COLUMBUS, Ohio – Indiana newspaper writer John Soule’s 1851 advice to “Go West, young man,” made popular by American newspaper editor, reformer and politician Horace Greeley, became the mantra for migration to new, untamed lands where fame and fortune could be had.
At one time in the early years of the nation, Ohio was the west. It no longer is, of course, but that doesn’t mean it shouldn’t stop looking west to see what some western states are doing to solve their budget problems, which are not dissimilar to what Buckeyes will face in about six months.
Looking west to see challenges, possible solutions
By looking west today to glimpse its future, Ohio’s next governor and legislature, who necessarily will have to arrive at some accommodation if the state’s budget is to be balanced as the constitution demands by the end of June 2011, can see with more clarity some choices other states are making to cope with filling the great divide between revenue shortfalls and operating expenditures that may run contrary to election-year campaign claims that may falter or fail in the face of grim economic reality.
Whether it’s second-term Democratic Gov. Strickland or first-term Republican Gov. Kasich, the task that awaits them and the 132 members who will constitute Ohio’s 129th General Assembly will put all the rhetoric of election-year campaigning to the test when economic necessity confronts economic reality head-on, as will happen next year when Ohio leaders come face-to-face with a budget conventional wisdom predicts will be $8 billion or more out of balance.
In addition to what some claim could be an $8 billion budget gap – current Ohio Auditor Mary Taylor CPA, the running mate of John Kasich, said it could be $9 billion or more – Ohio is required to start paying Washington back on more than $2 billion in loans to prop up its battered unemployment compensation fund.
Figures by The Center on Budget and Policy Priorities (CBPP) on states with projected FY2011 budget gaps, shows $2.5 billion in shortfalls before budget adoption and $463 million in current FY2011 gap projections. Total Ohio shortfalls, according to the group that focuses on fiscal policy and public programs that affect low- and moderate-income families and individuals, are $3 billion, representing 11.6 percent of the FY2010 budget.
Ohio’s 2009 budget gap was $733 million, while its 2010 budget shortfall was $3.3 billion, CBPP reported, based on information supplied by Ohio’s Office of Budget and Management.
The Ohio Budget Planning and Management Commission, formed last year, has set two meeting dates to hear from state legislative and management experts, and others familiar with state budgeting problems. The group has been criticized for not meeting sooner, but testimony at upcoming meeting should clarify the depth of concern state leaders should exhibit going forward on how to keep the state from falling further, as it struggled to rebound from the recession that has hit it hard.
Budget canyons open in Arizona
In The Grand Canyon State, where the governor and legislature set the issue of comprehensive immigration control on fire like never by passing a law requiring police to determine the status of people they lawfully stop and suspect are in the country illegally through proof of citizenship, hiking the state sales tax a percentage point, from 5.6% to 6.6%, for three years was done to avoid brutal budget cuts.
Arizona Gov. Jan Brewer argued that even for a tax-averse state like hers, cutting its way out of its fiscal fix wasn’t possible. The penny sales tax increase Arizona voters approved in Mid-May elections, which should generate $1 billion per year in new revenue, was said to be virtually impossible in a state like Arizona, whose political roots stem from a Hall of Fame Libertarian Republican like Barry Goldwater to the state’s current senior U.S. Senator John McCain, who has veered even further right to win against a candidate who has been christened in the crucible of the Tea Party movement.
Gov. Brewer said of the victory many political pundits said couldn’t happen in a state like Arizona, at this time: “Arizonans have spoken today. They told us our faith in them was well-placed…. They told us that doing the right thing almost always means doing the hard thing.”
California no longer glittering with gold
In the Golden State of California, the gaping budget gap is as wide as one of the grand canyons in the eponymous national park located east of it, and bridging the divide, about $24.3 billion according to reliable estimates, will take Herculean efforts to avoid default, as some say could happen while others say that can never happen, and keeping the gears of government grinding for the basics of daily operations.
California State Controller John Chiang estimates in one report that California is less “50 days away from a meltdown of state government.” The aftershock to a state like Ohio from the failings of a far left coast state like California is that borrowing could be made harder for other governments who are likewise experiencing budget gaps that cannot be filled because political ideologies will not accommodate necessary accommodations.
California, just three months ago, agreed to a budget deal that sealed a $40 billion gap by eliminating $15.8 billion in spending, raising the state sales tax by a penny temporarily (as was done in Arizona), borrowing $5.4 billion and using nearly $8 billion in federal stimulus funds, reported CNNMoney.com.
Californians are being told to expect fewer teachers, larger class sizes, fewer police, and more public offices closed on weekdays, as part of a correction that could also come down heavy on state spending for government, education and health, three sectors in which employment had increased since the start of the recession but which are also dependent on government spending.
Ohio, 45 other states face daunting budget gaps
Writing on this very grave topic in tomorrow’s Washington Post, staff writer Ezra Klein quotes Bruce Bartlett, a conservative economist who worked for Ronald Reagan, George H.W. Bush and Jack Kemp, saying that when the “history of the current crisis is written, much of the blame will be placed on the sharp fiscal contraction of state and local governments.” Bartlett told Klein that economists will view this as a “preventable error equivalent to the Fed’s passive shrinkage of the money supply in the early 1930s.”
Calling state budgets in bad shape the “anti-stimulus,” Klein cites about 46 states that will be facing budget gaps that will require them to cut spending or raise taxes, as Arizona has done and as California is wrestling with doing.
“The argument goes to the very role of stimulus in the economy,” Klein writes, adding that, based on data for 2009 and 2010 that is projected forward for 2011 and 2012, total state shortfalls will reach $610 billion.
Kasich, Ohio Republicans pledge no new taxes
In Ohio, GOP candidate John Kasich has signed a pledge to not increase taxes. Gov. Strickland, while he has raised as many fees as he could get away with in the last budget and reduced spending by $2 billion or more that included reducing the state’s workforce by 5,000 or more workers, has steadfastly said a recession is not the time to raise taxes.
Kasich, a former Ohio congressman and managing director at Wall Street’s now defunct investment banking firm of Lehman Brothers, signed the “taxpayer protection pledge” sponsored by the conservative Americans for Tax Reform.
Kasich’s campaign press secretary Rob Nichols defended the act Strickland’s campaign chief called a “gimmick,” saying his boss “knows that lower taxes are the key to creating jobs and reviving our economy.”
In step with Kasich, who says he wants to eliminate the state income tax over time as that option becomes viable, Republicans in the Ohio legislature have waged an unsuccessful crusade to bring legislation to a vote they say will drastically downsize government, encourage business development through fewer state regulations and lower taxes.
Strickland, Ohio Dems call GOP tax plans catastrophic
Democrats, who control the Ohio House for the first time since the early 1990s, have declared Republican overtures in this regard so flawed that they have scrubbed any further hearings on
the GOP’s mainstay bill, H.B.400, saying it would threaten Ohio’s financial stability so much that no further hearings are necessary.
“The consequences for eliminating the state’s largest single source of revenue [the income tax] would be catastrophic,” Rep. Letson, Chair of the Ohio House Ways and Means Committee, said in late May. “The testimony from library officials, schools and Ohio’s safety services made it clear that pursuing such a reckless proposal would seriously threaten Ohio’s financial stability,” Letson said, adding, “At this time, I see no need to have further hearings on such a fiscally irresponsible plan.”
Projections made by Ohio’s non-partisan Legislative Service Commission reports that local governments and libraries would experience a 67 percent reduction in funding as a result of a bill sponsored by 31 out of 47 House Republicans. LSC said that the bill would cause the Local Government Fund to lose $30 million in 2011, and as much as $450 million once fully implemented. Additionally, it said, the Public Library Fund would lose an estimated $16 million in 2011 and $271 million once fully implemented.
State budget experts said the proposal would result in an $814 million budget shortfall in 2011 and over $12 billion in budget shortfalls once fully implemented, which Kasich and fellow Republicans said could occur within the decade.
Ohio’s public libraries could see 67 percent in cuts, Ohio schools could see over $2 billion in funding cuts and communities across the state would see service cuts or even tax increases.
If Ohio shutters more of its government operations, as could happen if Republicans candidate win the governorship and the Ohio House – the Ohio Senate is firmly in Republican control now as it has been since 1984 – it’s unemployment rate, still historically high at 10.7 percent, could bump up another two percentage points.
On the Governor’s Website, the Strickland Administration says it is “guided by a commitment to living within its means while providing the essential health, education, economic development and public safety services Ohioans rely on every day.”
Faced with unprecedented economic challenges and declining state revenue, it says, “Ohio’s commitment to rooting out waste and finding efficiencies is not a luxury–it is an obligation. And, it’s just plain common sense. Save a penny here, a dollar there. It all adds up to leaner, more efficient state government that is continuously improving and producing better results at less cost.”
Government cuts back would hurt private sector rebound
On a national scale, big state and local government cut backs could increase the unemployment rates by as much as 3.6 percent, setting a new post war record high that surpasses the 10.8 percent rate set in December 1982.
Including the collateral damage such cuts would cause for the private sector, scary scenarios like these should be taken seriously.
As states who want but who may not get the amount of state stabilization funds from Washington they want because those funds are expected to dry up as Republicans decry more spending and Democrats fearful of winning re-election walk past the graveyard of November elections, a cessation of spending would lead to state workers losing their jobs, halting their spending, which would ripple effect its way to other workers.
“Nobody likes taxes,” Arizona Gov. Jan Brewer said. “I pushed back and pushed back, but the more I looked at the figures from my economic people and my policy people, there was no other way.”
Ohio may not like what it sees by looking at what some western states are doing, but not looking west only keeps the blinders in place that if not removed in time could lead future state executive and legislative leaders over a cliff from which their fall could be long and the landing hard.
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