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Budget ills invite debate over cuts, taxes

Experts offer solutions to Ohio’s continuing fiscal problems.

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By Laura A. Bischoff  and Jim DeBrosse, Staff Writers Updated 9:07 PM Saturday, July 11, 2009

Friday’s budget agreement averts any need to put Ohio up for sale on eBay, but the crisis that kept state government on hold for 10 days won’t go away just because Gov. Ted Strickland and legislative leaders reached agreement on a plan to put video lottery terminals at racetracks.

The economy is still bad and the immediate budget forecast ugly.

Strickland on Monday, July 13, will issue a directive authorizing the Ohio Lottery director to begin the process of putting video slot machines at seven Ohio racetracks.

According to Strickland, the plan will raise $933 million over two years, about half of that coming in licensing fees.

In a compromise, Senate President Bill Harris agreed to provide supporting language in the final version of the budget.

The pact ended the budget impasse between Republicans and Democrats, but not the debate over taxes, cuts and services in a state that’s been ravaged by an economy that shows few signs of recovery.

More cuts are sure to be coming and, some argue, a tax increase.

Zach Schiller, research director, Policy Matters Ohio

Rather than cut services to the needy, Ohio should raise taxes on the wealthiest Ohioans and review and eliminate tax breaks and loopholes, Schiller said: “To me, with or without (video slots at racetracks), the state needs substantial revenue to make the investments that are needed.... We’ve already acted as though taking $2.4 billion in cuts will be fine, thank you.”

Schiller said a tax reform package adopted four years ago sucked $2 billion in revenue out of the state’s coffers with the idea that tax cuts would spur growth.

“We have yet to see positive results. We haven’t seen Ohio outperforming or gaining ground on the rest of the country.”

He pointed to a study by the Center on Budget and Policy Priorities which said that since Jan. 1, 30 states have raised taxes and seven others have considered doing so.

Ned Hill, dean of the college of urban affairs, Cleveland State University

He made a number of suggestions: Allow slot machine licenses to be auctioned off to the highest bidder to maximize money to the state, institute a temporary half-penny sales tax increase that would sunset once the state’s unemployment rate hits 5.5 percent, delay the K-12 education reforms until the economy recovers, consider repealing some tax breaks such as the expanded homestead property tax exemption, and push the federal government to eat all the increased costs for jobless benefits as well as Medicaid and Medicare that are related to the recession.

Hill opposes Gov. Ted Strickland’s plan to put slot machines at the state’s seven horse racing tracks. “We should not tie the fiscal condition of the state to a bunch of dying ponies,” he said.

Marc Kilmer, policy analyst, Buckeye Institute for Public Policy Solutions

The budget gap is not an insurmountable problem if the governor and legislators look at a broad range of cuts and eliminate all increases from fiscal year 2009 levels, Kilmer said.

“The top need is Medicaid reform,” he said. Medicaid spending accounts for a quarter of the state’s budget.

Kilmer would move away from nursing home care for Medicaid recipients to cheaper alternatives like in-home care and stop paying for chiropractic and hospice services; eliminate what he called non-vital agencies like the Department of Development, the Ohio Arts Council, e-Tech Ohio and the Commission on Minority Health; increase the share of health insurance premiums paid by state employees from 15 percent to 20 percent as well as fees paid by visitors to state parks; allow education funding to follow the student to whatever school they choose, and eliminate the recent expansion of government health insurance to middle class children.

Richard Sheridan, financial consultant, The Center for Community Solutions

The governor and legislators are arguing over “crazy gambling schemes” instead of attacking the budget problem at its core, according to Sheridan.

“We are probably the only state in the nation giving people tax breaks at a time when we can’t balance the budget,” he said.

Sheridan would phase out recent tax breaks such as the homestead exemption for seniors and the 2.5 percent income tax reduction introduced by former Gov. Bob Taft five years ago; remove the cap on state university tuition and make students pay more of the cost for higher education, and shut down overlapping college branch campuses, such as the one Ohio University opened in Columbus.

John Rapp, chair of the department of economics and finances, University of Dayton

Elected officials need to get serious about cutting spending, especially for Medicaid and education, “which account for way more than half the state budget.”

“All this fooling around with little things like libraries is a gimmick,” he said. “You have to look at where the state is spending large amounts of money or you’re not going to get anywhere.”

Hopefully, he said, “you do that in a way that avoids massive layoffs.”

Evan Osborne, professor of economics, Wright State University

Government should get out of the economic development and health care business, Osborne said.

“The long-term future of this state is not going to be decided by whether we give tax breaks or investment incentives to businesses or try to promote green jobs or any other kind of jobs,” he said. “All that should go.”

Osborne also would end Medicaid as a fee-for-service system that pays health care providers directly and instead give the poor cash assistance toward the purchase of their own health insurance policies.

Permitting video gambling machines at race tracks to increase state revenue amounts to “shaking the state couch to see what comes out, no matter what the cost is in public policy,” he said. “We’re going to see more of that in coming years if we don’t get government spending under control.”

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Ohio budget revenue comes from: Sales and use taxes 26%,individual income tax 28%, other taxes 5.2%, other revenue 8.9%, federal welfare reimbursement 24%, federal stimulus 5.5%, pubic utility tax 1.2% corporate franchise tax .05%. Ohio budget appropriation top three by spending: Other health & human services 45.5%, higher and other education 8.5%, primary & secondary education 30.6%.. Ohio appropriations from all operating funds 59 billion.. Ohio revenue to general revenue fund 26 billion.

just the facts
9:51 PM, 7/12/2009

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The government getting out of healthcare is a good thing. This wasn't part of the American fabric until recently in our history. Death by natural causes happens for a reason.

Soylent Green
7:23 PM, 7/12/2009

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Kudos to John Rapp and Evan Osborne. Mr. Osborne's solution for medicaid is worthy of further investigation and reporting........Policy Matters Ohio is a liberal advocacy group. It is no surprise that they would support tax increases rather than budget reform.

bobby
6:11 PM, 7/12/2009

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It's pretty pathetic when our government's solution to an already struggling economy is to virtually shut down important programs thus putting thousands and thousands more Ohioans out of work.
I don't know if anyone else read the article on how our legislators get to take extravagant trips for 'business' and are put up in very pricey hotels. Seems that is an exorbitant waste of taxpayers' money.

Joe
11:39 AM, 7/12/2009

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Its about the jobs leaving. All of the job losses mean less of everything including taxes from all sales/income. It also increases the demand for social services. Will the good paying jobs come back NO! They won't. Will pension funds continue to go away and retired healthcare? SURE WILL!

No matter what party is in power those days are gone

SGT USMC
10:13 AM, 7/12/2009

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