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Budget shortfall could be as high as $1.9 billion, governor tells officials
By Dennis J. Willard
Beacon Journal Columbus Bureau
Published on Thursday, Jan 24, 2008
COLUMBUS: The state of Ohio could be plunging headlong into a recession and facing a budget deficit as high as $1.9 billion in the fiscal year that begins July 1 and runs through June 30, 2009.
Gov. Ted Strickland shared the dour financial news with legislative leaders and state officeholders on Wednesday during two meetings in which he outlined three scenarios facing the state in the next 18 months.
Keith Dailey, Strickland's spokesman, said the governor plans to aggressively manage the problems presented by the state's economy, and wanted to bring in top leaders to discuss the new revenue forecasts.
''This just lays out the situation,'' Dailey said. ''This obviously is not positive news to the state and the governor. These are tough economic times, but the governor has never lost faith in the overall
soundness of the state's economy or the ability of Ohioans to innovate and create a brighter future.''
The turnaround in the state's financial fortunes comes less than eight months after Strickland signed his first two-year state budget into law and just weeks before the governor is scheduled to give his second State of the State address Feb. 6.
Already criticized for underachieving in his first year in office, Strickland could be virtually paralyzed by the doom-and-gloom economic projections for Ohio.
His promises to address the unconstitutional school funding system, the state's souring job picture and broader social service programs for poor and working poor families are expected to be placed on hold as his administration struggles to balance the budget, as mandated by the Ohio Constitution.
In the meetings, with the aid of a 23-page computer presentation, Strickland said that the budget deficit will hit $733 million in a slow-growth economy, $1.3 billion with no growth and $1.9 billion if a projected recession arrives.
The governor focused on new projections for revenues from income, sales and automobile sales taxes.
Strickland did not outline cuts to specific programs, institutions that could be closed or whether he would implement a hiring freeze across state government.
Buyout process
According to the governor's Office of Budget and Management, a number of factors since November have contributed to growing economic problems, including the continued decline in the housing market, a credit crunch, slower job growth and continued manufacturing job losses, the stock market slide, and growing odds that the country was sinking into a recession.
Although Strickland was meeting with top leaders on Wednesday, the bad financial news was not a shock to the administration.
In a recent cabinet meeting, the governor asked his directors to look into the potential savings from closing facilities and offering voluntary early buyouts to primarily union employees. On Jan. 7, Strickland's budget director, Pari Sabety, posted a four-page memo outlining the legal guidelines for agencies to follow in developing mandatory and voluntary early retirement incentive programs.
These steps were taken after December and January budget forecasts indicated the state's skid was worsening, driven largely by a slumping housing market and rising energy costs.
Republican responds
House Speaker Jon Husted, R-Kettering, attended one meeting and said he is more concerned about the potential impact of a recession on average families.
''I don't want to get lost in this debate of how we are going to solve the problems of government in Columbus and not be focused on how we are going to help people solve the real problems they face on a daily basis,'' Husted said.
Husted said he is not aware of programs that can be cut in the current spending plan, and said those ideas should have been discussed and decided before the two-year budget was passed last June.
''If there are lots of things out there that I wasn't aware of and the administration can find them, then I'm for reducing those things,'' Husted said. ''I don't know why they were in the budget to begin with if they were not necessary.''
The speaker said the key is to focus on priming the economy to create jobs.
''The reason we're facing this challenge is because the economy is underperforming,'' Husted said.
He ruled out a tax increase and added he would be opposed to reducing or eliminating tax cuts enacted in recent years.
''This is the exact wrong time to do that,'' Husted said.
Rainy day fund
Legislative leaders had little time to absorb the details or magnitude of Strickland's projections before being hit with questions from the media for potential solutions.
''I have had this information for a grand total of three hours, something like that,'' Husted said. ''We will work with the administration on solutions.''
Husted would not rule out tapping into the state's rainy day fund if the budget deficit is as bad as the governor's analysts are predicting.
''That's what the rainy day fund is for. If we truly experience a recession, then why do we have a rainy day fund? It's the people's money. They sent it to us, so we're going to say you're having a tough time and can't make ends meet, and we're having a struggle here, and we're just going to sit on it in the bank account rather than focusing it on the problems we have in this state? That's what you have that money for,'' Husted said.
House Minority Leader Joyce Beatty, D-Columbus, said she is not certain it is time to tap the state's savings account.
''I don't know how hard it is raining yet,'' Beatty said.
She said Strickland did not dictate solutions, but rather used the meeting to inform the legislative and other leaders about the financial problems facing the state.
''This is not all doom and gloom. There is still a lot of hope ahead of us because we have everybody at the table trying to figure out how best to resolve this,'' Beatty said.
Beatty said her caucus will submit recommendations to the governor. ''Everybody's complaining. This is not just Ohio,'' Beatty said. ''I would say the problem lies with the economy and we're not generating enough revenue.''
Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.
COLUMBUS: The state of Ohio could be plunging headlong into a recession and facing a budget deficit as high as $1.9 billion in the fiscal year that begins July 1 and runs through June 30, 2009.
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