SUNDAY, JANUARY 2, 2011 03:01 AM
BY JIM SIEGEL AND DARREL ROWL
THE COLUMBUS DISPATCH
PATRICK KASTNER | DISPATCH
Try it yourself
The Dispatch has created an interactive online exercise that lets readers attempt to balance Ohio’s next budget. Users can make any or all of 34 policy choices, then see the results.
Try your hand at balancing the state budget
DispatchPolitics
- DispatchPolitics.com
Complete coverage of Ohio politics - The Daily Briefing
The Dispatch’s public affairs team sates the appetites of political junkies with bite-sized portions of the news and what’s behind it. - Buckeye Forum
Veteran political reporters examine Ohio politics in this weekly podcast.
Today’s political news
- Ohio Turnpike takes in record tolls in 2010
- GOP’s watchdog promises savings
- 9/11 health bill signed by vacationing Obama
- Ohio homebuilders fight tougher code
- Family is key to new judge’s success
- Budget not sole issue facing Ohio legislators
- Boehner to promise new routine in House
8,000,000,000.
We’re not used to seeing Ohio’s probable state budget shortfall for the next two years written out that way, with all the zeros.
Perhaps it somehow better conveys the enormity of the task facing the administration of incoming Gov. John Kasich and the state legislature, which will be controlled by Kasich’s fellow Republicans.
Maybe Ohio State quarterback Terrelle Pryor could help solve the problem. He sold his 2008 Big Ten championship ring, 2009 Fiesta Bowl sportsmanship award and 2008 gold pants trinket for beating Michigan and now must repay $2,500.
‘Course, he’d have to repeat his deeds 3.2 million times to come up with the necessary cash.
OK, let’s think bigger: Put a super-surcharge on fans attending next season’s revenge game against Wisconsin of, say, a mere $75,000 apiece.
Still wouldn’t be enough.
All right, let’s talk about more realistic options – althoughrealistic may be in the eye of the beholder.
Firing every state employee would get you more than half of the way there, but not much more. About 85 percent of state general revenue funds (money from state taxes and some matching federal dollars) are passed through to local boards, agencies and governmental entities. That means major cuts to “state” government actually wind up reducing funding to schools, cities, universities, counties and townships, most of which have their own fiscal woes.
Raising the state sales tax from 5.5 cents on the dollar to 8 cents, a 45 percent jump, would bring in about $6.5 billion. Wiping out the 2005 income-tax cut (21 percent), could mean about $4.3 billion. Majority Republicans likely would argue that either option would devastate the state.
Ohio charges many dozens of fees for various licenses and services, and nearly all of them could be raised to some degree. Ohio also gives away more than $7 billion in tax exemptions, credits and deductions that could be eliminated or reduced.
But Kasich and a number of Republican lawmakers have signed a national no-tax pledge that covers not only taxes, but also fees. Under the pledge, some could be raised, but others must be lowered so there is no net increase. However, some veteran legislative Republicans are quietly questioning whether the budget can really balance without more revenue, and there seems to be a growing expectation that Kasich will violate the no-new-fees portion of the pledge.
There are other ways to pick up more money. Selling state buildings could provide a quick cash infusion, but would cost Ohio more in the future for lease payments. Selling the Ohio Turnpike could also mean major up-front cash, but doing so could also have ramifications and would be difficult to pass over objections from a host of lawmakers from both parties across northern Ohio.
In mid-March, Kasich and his team may unveil some truly unique ways to balance the 2012-13 budget, including perhaps combining and privatizing state functions.
So what is the $8 billion shortfall anyway? Simply put, it is roughly the amount the state is lacking if it wants to continue to providing the same services it provides today for the next two years, starting July 1.
No one can pinpoint the exact budget shortfall because there are too many unknown factors, including the estimated tax-revenue growth, some future costs, whether Congress plans to help again, and just what state leaders want government to look like when they’re done. But most experts agree $8 billion is a good place to start the conversation, and some say it’s more like $10 billion when such factors as the state’s debt on unemployment compensation is included.
The current two-year budget is balanced with about $8.7 billion in one-time money that is not expected to be available again. More than $5 billion is from the federal stimulus package that, depending on one’s perspective, either saved Ohio and most other states from potentially devastating cuts, or simply put off tough decisions for two years.
Despite what you may have heard during the campaign this fall, there is no way state leaders can save billions simply by “trimming fat” or “enacting efficiencies” that won’t be noticed. Experts will tell you that most of the low- and even medium-hanging fruit has already been harvested to balance the current budget, which suffered from an unprecedented drop in tax revenue.
Rather, state leaders will soon learn a political truism: Talking about cutting the budget is easier than actually cutting it. Perhaps that is why nearly every prior state budget crisis was at least partially fixed with tax increases, regardless of which party was in charge.
So you want to cut? Eliminating all tax funding for a dozen state agencies – including the departments of Mental Health, Developmental Disabilities, Development, Veterans Services and Youth Services (juvenile prisons) – saves about $3.4 billion, less than half the shortfall.
Republicans have talked about significantly reducing the number of state agencies, which might save money long term. But significant savings in the first two years are far less likely.
Cutting Medicaid, which makes up about 40 percent of the state general revenue fund, is ugly because it eliminates about $2 in federal money for every $1 in state cuts. In addition to hitting Ohio’s poorest and most fragile citizens, cuts also can hurt hospitals, doctors, nursing homes and others in the health-care industry.
Deep cuts to grades K-12 education would force further reductions in teachers and programs and likely send property taxes upward, leaving Ohio’s overall tax burden worse.
Major cuts to universities could trigger huge tuition increases, which could be considered tax increases on the middle class.
Ohio’s prisons are already overcrowded, and while there have been recent proposals to move nonviolent prisoners to community programs, the short-term savings are about $50 million over two years. And some lawmakers are nervous about constituents’ reactions to freeing criminals.
Ohio sends more than $1 billion a year directly to local governments and libraries, making it a tempting cut. But libraries have an amazing ability to organize their patrons to fight cuts. For cities and villages, most of that state money pays for police and fire protection.
While groups including Greater Ohio and the Ohio Chamber of Commerce have recently recommended major changes to the state’s 19 {+t}{+h} century system of local governments, even if local officials pledge to consolidate and become more efficient, such moves take time to see big savings.
And finally, the state pays 12.5 percent of every local property tax levy approved by voters. This is a huge, growing expense for the state ($1.7 billion a year). But while most homeowners are likely unaware that the state is picking up one-eighth of their property tax bill, they are sure to notice if the state stops doing it.