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Published: Thursday, 6/11/2009

Debate over Ohio s budget moves to legislative panel

BY JIM PROVANCE
BLADE COLUMBUS BUREAU CHIEF

COLUMBUS Gov. Ted Strickland and lawmakers are bracing for major cuts as budget debate shifts to a six-member committee that must wrestle with a new projected shortfall that could measure in the billions.

The state s fiscal woes were reflected in yesterday s decision by Fitch, one of three major Wall Street bond-rating agencies, to downgrade Ohio s rating from an excellent AA-plus to AA for borrowing backed by faltering state tax revenue.

The downgrade reflects the long-term deterioration in the state s economy, in particular, the structural decline of the state s large manufacturing sector and the resulting negative impact on state financial operations, according to Fitch.

The agency, however, noted that it s confident the state will balance its budget and said the state s overall debt management remains conservative.

Amanda Wurst, spokesman for Mr. Strickland, said the downgrade was not unexpected because Fitch had revised Ohio s long-term economic outlook from stable to negative, in part because of its heavy dependence on the struggling auto industry.

J. Pari Sabety, the governor s budget director, said she does not expect the downgrade to affect the state s plans to refinance some long-term debt to free up cash for the next budget cycle.

Our economic performance has had an impact on the price we command in the bond market place, she said. We ve already seen that in previous bond issuances. What has been helping us enormously is that interest rates have been at historic lows since last September.

The Democratic-controlled House voted 97-1 yesterday to reject major changes made by the Republican-controlled Senate to a $54 billion, two-year budget proposal. That will set up a joint House-Senate conference to reach a compromise. Northwest Ohio will have a seat at that table in Sen. Mark Wagoner (R., Ottawa Hills).

We anticipate that new revenue projections may require us to cut hundreds of millions, even billions of dollars, from the Senate level of appropriations, said Rep. Vernon Sykes (D., Akron). He leads the House Finance Committee and sits on the conference panel.

The Ohio Office of Budget and Management reported that tax collections during May were off $110.2 million, or 6.8 percent, from the same month a year ago, and that collections for the year to date were $1.9 billion, or 10.7 percent, off for the first 11 months of last fiscal year.

Ms. Sabety declined to reveal the size of the projected shortfall that she will present to the conference committee this morning. That news likely will strike fear in advocates of human service and other programs that could be cut, given the consensus among legislative leaders and the governor s office that a tax increase is not on the table.

Rep. Ron Amstutz (R., Wooster), a conference committee member, estimated that tax collections for the full year could be off $2.6 billion from last year.

It is scary to me, he said. We have a giant gap here that has not been addressed.

The House passed its version of the budget in late April. The Senate last week put its stamp on the pact, cutting it by $650 million. Members of the Ohio Legislative Black Caucus slammed the Senate, arguing that the cuts disproportionately affected minorities.

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



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