When the Ohio Supreme Court ruled recently that Gov. Ted Strickland and the General Assembly overstepped their authority in approving the placement of slot machines in the state’s horse-racing tracks, it blew an $851 million hole in the biennium budget. That revenue was to have gone to Ohio’s schools.
Faced with the prospect of primary and secondary education being set back years because of the loss of state and federal dollars, the governor moved quickly to address the state’s budget crisis.
On Wednesday, just a week after the Supreme Court ruling, Strickland announced that he has arrived at a solution to the $851 million shortfall that causes the least amount of pain for the people of Ohio. He proposes postponing the final phase of the income tax reduction that went into effect in 2005. Even without the 4.2 percent income tax cut, Ohio taxpayers will continue to pay at a rate 16.8 percent less than what it was in 2004.
Indeed, if a family of four’s earnings remain the same as they were in 2008, they are paying less in taxes this year than they were last year because of the slight increase in the personal exemption.
Postponing the reduction for two years will generate $844 million in revenue — slightly less than the $851 million needed to protect education funding and balance the budget, the governor said.
The $7 million will be made up by cutting spending, if necessary.
“Since becoming governor I have worked to protect the tax reforms first enacted in House Bill 66,” Strickland said. “I believe this delay will have a minimal impact on the totality of the tax reforms, which have established Ohio’s tax rates as the lowest in the Midwest.”
The Democratic governor’s leadership in dealing with the state’s fiscal problems, which he inherited when he took office in January 2007, must be acknowledged. He has made tough decisions knowing that his political detractors will use them against him in the 2010 statewide election.
Republicans must know they will have a difficult time holding the governor responsible for the collapse of the budget, seeing as how the GOP controls the Senate. The plan to put video lottery terminals in the racetracks was developed on a bipartisan basis.
Now, Strickland’s proposal to postpone the final phase of the income tax cut must be approved by the General Assembly. Democrats control the House of Representatives.
“If members of the legislature have other ideas, I encourage them to bring them forward for consideration,” the governor said. “My door will remain open to leaders of both chambers and both parties in the coming days as we work to address the challenge before us.”
It should be pointed out that there weren’t many options for filling the hole in the budget. A sales tax increase was one, while slashing education funding by more than $800 million was another. Neither would have been acceptable to the people of Ohio. Raising taxes in the midst of an economic recession is a bad idea.
Slashing funding for education, with the accompanying loss of federal funds, would have been even worse.
Paralyzing education, which is what would happen if the state cuts were coupled with the loss of hundreds of millions of dollars in federal money, is a non-starter.
And just to be clear, postponing the final phase of a tax cut is not an increase — even though Republicans will insist that it is.
It’s important to provide some context to the current budget crisis.
Strickland’s first biennium budget had the lowest growth in spending in 42 years. In response to the national recession, the governor slashed outlays by $1.5 billion.
The current budget reflected a reduction in government spending by nearly $2 billion, compared with actual spending in the previous budget. That was before the $851 million hole.
An objective analysis of Strickland’s management of the state’s finances shows that he has reduced the size of government to the level it was during the Reagan era.
In fiscal year 2009, general revenue fund tax receipts declined by $2.3 billion, or 12 percent, compared with the previous fiscal year — the worst decline in state revenue in at least 50 years.
General revenue taxes available to the state of Ohio will be lower in this biennium than they were seven years earlier.
Here are some numbers to consider:
From February 2007, at the beginning of the Strickland administration, to this September, the state’s workforce has decreased by 4,670 employees.
On Feb. 28, 2007, the total number of state employees was 63,559; on Sept. 16 of this year, the total was 58,889.
Finally, to give further context to the challenges confronting Ohio, it must be noted that more than 20 states are facing the same problems — with Republicans and Democrats at the helm.
In fact, the state with the eighth largest economy in the world is on the verge of fiscal collapse. California is led by one of the most prominent Republican politicians today, Arnold Schwarzenegger.
We point that out to illustrate why politicizing the current situation is cheap — and won’t wash with fair-minded Ohioans.