Thursday, January 9, 2003

Budget fixes being considered

Tax hike not likely; cutbacks for some agencies in place

By John McCarthy
The Associated Press

COLUMBUS - New predictions of Ohio's income indicate the state would have to cut expenses for a third time in a year and a half. In question and answer form, here's how a budget fix could affect Ohioans.

Q: Why does the budget need attention?

A: The $45 billion budget lawmakers passed and Gov. Bob Taft signed in June 2001 was based on income estimates by Taft's Office of Budget and Management. Since then, collection of tax receipts and other income have fallen below the projections.

Q: Hasn't the Legislature adjusted the budget twice already because the estimates were too low?

A: Two previous budget adjustments, in December 2001 and in early June, closed deficits totaling $3.4 billion. However, Ohio's economy has not rebounded, and spending increases for Medicaid and other programs have threatened to unbalance the budget.

Q: How big is the current deficit?

A: No one knows. Revenue collections have fallen behind expectations by $64.8 million for the first six months of the budget year that began in July. Mr. Taft's office says a new projection for the second half of the budget year won't be available until early February, when the state has had a chance to add up the sales tax money from holiday shopping. Legislative leaders say the deficit could reach $250 million.

Q: Why not just finish the year in the red, as the federal government usually does?

A: The Ohio Constitution requires the governor and the Legislature to balance the budget by the end of the fiscal year on June 30.

Q: What has Ohio done to balance the budget?

A: Mr. Taft cut spending 6 percent for most agencies. That has meant closing underused areas of some state parks and cutting back park personnel and shutting down some prison housing.

If you smoke, you are paying 31 cents per pack more in state taxes on cigarettes, and income from trusts is being taxed for the first time. Ohio joined the Big Game lottery as a way to raise money - the state's first entry into lottery agreements with other states.

The Department of Development shut down the Ohio Film Commission, making it more difficult to get movies shot in the state. Also, the state drained its $1.01 billion rainy day fund and borrowed $600 million from the state's share of the national tobacco settlement, to be paid back in the next decade.

Q: How will the current deficit be closed?

A: Mr. Taft hopes small increases in the cuts already in place will take care of it. However, House Speaker Larry Householder warned that "dramatic" new cuts may be necessary because only six months remain in the two-year budget cycle to fix the problem.

Q: Why not just raise taxes?

A: Never politically popular, raising taxes would not produce the money it would take to close the deficit in the time remaining, Mr. Taft and legislative leaders agree.

Q: Is there any money available to help erase the deficit?

A: On June 30, at the end of the 2002 budget year, the state had about $65 million it didn't need to spend and put it in back in the rainy day fund. That could be used to help close the deficit.

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