget spending increases to 3 percent or the rate of inflation, whichever is higher. Though Mr. Finan praised it, Democrats called it irresponsible or questioned whether it would work.

        “I think it will work,” Mr. Finan said. “If it doesn't, the legislature can always change it.”

        Another amendment would drop the state's cigarette tax 5 cents once the state's rainy-day fund has enough money in it to equal 5 percent of the general revenue-fund budget. With the rainy-day fund drained, that tax rollback isn't likely to occur for several years.

        Other questions about different provisions in the bill continued to dog legislative leaders.

        Asked if lawmakers left funding cuts to cities, counties and libraries for Gov. Bob Taft, Mr. Finan said, “There is nothing in this bill that says there are local government cuts.”


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