Report outlines impact of budget cuts

As state government prepares to take up the next biennial budget in 2013, a policy group is urging Ohio's leaders to consider returning money to local governments to counter the deep cuts of the previous spending plan.

Policy Matters Ohio, a nonpartisan think tank focused on economic policy, released a report last month outlining the impacts of back-to-back 25 percent cuts to the Local Government Fund and other changes, including accelerating the phaseout of the tangible personal property tax reimbursement and the looming elimination of the estate tax. In the report's conclusion, the group recommends "a more balanced approach to rebuilding Ohio's common wealth and job base."

"We think that some of the money should be reinstated," said Wendy Patton, senior project director for Policy Matters Ohio. "We think that some of the cuts went too far."

"We would have preferred (for the current budget) to see much more revenue raised. But what we saw was no revenue raised," she said.

As a means of increasing revenue, Patton suggested restoring the state's top income tax rate, pinning part of the responsibility for the reported $8 billion budget hole the cuts helped address to tax cuts given in 2005.

Policy Matters' position is that returning money to local governments - counties, municipalities, townships, schools and entities like county mental health boards - will reverse cuts to services and improve quality of life, making Ohio more attractive to employers in the process.

Rob Nichols, spokesman for Ohio Gov. John Kasich, said raising taxes and increasing spending will have the opposite effect.

"Their line of thinking - raising taxes, growing government, killing jobs - is what got us into this mess in the first place," Nichols said.

Ohio lost more than 400,000 jobs during the administration of the Republican Kasich's predecessor, Democrat Ted Strickland, Nichols said. During Kasich's time in office, the state has gained 132,900 jobs.

"It's just differing philosophies," he said. "Ours is one focused on job creation and theirs (Policy Matters) is one on growing government. And we're not going to do that."

Impact

According to Policy Matters' report, by the end of fiscal year 2013 in June, Washington County governmental units will have received $13.1 million less for the budget's two-year period than it did in 2010-11. The bulk of that - $8.5 million - came from school districts.

According to www.cutshurtohio.com, with statistics compiled by Policy Matters Ohio and Innovation Ohio from state records, the biggest loser in terms of school funding was the Warren Local district, projected to see nearly $2.6 million less in this biennium than the previous one.

Superintendent Tom Gibbs said the district was "already struggling to make ends meet" when the current budget was passed. Changes like moving up the phaseout of reimbursements for tangible personal property tax - which costs the district about $430,000 a year until the amount reaches zero - came a year after the board of education voted to make about $1.4 million in cuts, including the controversial elimination of high school busing, after multiple failed bond issues to construct new schools.

"It essentially put us in a spot where what we reduced, we lost nearly that much in income," he said.

One reason schools are receiving less money is that the state didn't replace the federal stimulus money used to shore up its budget in 2010-11, which Nichols noted had been announced in advance.

The report says Washington County will have lost $3.2 million, including Local Government Fund distributions to townships. County commissioners agreed earlier this year to increase the share of the county's 1 percent permissive sales tax going toward township bridge and road repairs in part to help offset those cuts.

Meanwhile, mental health services in the county are projected to lose $551,000. Brent Phipps, CEO of L&P Services, said these and previous cuts have limited the amount of help they can provide to mentally ill individuals with limited financial means.

"People calling in need to be in a crisis situation before they can get treatment," he said, nothing the Washington County Behavorial Health Board won't provide reimbursement otherwise. "We'd like to go back to providing a sliding fee scale for people who need mental health care."

That would allow them to help individuals before they reach a crisis situation, Phipps said.

The report lists a loss of $399,000 for the City of Marietta, where Mayor Joe Matthews said more services are being provided with fewer employees.

"We need more people; there's no doubt about it," he said.

Matthews noted some of the staffing reductions preceded the period targeted in the Policy Matters report, but said losing that funding certainly didn't help the situation.

County senior services are on pace to lose $143,000, the report says. The O'Neill Center in Marietta only gets a portion of that, but director Terry Zdrale said they have nevertheless felt the pinch. So far, the center has been able to maintain services like its adult day care and homemaker program with the help of fundraising and the county senior levy, but the current level won't continue to be enough for the area's aging population.

"The demand is increasing," Zdrale said. "Maintaining the status quo really isn't going to meet the demand in the future."

Going forward

Gibbs said he doesn't expect all of the cuts to be reversed in the next budget, but he hopes there's at least enough restored that districts can respond to inflationary changes.

"You can't expect school systems to operate in such a fashion that not only do you ask them to reduce but you say, 'Now that the economy is improving, we're not going to share that with you,'" he said.

Ohio Rep. Andy Thompson, R-Marietta, said he'd like to at least see funding for local governments stabilized, not cut further in the new biennial budget. He said there is new revenue on the horizon, not in the form of tax increases but as a result of shale-drilling activity, casino revenue and more people being employed.

Even though there is good economic news, raising taxes now would be "premature," Thompson said.

"Given what's going to happen at the federal level," he said, citing the fiscal cliff standoff and the advent of Obamacare, "I think raising taxes elsewhere is going to have a depressing effect."

Ohio Rep. Debbie Phillips, D-Albany, attempted to attach an amendment to this year's budget correction bill to return surplus money that went to the state's rainy day fund to those local entities. When that failed, she introduced it as a standalone bill, but it has not received a hearing, she said.

"So many of the core services that people depend on ... are provided at the local level," she said.

Possible sources of revenue Phillips has identified going forward are a proposed increase in the oil and natural gas severance tax to match other states and capitalize on the shale drilling going on in the state. She said Kasich has targeted that money for additional income tax cuts, but she would like to see it benefit local governments. Closing tax exemptions that are no longer beneficial is another possibility, she said.

Matthews said he is optimistic about Marietta's immediate fiscal future, with increased revenue anticipated and plans already in the works to hire additional summer workers.

But other agencies continue to face uncertain futures, with levies for the county's mental health and children services recently rejected.