Accelify Blog

Kasich Cuts Wide Swath of Items to Repair Budget (OH)

March 30, 2011

COLUMBUS — More than a week after Gov. John Kasich presented his $55.5 billion budget, his budget director Thursday spelled out how the administration would close a projected gap that it now says is closer to $7.7 billion.

Mr. Kasich’s proposed two-year spending plan would rein in Medicaid spending for the poor, disabled, and infirm by more than $3 billion; slash aid to local governments, schools, and libraries by more than $2 billion, and count on the sale of five prisons and the selling off future profits from state liquor sales to close the gap.

Budget Director Tim Keen met yesterday with reporters to go over details of the spending plan that Mr. Kasich had outlined in general terms a week ago.<br /&gt ;

The governor earlier had said the state faced an $8 billion revenue shortfall.

Mr. Keen said he came up with the $7.7 billion number after projecting how much the state could collect in taxes and other revenue over the next two fiscal years beginning July 1, and how much spending would be expected to climb if no policy changes were made.

"It’s not just a balanced budget," Mr. Keen said. "[The current budget] was balanced, but it was balanced with significant [one-time] revenues. [The 2012-2013 plan] is a structurally balanced budget. There is one-time money in the first year. The second year there’s essentially no one-time money, which means to say that ongoing revenues and ongoing expenditures are matched."

The budget anticipates $579 million in cuts to the Local Government Fund over the biennium, $127 million in cuts to public libraries, and $1.5 billion in cuts to local governments and schools as the state accelerates the phase-out of reimbursements that made their budgets whole after the losses of taxes on businesses and utilities.

The state has yet to release district-by-district breakdowns that show the full impact of all of these changes.

Many school districts had held out hope that the state would earmark another revenue source to replace the loss of the business and utility taxes before their day of reckoning. Those hopes have now been dashed.

"As human nature would dictate, they just hoped that it would never go away," Mr. Keen said. "They felt like they could go back and continue the 100 percent hold-harmless or some variation thereof."

Despite Mr. Kasich’s criticism of his predecessor, Democratic Gov. Ted Strickland, for his heavy reliance on federal stimulus money, tobacco settlement money, and other one-time funds to balance the books, Mr. Kasich’s spending plan does the same thing, although to a much lesser extent.

The budget counts on $848.5 million in one-time money in its first year by selling off future profits from state liquor sales to the newly created JobsOhio, $50 million from the sale of state prisons, debt refinancing, the tapping of some idle cash in the state’s unclaimed funds account, and transfers from a variety of fee-driven accounts.

The use of one-time funds in the second year would drop to $115 million.

"Apart from the irony that the same people complaining about the last administration’s use of one-time money have now used one-time money, there’s a much broader issue about how they’re closing this gap," said Dale Butland, spokesman for Innovation Ohio. The left-leaning organization was created to counter information released by the new Republican-controlled administration.

"While nobody disputes that there will have to be cuts and some pain inflicted, the sacrifice called for should be shared, and everybody should be asked to pony up," he said. "The wealthier folks in this state have not been asked to sacrifice anything."

The $55.5 billion, two-year budget is $5 billion larger than the current spending plan that will expire on June 30.

Mr. Keen, however, said the budget growth is based on a number of Medicaid and other programs that were moved outside of the general fund two years ago because they were funded by the one-time federal stimulus money.

Now that the federal dollars are disappearing, some of those programs are moving back into the general fund and again becoming the state’s responsibility.

The budget, however, anticipates tax revenue growth of 2.5 percent in fiscal year 2012 and 4.4 percent in 2013.

Although the budget counts on only $50 million from the proposed sale of five state-owned prisons in northeast Ohio and Marion County, Gary Mohr, the director of the Department of Rehabilitation and Correction, said the sale could bring in $200 million.

If so, some of the remaining $150 million would have to be spent to pay off some of tax-free bonds used to build and renovate those prisons.

"I said I’ll put in $50 [million into the budget], and when they sell for what Gary Mohr thinks they’re going to sell, I’ll be surprised and have a little extra money," Mr. Keen said.