DAYTON — In Dayton, commissioners will consider approaching voters for an income tax increase.

In Kettering, capital projects like roadwork could be reconsidered.

In Fairborn, months after trying to add police and fire staff, the city could have to cut jobs.

Gov. John Kasich’s proposed one-third cut to local government funding will force some combination of local tax increases, spending cuts or the combination of services, according to officials in cities throughout the region.

Kasich’s budget proposal, released Tuesday, would reduce local government funding by 34 percent, from $1.31 billion in the last two-year budget, to $865 million in 2012-13, putting the difference back in the state’s general fund to help solve an $8 billion shortfall.

The LGF amount that governments receive annually varies widely. The Montgomery County Auditor’s Office estimates that in 2011 distributions would include $13.7 million for Montgomery County, $11.2 million for Dayton, $1.1 million for Kettering and as little as $131,000 for a small city like Moraine.

City Manager Tim Riordan says Dayton could have $6.5 million less in state funding by 2013. From that 2011 starting point, the cut would be 21 percent in the 2012 state fiscal year (which begins July 1) and 49 percent in 2013, according to Kasich’s budget.

Kasich’s budget solidifies his promise not to raise taxes, but could result in higher taxes at the local level to make up for it.

Riordan said he will “seriously consider” asking commissioners to approve putting an income tax in front of voters as soon as August if Kasich’s proposal or a similar proposal is passed at the Statehouse. The LGF is Dayton’s second largest source of income. An income tax would be voted on by Dayton residents, but if passed would also impact people who work in the city.

“This is very devastating,” Riordan said Tuesday, in the midst of digesting Kasich’s proposals. “I always knew this was possible, but in my own mind I anticipated a 15 to 20 percent cut. But for it to be 50 percent (in the second year), that’s just devastating.”

Montgomery County expects to lose about $6.5 million a year if the proposed cuts are fully phased in over two years.

Kasich has said local governments must find new, more efficient ways to operate, including collaboration and service consolidation such as the recent move in Montgomery County to a regional dispatch center.

“We are going to give (local governments) the tools to pool resources,” Kasich said. “They are getting casino money. This is not just a one-way street.”

One of those tools is Senate Bill 5, which would remove some collective bargaining rights for public employee unions and give governments more leverage in negotiating contracts.

But Fairborn City Manager Deborah McDonnell said collective bargaining legislation “is not going to help me one bit.” She said Fairborn, which will have one or more levies on the ballot in 2011, already has forced its employees from three expensive health plans into a single high-deductible system. She said they pay 22 percent of their costs, well above the SB 5 minimum of 15 percent.

“The best tool he could give us (with this budget) is give us Rumpelstiltskin so we could spin our own gold,” Riordan said.

Kettering City Manager Mark Schwieterman said the budget’s lack of proposed cuts to the estate tax or property tax rollbacks could protect city revenues. But Kettering could lose $800,000 in LGF, and an estate tax repeal bill is still pending in the Ohio House.

“The Local Government Funding funds operating expenses, so I’ll need to balance our revenues versus expenditures,” Schwieterman said.

Dayton Mayor Gary Leitzell struck a hopeful tone.

“By 2013 we will have devised a strategy to endure,” he said. “Cities outlast governments and even countries. I have complete faith in the citizens of Dayton.”