Taft axes $118.2M to fill hole in budget; increasing revenue averts further cuts

7/2/2004

COLUMBUS - Budget cuts for the fiscal year that began yesterday weren't as severe as promised in March, but, with a few exceptions, Gov. Bob Taft followed through on a promised 6 percent cut from most departments.

Buoyed by higher-than-expected income tax collections as the prior fiscal year came to a close, the total cuts were $30 million less than projected.

In all, $118.2 million was cut to help compensate for revenue collections now expected to fall about $340 million below the projections originally used to enact the two-year budget more than a year ago.

The Taft administration is closing the rest of the gap by reducing an anticipated year-end surplus and other bookkeeping maneuvers.

The executive order issued yesterday marked the fifth consecutive year of mid-year bud-

get cuts. Cuts ordered in March for the fiscal year that ended Wednesday totaled about $86.5 million.

Basic K-12 education, direct instructional aid to universities, college student financial aid, and the Passport in-home health-care program for the elderly were spared, but other education and social programs were affected.

The cuts weren't as traumatic for prisons, mental retardation/development disability facilities, and other state institutions, which must carve just 1 percent from their budgets.

Although the income-tax collections came in a little higher than the lowered estimates in March, they were still below the original 2003 projections that fueled the budget. Mr. Taft's budget director, Tom Johnson, said the $30 million surprise was scattered throughout the budget as occasional exceptions to the 6 percent rule during negotiations with departments.

"For the first time, we're seeing some solid footing as far as our budget and revenue is concerned," he said. "Things are modestly improving."

But lawmakers know they face a projected $3.8 billion revenue shortfall for the next two-year budget that must be passed by June 30, 2005, even before any additional spending for Medicare or education is factored in.

"There's some spending that kind of occurs as a natural thing," said David Ellis of the Cleveland-based Center for Community Solutions. "The deficit could be as much as $5 billion.

"As for the good reports about the economy, I'm not sure it's made its way to Ohio yet," he said.

"Even historically, we're not talking about revenue growth anywhere near enough to solve this problem."

Among the one-time monies used to shore up the budget were a $2.5 billion temporary one-penny surcharge on the sales tax that will expire June 30, 2005, $770 million in one-time federal aid, and about $230 million "borrowed" from the state's settlement with major tobacco companies.

The $49 billion two-year budget adopted last year was 11 percent bigger than its predecessor.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.