Friday, September 26, 2008


Ohio not alone in budget troubles

With economic indicators providing a bleak outlook, Congress considering a new economic stimulus package, and negotiation of a mammoth bailout for financial firms taking place in Washington, fiscal concerns have risen to the forefront of our public consciousness. Ohio is far from alone in its budget troubles.

Already 22 states have reduced services for residents as a result of budget problems, according to an updated report released today by the Center on Budget and Policy Priorities. Ohio is one of the states enacting budget cuts that will affect services for children, the elderly, the disabled, and families, as well as the quality of education and access to higher education.

  • Ohio’s closure of two mental health facilities makes it one of 11 states that have cut programs for the elderly and disabled.
  • Governor Strickland protected Medicaid and SCHIP programs during the latest round of cuts, but 14 other states have implemented or proposed cuts that will affect eligibility for health insurance programs or access to health care services.
  • Twelve states, including Ohio, have reduced funding for K-12 education programs.
    While 17 states have cut funding to public colleges and universities, the tuition freeze enacted in HB 119 remains in place in Ohio.
  • Ohio is one of 19 states reducing their state workforce, which is likely to impact the ability of residents to access state services. Fully 14 percent of positions in ODJFS are estimated to be eliminated or left unfilled.

Because Ohio and other states cannot run a deficit, they must draw down reserves, cut expenditures, or raise revenues (or a combination of the three) to balance their budgets. With revenue collections continuing to fall below estimates, the increasing girth of Ohio’s budget shortfall will require the state to consider enacting temporary or permanent tax increases and drawing more from the Rainy Day fund to avert deeper cuts in vital services.

Fifteen states, including Ohio’s neighbor Michigan, have already enacted tax increases, closed loopholes, restricted tax credits, or implemented other revenue raising measures. New Jersey has begun means testing its homestead exemption, eliminating property tax rebates for families earning over $150,000. Maryland enacted a $1.35 billion tax increase. Rhode Island and California have moved to limit or eliminate certain corporate tax breaks, while Massachusetts and New York have closed corporate tax loopholes.

Ohio must keep its options open to ensure that vital services are available in this time of economic hardship when residents need them most.

Wednesday, September 24, 2008


New Report on Regional Achievements in Higher Education

Yesterday, Community Solutions released a new report by Mark Salling, Ph.D., based on release of new data from the American Community Survey. It is entitled "More Persons Attending College and Getting Degrees, 2000- to 2007: The Cleveland-Akron-Elyria Region Doing Well."

Thursday, September 18, 2008


And Now, More Budget Cuts

State agencies just submitted their FY2010-11 budgets, and now they’re revising their current budgets to accommodate the latest round of budget cuts. Last week, the Governor announced another $540M in spending cuts ($198M to agencies and $342M in other actions). Combined with the $733M cuts announced last January, this brings us to the “zero growth scenario” middle range of the original OBM deficit projection – OBM had estimated the deficit to be between $733M and $1.9B. Other options include postponing phase-in of tax cuts, federal stimulus, and rainy day funds.

These cuts come as a response to the lagging economy. Both the personal income tax and the sales tax are coming in below estimate, both of which reflect economic conditions. We’ve seen eight straight months of Ohio job loss, along with recent Wall Street drama, and OBM has reported that it expects weak growth for several more quarters. A recent court case also narrowed revenues from the Commercial Activity Tax (CAT) by an estimated $188M in FY2010 when it found the CAT unconstitutional as applied to grocers. The CAT is therefore not as broad-based as originally intended. In addition, we started FY2009 with expenditures that had been delayed from last fiscal year. However, August GRF tax revenues came in (although still below estimate) much better than July’s. Even before these cuts, we’ve seen decreased revenues and spending each year since 2006. The latest budget cuts will be implemented starting October 1. Although painful, it’s better to act sooner than later because it allows more time to fix the problem.

The 4.75 percent across-the-board cuts include an estimated $80M to ODJFS but do not touch “core priorities” which include tax reform and the homestead exemption expansion as well as children’s health care expansions, tuition freezes, and increased local school funding. Programs will be cut at a time when the need for public services is rising. This will cause job lay-offs and cancelled contracts, which further weaken the economy. If we increased revenues (or postponed phase-in of tax cuts) rather than cutting programs, some of those revenues would come from money that would otherwise remain in savings rather than being spent. Additionally, those tax payments could be partly deducted from federal taxes, which would keep more money in Ohio.

Federal stimulus would also help, which Governor Strickland is requesting from Washington D.C. including Medicaid, unemployment insurance, and public infrastructure grants.

Another option is to access the Rainy Day Fund. The Governor announced that they will use existing authority to use $63M of the reserve for Medicaid, and that they will avoid using more of the reserve now in case things get worse later, which seems probable. Using the reserve fund at this point would put those dollars into our economy now and avoid the negative effects that program cuts have on the economy.

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