Slowdown Means Double Headache for Ohio

Most states are feeling a budget pinch, now that the economy is cooling off. But few states face Ohio’s “double whammy.” At the same time that budget specialists have realized tax revenues over the next two years may come in $800 million below projections, Ohio is under pressure from the state Supreme Court to pump a lot more state dollars into schools.

Last May, for the second time in 3 years, a 4-member majority on the high court ruled unconstitutional the way Ohio pays for schools. The justices ordered the state to do more for poor schools and move Ohio away from heavy dependence on local property taxes for education.

The deadline for putting a new school funding system in place is June 15. With only 10 weeks to go, neither the Ohio House or Senate has passed a plan.

So far, Ohio’s most powerful officials – Governor Bob Taft, Senate President Richard Finan, and House Speaker Larry Householder – have yet to agree on the broad outline of a school funding package. They have held several closed-door negotiating sessions to try to forge a compromise from three different plans already on the table. The Governor’s plan would boost state dollars to schools over the next two years by about $800 million.Finan’s plan would boost funding by $1.2 billion. And Householder’s plan would boost funding by $3.2 billion. Latest indications are that the “Big Three” Republican leaders may settle on a package worth about $1.5 billion.

Still, two huge questions remain unanswered. First, will the lawmakers’ school funding reform plan satisfy the court? And second, even if it does, where will all that extra money come from ?

A major tax increase seems out of the question because Republicans dominate all branches of state government, and they’ve promised not to raise state taxes. In 1998, a statewide ballot proposal to raise Ohio’s 5% sales tax by a penny on the dollar was smashed at the polls by a modern-day record margin – 4 to 1. Legislators say they heard the anti-tax message from the voters loud and clear.A second money-raising scheme — legalizing video slot machines and video poker machines at Ohio’s seven racetracks — has been shot down by Taft and anti-gambling church groups.

A third option – slashing spending in non-education programs and shifting the money to schools – is probable, but there are limits to it. That’s because much of the cash saved from spending cuts in non-education programs is now being used to plug projected holes in the state budget, sparked by lagging tax revenues.

Ohio’s prison system has announced it will have to leave 300-350 vacant jobs unfilled to comply with two rounds of spending cuts Taft has ordered. Corrections officials say security at the lock-ups won’t be compromised, but they add that further spending cuts could lead to layoffsof guards and that could mean a breach in security.

If history is any indication, the continuing promise by Ohio politicians not to raise taxes may not be as firm as it appears. In 1981, when a recession hit, even the late Governor, James “No New Taxes” Rhodes, signed a sales tax increase into law. In 1991, another recession hit, and the next year, then-Governor George Voinovich signed a series of tax hikesinto law, despite his campaign proclamation “Read my lips: No NewTaxes.”

Now, it’s 2001, and the ten-year economic jinx has struck Ohio again. Governor Taft had promised not to raise taxes. But in recent months, he has “clarified” that to mean only that he won’t support raising the Ohio income tax or sales tax. And now that tax revenues have slumped and thousands of Ohioans are facing layoffs, Taft is saying that “no new taxes” is not a promise, it’s a “goal.”