Happy New Year everyone! And welcome to 2011.
If you haven’t been living under a rock for the past few months then you should already know that the state budget is going to be THE story in Ohio politics well into the summer.
We have some special projects in the works to help cover this important story for our readers but, in the mean time, if you aren’t familiar with the budgeting process or have questions about why we are facing so many problems right now then I urge you to read Steve Hoffman’s piece that will be published in tomorrow’s Akron Beacon Journal.
Steve’s article does an amazingly effective job of describing Ohio’s budget process and the reasons why we are in our current mess. He also does some analysis of some of the options that have been presented for solving the problem (e.g. cutting state workers or reducing their pay) and why many of these options simply won’t work ( e.g. “even if all 58,000 state government workers were fired … the total savings would be … less than the budget hole”).
I think the following four paragraphs provide almost all of the basic information most Ohioans should (but probably don’t) know about the budget process and the current budget shortfall:
John Kasich, the former Republican congressman who won the governor’s race, must present the administration’s two-year budgJohn Kasich, the former Republican congressman who won the governor’s race, must present the administration’s two-year budget plan by March 15. The legislature must act by July 1. Under the Ohio Constitution, no deficits are allowed. If shortfalls develop during the biennium, the legislature may act to plug the holes. If the legislature fails to do so, then the governor must cut spending.
Ohio has two two-year budgets: One for transportation and one for all other operations. Overall, Ohio will spend about $118 billion in the two-year period ending June 30. Of that total, about $54 billion is in the General Revenue Fund, 72 percent of which comes from income, sales and business taxes. Non-GRF money is in more restricted funds and comes from fees, bond issues, licenses and federal grants.
Estimates of the budget shortfall apply to the general fund, which makes a worst-case scenario of a $10 billion shortage look insurmountable. But even if the problem is closer to $4 billion, and state leaders reach outside the GRF to tap other funds, the scope of the problem remains ominous.
How did Ohio get into this fiscal mess? A national recession cut deeply into general fund tax revenues at the same time the state was implementing business and individual income tax reductions enacted in 2005. The state’s income tax rates, for example, are now 30 percent lower than they were just 25 years ago.
Again: go read the full article. It’s worth the time.
And make sure you stick around Plunderbund for what is going to be a very interesting 2011.
Think we were tough in 2010?
We were just getting warmed up.