Friday, December 19, 2008
More Cuts in This Budget - What About Next Budget?
The most recent estimate of this budget’s deficit is $640 million. Today, Governor Strickland announced that they will fill the gap with budget cuts of $180.5 million, with the rest of the shortfall being met through Medicaid adjustments and various cash management strategies. These 5.75% (mostly) across the board cuts follow the September 4.75% cuts. Our revenue problems have been exasperated by the weakening national economy, and our budgets have seen drastic cuts.
We are hearing that we must all share in the sacrifices that are needed to get us through this. The question is, how do we do this. Hopefully, the $640 million in adjustments will get us through this budget. But as we look at next budget’s estimated $7.3 billion deficit at flat funding, we will need to look at all options and make the choices that do the last harm to the economy and Ohio’s future. Options include the Rainy Day Fund, temporary tax increases, examination of this decade’s tax reforms, and budget cuts.
When weighing whether to decrease government spending or raise revenues, we should appreciate government as a major part of our economy - every dollar cut is a loss of income to someone. It is particularly hard to cut the services that make up our safety net when more and more families are falling on hard times. Economists, including Barack Obama’s new budget director, Peter Orszag, recommend temporary tax increases for high income tax brackets over general tax increases or budget cuts. Ohio has increased income tax rates for high income brackets in past recessions, in both 1982 and 1992, and added a temporary sales tax increase during the last recession. Even with a federal economic recovery package, there will be tough choices, and we’ll have to consider all options.
We are hearing that we must all share in the sacrifices that are needed to get us through this. The question is, how do we do this. Hopefully, the $640 million in adjustments will get us through this budget. But as we look at next budget’s estimated $7.3 billion deficit at flat funding, we will need to look at all options and make the choices that do the last harm to the economy and Ohio’s future. Options include the Rainy Day Fund, temporary tax increases, examination of this decade’s tax reforms, and budget cuts.
When weighing whether to decrease government spending or raise revenues, we should appreciate government as a major part of our economy - every dollar cut is a loss of income to someone. It is particularly hard to cut the services that make up our safety net when more and more families are falling on hard times. Economists, including Barack Obama’s new budget director, Peter Orszag, recommend temporary tax increases for high income tax brackets over general tax increases or budget cuts. Ohio has increased income tax rates for high income brackets in past recessions, in both 1982 and 1992, and added a temporary sales tax increase during the last recession. Even with a federal economic recovery package, there will be tough choices, and we’ll have to consider all options.
