Promises of tax cuts and the state's $851 million budget deficit

The state of Ohio is facing an $851 million budget deficit following a decision from the Ohio Supreme Court that a source of funding, income from slot machines at racetracks, is subject to a ballot challenge and cannot be implemented as planned.

Just like most politicians who don't want to make the tough decisions, Gov. Ted Strickland and the Democrats in Columbus have decided that the best thing for the state, the residents and our current economy, is to 'delay' a planned income tax cut.

Yes, you heard me correctly. They believe that the best thing to do is to raise your taxes, taking more of your money for their purposes. The tax cut they want to 'delay' is part of a phased-in plan that was passed several years ago. Interestingly, most of the organizations that rank states for business-friendliness or for tax purposes have touted this phased-in plan as a good thing for Ohio.

But despite the fact that the lower tax rates appear to be working in our favor, the easiest way to deal with a budget deficit is to raise taxes - no matter the dire negative consequences to the residents and the state economy.

Now comes some members of the Republican Party who think that 'delaying' only two-thirds of the cut is a good thing.

Perhaps they've missed the lesson.

The Plain Dealer has some interesting quotes in their story on the GOP plan:

Ohio Senate Republicans rolled out their plan to fill an $851 million hole in the current state budget Wednesday, but Senate Democrats immediately shot it down.

"It is in conflict with our core values and counts on money that can't be relied on," said Senate Minority Leader Capri Cafaro, a Youngstown-area Democrat.

Let's start with this one... Is Cafaro really saying that letting Ohioans keep their money that was promised to them 'is in conflict with' his core values? I'm not really sure.

And the hypocrisy of criticizing the Republican plan that 'counts on money that can't be relied on,' is just priceless. State Auditor Mary Taylor said the entire budget these same people voted for and touted relies upon one time funds that 'can't be relied on' for continuation. And the huge hole in the budget was created for the same reason - relying upon money that can't be relied upon.

Of course, if people and businesses continue to flee the state because of the high tax rates and bad decisions made in Columbus, even the 'delay' in the income tax cuts will turn out to be money that can't be relied upon.

The Republican plan would delay two-thirds of a 4.2 percent state income tax cut. Gov. Ted Strickland and fellow Democrats in the General Assembly want to suspend the entire cut until 2011. Republicans instead proposed that the rest of the money to fill the budget gap -- which resulted from an Ohio Supreme Court decision that slot machines at racetracks are subject to a ballot challenge -- would come from a variety of sources.

Those include $200 million in casino license fees, $50 million from sentencing reforms, a $30 million raid on the state's Housing Trust Fund as well as $10 million from oil and gas drilling at Salt Fork State Park.

So rather than drill for oil and gas at a state park, Democrats want to tax us more. Where are the priorities here? What's more important to them: letting Ohioans keep the money they've earned and keep a tax cut promised several years ago, or drilling in one of the state parks? Seems like a no-brainer to me...

And raiding the Housing Trust Fund appears to be no different than raiding the tobacco settlement fund - the politicians are good at raiding funds designated for a specific purpose whenever they are faced with that choice or cutting spending.

Strickland doesn't think the Republican plan is a responsible way to solve the budget crisis, said his spokeswoman Amanda Wurst.

Really? The 'responsible' way would have been to not rely upon a questionable source of funding in the budget in the first place.

On the other hand, what is more responsible? Keeping a campaign promise to not raise taxes or taking the easy way out of a budget deficit by raising taxes?

I'm sick and tired of politicians telling us they've cut everywhere they possibly can while actually increasing spending in many areas where it is not required. Our elected officials in Columbus should just start eliminating departments, cutting funding to projects and tasks that are not mandated, reducing the szie of Ohio's government and tightening the state's belt.

That's what we're all doing - going without things that we'd like to have because we don't have the funds to cover their costs. Will some special interests be upset? Yes - they will. But better that some special interests be upset over their loss of funding than all Ohio residents have to pay a higher tax just so some politician won't have to explain logic and reason and priorities to them.

As for all of us - let us be sure to learn a very valuable lesson: promises of tax cuts aren't worth the paper they're written on.

Keno revenue comes up short

I saw coverage of this in various news outlets over the last couple of weeks, but nothing locally. I may have missed it, but just in case....

The Ohio Lottery reported that year-end figures for the new Keno game were significantly short of projections. They were budgeted at $73 million for the year which ended July 31. Total collections, however, were only $30 million - 41% of the estimated amount.

From The Columbus Dispatch, which questions the results in relation to the new video slot machines:

"The video-slots plan will raise $933 million for the current two-year budget, the governor predicts.

About half -- $455 million -- will come from license fees paid by racetracks that install slot machines. The rest, $478 million, is the state's projected share of revenue generated by the slots.

How likely is Ohio to see $478 million? Amanda Wurst, Strickland's spokeswoman, says the governor's slots estimate takes into account the slumping economy. But if the same thing happens to slots revenue that happened with Keno, then slots will generate just $196 million for Ohio, leaving a $282 million hole in the state's 2010-2011 budget.

And even this is contingent on the state winning a lawsuit challenging its right to authorize slot machines without a statewide vote."

This shows that, even with gambling revenue, nothing is guaranteed. So what's next?

The Keno revenue was counted upon to avoid deep cuts in education funding. Now that it's not even half of projections, what decisions will the state have to make regarding education disbursements? Will there end up being cuts to local school systems?

Considering that we will be electing school board members this November, I'd be interested in hearing their thoughts on this on the campaign trail.

And we also have Issue 3 on the ballot in Ohio which would allow casinos in certain cities. Will the lack of projected revenue from Keno have an impact on that vote?

stay tuned....

Would $17/week keep you in Ohio?

That's the question and it appears that state legislators believe the answer to the question is 'yes.'

According to today's paper,

"The program, watered down from a bill offered by Sen. Stephen Buehrer (R., Delta) and approved by the state Senate, offers cash grants to home buyers that would be second mortgages and would disappear after five years if the graduate stays in the state, automatically adding to the equity in the home. "There would be a cap on income, so we would not be giving a free lunch to people with half-a-million-dollar jobs,'' Mr. Buehrer said. His original plan had no income limits and would have offered larger grants to those earning a higher degree."

So we're going to take tax money from everyone who's already struggling to stay in our homes (remember all the political fretting over Ohio's highest foreclosure rates????) and just give it to recent college grads as a gift? How does that help all Ohioans?

The simple answer: it doesn't.

Taking tax dollars from some in order to redistribute it to others is exactly what Republicans in Columbus have been criticizing the federal government and the President for: redistribution of wealth by politicians who think they know better who 'deserves' the money. Yet they go and do the exact same thing in Ohio. Do they expect that we won't notice?

And, there are limits on income in order to qualify. If you're one of the few graduates making a good living (no more than $61,800 for a one or two-member family in Lucas County) - the kind of wage earners we really want to keep in the state - you don't qualify. This would be only for those of lesser incomes. As Buehrer explains, "There would be a cap on income, so we would not be giving a free lunch to people with half-a-million-dollar jobs."

Really? Do we really have college graduates going into 'half-a-million-dollar jobs' upon graduation? In Ohio? And if this is to keep college graduates in the state, we have to know which of those graduates are most likely to leave. What do you think: the ones with potential incomes above $50,000 or those with potential incomes below that amount? So if only lower earnings are eligible, will we really get the results touted?

They must think that keeping college graduates here for five years is more important than providing a state environment that is attractive to everyone. And since it's only for five years, how likely is it that these same grads will take this option, wait the five years, and then flee? Well, that's a good question - and one that isn't answered.

So how much will this cost? Again, a good question without an answer:

"The state budget contains no appropriation for the program and there are no estimates on the revised program's cost."

The paper uses an example of 3% of the purchase price of the home for the second mortgage bribe. So let's take a look at the 'incentive.'

If you're earning $60,000/year, it's likely you'd be looking at a house in the $150,000 range (based upon the suggestion that your mortgage be no more than 2.5 times your earnings). A 3% second mortgage on a home valued at $150,000 is $4,500. When you divide that by the 5 years, that's $900 per year - or $17 per week.

Would you stay in Ohio for $17 per week? Or might a recent college graduate weigh that $17/week against other factors and components of leaving the state and getting a better paying job in a more taxpayer-friendly state?

Being a college graduate, hopefully they've got the financial and educational wherewithal to effectively evaluate, for a 5-year period of time, the value of $17/week for staying in Ohio versus leaving the state and getting lower overall tax rates, higher earnings potential, better climate and other such amenities, including getting a good-paying job in the first place (something lacking in Ohio in many areas right now).

So what value does this unfunded program really have?

None - except for the politicians who want to claim they've 'given' us something, 'helped' keep people in Ohio and 'deserve' our vote as a result.

Why should libraries be exempt from cuts?

They shouldn't - not really.

In today's economic environment and record deficits by our governments (federal, state, county, municipality), there is no entity or recipient of taxpayer dollars that should be exempt from reductions.

Despite all the doom and gloom predictions if government doesn't keep spending at the same - or even higher - levels, the world will not end. In our own families, we're setting priorities and making decisions about where and how we spend our limited dollars. We are cutting out many things in order to ensure that the essentials are covered.

Government should be no different.

First, the solution from so many who are opposed to cuts is that taxes should be raised - if they say anything at all. Most are just saying 'don't cut MY pet program' and are pretty silent when it comes to answering the question of where cuts should come from if their program's funding remains the same. When they do suggest a solution, it is to raise taxes so nothing needs to be cut.

Of course, those of us who are paying those taxes are finding our funds reduced as well, so taking more from people who really have nothing left just compounds the problem - it does not solve it. And the detrimental impacts of additional taxes are severe and long-term (think of loss of population and businesses...).

Second, there is no reason that any program or project should be sacrosanct when it comes to 'helping' the state meet its budget. I've applauded Gov. Ted Strickland's decisions to reduce the state spending in the past and for his position on not raising taxes. (Though I did take exception to his change of position when he decided that raising fees is not raising taxes despite his prior comments that an increase in fees is an increase in taxes.)

His approach has been to impose across-the-board cuts with lesser priority areas getting larger cuts. Libraries hold no more special position than anything else in government. In fact, they are far less of a priority that certain mandated functions. While library supporters may not like this, it is true and must be considered as part of an overall budget.

Third, there is certainly room in all budgets to make adjustments. The main branch of the Toledo Lucas County Public Library is open 9 a.m. to 9 p.m. Monday through Thursday and 9 a.m. to 5:30 p.m. on Fridays and Saturdays. Since so much of the library focus is on children (and just what isn't these days when it comes to justifying public funding), there is certainly room to reduce hours, especially during the school year when kids cannot use the library during a normal school day. Additionally, most operations are not open 12 hours a day. Even our malls have reduced their hours of operations - so why not libraries. And if meeting the needs of the public is important, then why not have more weekend hours and close down on one of the week days when most adults are at work?

I am certain that anyone looking closely will find waste and inefficiency in any government operation - and certainly government should streamline itself, either voluntarily or forcibly by taxpayers who refuse to allow increased taxes. Libraries are no exception.

As a side note, I cannot express how angry I am that our library has a huge yellow and black ad that pops up before allowing me access to the library website. The ad tells me that the governor wants to cut funding by 50% and has a link for me to send an email to the legislators. Since our library is publicly funded, and this ad has no disclaimer on it, I can only conclude that tax dollars are being used to campaign for more funds. I know that some legislators want to make it against the law for publicly-funded agencies, etc., to use any of their assets to lobby for more public funding. Maybe they should start with the libraries.

There is one glitch in Strickland's plan to reduce funding, though. When the state decided to change its tax system (which has improved Ohio's rankings on tax-friendly charts), counties and libraries and other entities who received 'Local Government Funds' were found to have huge reductions as a result of the change. At that time, there were agreements reached which would ensure stable levels of funding during the new tax structure phase-in period. So there is some expectation that libraries would not have reductions as a result of the new tax structure.

However, the current circumstances have nothing to do with the change in tax structure and everything to do with the overall economy. The agreement for continued state funding did not anticipate huge state deficits - and why should it, government rarely plans ahead for downturns...

So given the challenges faced by everyone, libraries need to 'share the pain' especially if they also expect to 'share the wealth' when times are better.

Fees are taxes

Governor Ted Strickland gave his state of the state address last week and pledged not to raise taxes to help balance the budget, even in these difficult economic times.

However, when his budget was made public, it included increases in 120 different fees - from drivers licenses and car registrations to new business filings.

It should come as no surprise that I believe fees are, indeed, taxes. But you might be surprised to know that the Governor agrees with me.

Shortly after taking office in 2007, Strickland made it perfectly clear that he opposed both higher taxes and higher fees as a way to raise more money, saying, "I think higher fees are higher taxes." Columbus Dispatch, 2-3-09

So, if higher fees are higher taxes and he's promised not to raise taxes, how can he raise fees?

Oh, well, you see, "not every fee is like every other fee."

Translation: now that I want to raise fees to balance the budget, they're not really a tax.

Priorities, not special interests

For the 2008-09 fiscal year, Ohio will spend $21.9 million on the Ohio Arts Council. That's down from their original biennial budget of $24.9 million, as a result of the state's budgetary issues.

In case you've never heard of the OAC, they are "a state agency that funds and supports quality arts experiences to strengthen Ohio communities culturally, educationally and economically. With funds from the Ohio Legislature and the National Endowment for the Arts, the OAC provides financial assistance to artists and arts organizations."

Some of the local recipients of funding from the OAC include the Young Artists at Work program through the Arts Commission of Greater Toledo, small amounts to Bravo Magazine, and college professors/instructors who've received fellowships (usually $5,000 or $10,000). They have provided operational support to the Toledo Museum of Art, Toledo Opera Association, the Toledo Orchestra Association, Inc., Toledo Ballet, Toledo Jazz Society, Toledo Botanical Garden and the Arts Council Lake Erie West. Money from OAC has also supported performing arts seasons at Lourdes College and Toledo Cultural Arts Center.

I have always had a problem with government funding of 'the arts.' I don't believe that government should fund any particular industry and the arts are certainly a particular industry. My basic premise is that individuals who so choose would fund arts - and probably be more capable of doing so if the government didn't take so much of their personal funds in the first place. Additionally, as with anything governments do, the bureaucracy established to 'administer' any dedicated funds takes its own percentage off the top, resulting in less funds than what individuals could provide without the third-party costs of government.

But - that's really not the point of this post. My point is priorities. Even if you believe government funding of the arts should be done, is it the most important thing government should do – and at the expense of other government spending?

In January of this year, Governor Ted Strickland announced $733 million in budget cuts due to the economic condition of the state. One of the biggest budget reductions was $31 million from the Department of Mental Health. Could the state have eliminated the OAC and, instead, funded the Department of Mental Health? Yes.

Another cut was to the Department of Aging which was to lose $17.9 million in FY 2008. Could the state have eliminated the OAC and, instead, funded the Department of Aging? Yes - and with some money left over.

What about the $25.8 million that was earmarked for the state Department of Development? Such funding is key to Ohio's chances of attracting and retaining businesses and their jobs, politicians tell us. What would have been a better use of limited tax dollars: attracting new businesses or subsidizing 'starving artists'?

Instead of going through the state organization and eliminating unnecessary or non-mandated functions, departments had across-the-board cuts. As a result, everyone was equally unhappy, but the size and scope of government was not really reduced. The hard part of governance is setting priorities and sticking with them. Every organization that receives funding through the OAC will lobby for continued funding. Everyone who gets funds will say 'don't cut us.' But politicians and decision-makers rarely ask: if we don't cut you, who should we cut? And if they do, the response is almost always: don't ask me - that's your job.

Well, if that's the case, then go through and eliminate the non-mandated expenditures. It's actually a very easy criterion to meet, but often so very hard to get politicians to do because they don't want to risk alienating any group of constituents who might decide to oppose them in their next re-election bid.

The City of Toledo is facing the same circumstance. We had city council members insist on funding the city's Youth Commission ($2 million in 2008) and pools (about $500,000). Council is now faced with a $10 million budget deficit to address before the end of the year, including a reduction in the number of recruits in the new police class.

So what is more important: pools and 'hip hop' concerts or police officers?

I pick police every time - and I think most people would, considering that, without police, pools and concerts might not be safe places to be.

And that's the point: priorities. we don't have good ones when it comes to government spending. What we have is the priority of elected officials to try and placate everyone so as not to make enemies, thus ensuring they continue to have support for staying in office. These elected officials stop representing us when their priority is such as this - and we are to blame, because we reward them with re-election while our city and state continue their slide to the bottom in terms of growth, population, employers and jobs.

So - what do you think our priorities should be? And what are you willing to do to ensure the politicians support them?

Potential local impact of state budget cuts

The information in this post is courtesy of the County Commissioners Association of Ohio.

As Governor Ted Strickland deals with projected budget shortfalls of between $733 million and $1.9 billion, reductions in department spending and possibly layoffs are being planned.

As counties are the local arm of state government, cuts in state department budgets usually impact county department budgets. Here is a recap of some of the planned cuts and how they may impact us in Lucas County.

Department of Job and Family Services

This department is looking at cuts of $67.5 million in FY08 and FY09. The department is hoping to absorb most of the cuts internally through attrition, early retirement incentives and potentially reducing 300-600 positions.

County departments are being asked to see what can be done internally as well. ODJFS does not want to mandate across the board cuts, but wants to see what county JFS departments can come up with first.

They plan to institute a 10% reduction in the child support state match. However, they will continue to move forward with expanding coverage for adult dental and increased rates for community healthcare providers. Planned increases in in-patient hospital reimbursement rates as well as recalibration rates for hospitals will be delayed.

Department of Aging

They have funding to continue core activities without service interruption, including new PASSPORT enrollment as well as funding for those on the waiting list for Assisted Living. Plans are for the governor to seek legislative approval to eliminate the 3% Medicaid reimbursement rate increase in FY09 for PASSPORT and Choices providers that was previously approved as part of the budget bill.

Department of Mental Health

Closing two psychiatric hospitals has already been reported, with some patients being shifted to units here in Toledo. This department plans to reduce staff and equipment and contract spending by 20% each.

Department of Mental Retardation and Developmental Disabilities

In addition to internal cuts, they plan to move 150-170 people from developmental centers to Martin waivers, allowing for closure of some cottages in development centers.

*****

One thing I must do is compliment the governor on the budget projection process. He and his staff looked at three scenarios: the economic picture staying the same - getting a bit worse - and getting bad. He's basing these cuts upon those projections. This is a useful and pragmatic approach that counties and cities should take as well. It would certainly put into perspective the serious implications such economic downturns have upon public budgets and would force people to prioritize necessities over niceties when it comes to public spending.