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Published: Thursday, 3/21/2002

GOP won't raise taxes to plug leaks in Ohio finances

BY JAMES DREW AND JIM PROVANCE
BLADE COLUMBUS BUREAU

COLUMBUS - With state tax revenue lagging behind projections yet again and Ohio now facing a $400 million deficit, Gov. Bob Taft and Republican legislative leaders said yesterday a tax hike is not the answer to the problem.

But they were tight-lipped about how they plan to close the hole in their budget.

Taft spokesman Joe Andrews said several options are on the table, including another raid on the state's rainy-day fund - a $600 million savings account for hard economic times.

From December through February, tax collections were $233 million lower than projected, said Tim Keen, assistant director for the state budget office. State spending, however, has been $160 million below estimates.

Officials expect that the trend will continue during the last four months of the fiscal year.

“We're under water,” said Senate President Richard Finan (R., Evendale). “The longer you let these things sit around, they don't get any better.”

Mr. Finan joined the governor and House Speaker Larry Householder (R., Glenford) in ruling out a tax increase.

“I just think in bad times, it's the worst time to raise taxes,” Mr. Finan said.

The state must close its books for the current fiscal year on June 30, the halfway point in the state's two-year budget cycle.

“The agencies and the state in general have done a good job of tightening belts, but when the revenues aren't coming in, it still creates a definite shortfall,” said Mr. Andrews. He said agencies are expected to return some unspent money before June 30.

In December, lawmakers and Mr. Taft, faced with a projected $1.5 billion shortfall through June 30, 2003, cut appropriations to state agencies, took $245 million from the state's rainy-day fund, and “borrowed” $260 million from the state's settlement with major tobacco companies.

Even after making those budget adjustments, the continuing revenue problems have opened up a new hole in the budget.

Mr. Householder said using his own budget numbers he estimates Ohio will face a projected budget shortfall of $200 million to $300 million in the fiscal year that ends June 30. He says that deficit could balloon to $600 million and $800 million in the 2002-2003 fiscal year, which begins July 1.

The legislature is expected to take action next month to eliminate the shortfalls, but how it will do that hinges on what the Taft administration recommends within the next few days, Mr. Householder said.

“It will be very difficult to get the votes to raid the rainy-day fund,” Mr. Householder said. “Once you take it all, you put your back against the wall. At that point, if your revenues don't improve, you have got two choices - either dramatic cuts or you are forced into a situation where you raise revenues.”

Mr. Householder said he anticipates possibly $100 million will be available from state agencies that spent below their budgets this fiscal year.

In addition to tapping those dollars and part of the “rainy-day fund,” the speaker of the Ohio House said the state could do “minor cuts” to balance the budget.

The projected shortfall does not include any of the additional spending that the Ohio Supreme Court has ordered as part of the decade-long school-funding case.

Mediator Howard Bellman, the Madison, Wis., attorney who left Columbus after talks between the state and the coalition of public schools that filed the suit collapsed, plans to file a report today with the Supreme Court. He would not disclose details yesterday.

The Supreme Court in December appointed Mr. Bellman to try to broker a settlement between the state and a coalition of about 500 public school districts. In September, 2001, a 4-3 majority of the court said the new school-funding system is constitutional as long as the state spends millions more on primary and secondary education.

The Supreme Court agreed to reconsider its decision - after Mr. Taft and GOP legislative leaders said such a funding system for Ohio schools would cost an extra $2.4 billion over two years.

“Now we await further direction from the court,” Mr. Finan said yesterday.

Mr. Householder said the high court should take into account the state's budget woes.

But Bill Phillis, executive director of the Coalition for Equity & Adequacy of School Funding - which represents the school district plaintiffs, including Toledo Public Schools - said the state's “budget issues are not relevant” to the court case.

The state is looking ahead at the effect the recently passed federal economic stimulus package will have on Ohio in the next fiscal year beginning July 1.

Gary Gudmundson, spokesman for the state Department of Taxation, said breaks for businesses and investors just approved on the federal level also could mean $175 million less for Ohio.



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