Ohio auditor warns Strickland budget could put state in $7.9 billion hole

4/16/2009

COLUMBUS - Gov. Ted Strickland's heavy dependence on one-time money to get by with his proposed budget means lawmakers could face a budget hole as wide as $7.9 billion two years from now, the state auditor warned Thursday.

Auditor Mary Taylor projected that the use of one-time federal stimulus aid, the draining of Ohio's budgetary reserves, and projected growth in Medicaid, debt service, and property tax relief could put state revenues and spending dramatically out of balance by 2013.

"We cannot continue to push our problems off until tomorrow, because the huge shortfall we project for 2010 and 2011 won't go away simply by ignoring it,'' said Ms. Taylor. "We need to get ongoing spending in line with ongoing revenues. That will require action and tough decisions.''

The $7.9 billion projection was Ms. Taylor's worst-case scenario. A more conservative estimate, which assumes flat spending across all of state government, placed the expected deficit at $4.9 billion.

"Auditor Mary Taylor appears to be advocating for tax increases or severe service cuts at a time when too many Ohioans are struggling to make ends meet," Governor Strickland said in a statement following Ms. Taylor's statement. "I continue to believe that increasing taxes on Ohioans during this national economic downturn would deepen the effects of the recession in Ohio and hurt, rather than help, Ohio families striving to emerge from this recession.

"If we put aside heated rhetoric and partisan gamesmanship, there emerges a simple truth about federal stimulus resources. Without them, more Ohioans would lose jobs, fewer Ohioans would have access to health care, teachers would be laid off, tuition would increase, prisons would be forced to close, mental health and other important community services would be cut, and fewer Ohio jobs would be created," the governor's statement continued.

Mr. Strickland's budget director, J. Pari Sabety, had denied that the state's reliance on one-time monies in the current $54.4 billion budget proposal for fiscal years 2010 and 2011 will automatically translate in the need for higher taxes in the next budget for 2012 and 2013.

In testifying before the Senate Finance Committee on Wednesday, Ms. Sabety said she expects the state will experience revenue in growth in coming years now that a five-year phase-in of business tax reforms and personal income tax cuts is nearly complete. She estimated revenue growth of more than $1 billion over the next two years.

"It's not always going to look as dire as it does today and in the next two years,'' she said.

Ms. Sabety said proposed reforms built into the governor's budget in areas like sentencing reform and health care should pay off in budget savings in prison and Medicaid spending in future years. She predicted those savings at about $1.5 billion each year.

"It's clear that our next biennial budget is going to require us to continue to make very difficult choices,'' she said.

Mr. Strickland's budget proposal relied on $5.4 billion in one-time federal stimulus money, about 10 percent of the total budget, as well as the draining of about $700 million from the state's Rainy Day Fund. The budget also relies on one-time refinancing of existing debt to immediately free up about $400-million and empties a number of fee-driven accounts in many state agencies.

"Ohioans deserve to know where our state is headed,'' said Ms. Taylor. "This budget should not pass in its current form without a full understanding of the serious, long-term consequences it will have for Ohio and our citizens.

Projections released today make it very clear there is little room for error as Ohio navigates these unprecedented and uncertain economic times.''

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.