One-time funds prop up budget plan

6/13/2003

COLUMBUS - Despite worries from credit-rating agencies, the next two-year budget being hashed out by a six-member legislative conference committee would fund more than half of about $5 billion in new spending with one-time money.

This fuels fears that, when reality sets in two years from now, the proposed temporary penny hike in the state sales tax might not be so temporary.

The state is banking on about $2.5 billion in additional sales taxes by increasing the state's share of the tax to 6 cents on the dollar. The surcharge would expire on June 30, 2005.

The budget would also again divert about $250 million from Ohio's settlement with tobacco companies, money earmarked for tobacco prevention programs and school construction that the state has promised to repay with future tax collections and borrowing.

Congress has set aside $770 million in emergency budget assistance for Ohio. If Ohio spends just half of that over the next biennium, it would mean more than a total of $3 billion in funds that shouldn't be available to lawmakers for the 2006-2007 budget.

That budget would undoubtedly grow because of demands from Medicaid and basic and higher education.

“Legislative institutions react to crisis,” said David Ellis, a senior fellow with the Federation for Community Planning, a Cleveland-based group researching health and social service issues.

“We've maintained this is a revenue problem,” he said. “You can't go through 15 years of picking away at the tax structure and expect to provide sufficient revenue to fund ongoing government services, 80 to 85 percent of which are uncontrollable because of statutory formulas and inflationary pressures.”

It's a spending problem, argues state Sen. Jim Jordan (R., Urbana), a tax foe.

“When we did it two years ago, it was to avoid raising taxes,” he said. “Now we're doing the worst of everything. We're using every bit of savings-account money and raising taxes. I'm convinced that my colleagues know deep down that the sales tax is not temporary.”

Wall Street bond-rating agencies are watching the state's progress with the budget. Standard & Poor and Moody's have placed Ohio on their negative outlook lists, warning that the state's now-stellar credit rating could be downgraded because of past quick-fix approaches to the budget.

Although Gov. Bob Taft relied heavily on one-time fixes in the past, he has urged lawmakers to avoid that temptation this time. Budget Director Tom Johnson this week said legislators shouldn't spend all of the emergency federal aid to solve the latest problem, a $1.1 billion projected revenue shortfall over the next two years that the administration dropped at the General Assembly's door this week.

To plug much of a projected $200 million hole in the current fiscal year ending June 30, the administration will draw down $193 million of the federal funds, although it doesn't expect to spend all of it.