Fiscal forecast fickle amid cuts

A recent economic tailspin has county officials worried about next year's funding.
By BOB JACKSON
VINDICATOR COURTHOUSE REPORTER
YOUNGSTOWN -- Word from Columbus that next year's state budget is likely to bring cuts and unfunded mandates has Mahoning County officials squirming.
County commissioners say sales tax revenue and interest on investments are both down due to a recent national economic downturn. And in a county whose budget is driven largely by sales tax revenue, having to do more with less will be daunting.
"I'm concerned because of the general state of the economy," said Commissioner Ed Reese. "The worst part is that it's a trend. It's not going up."
Mahoning County has two five-year, 0.5-percent sales taxes, for a total of 1 percent. One of those taxes expires Dec. 31, 2002, the other expires at the end of 2004, said county Administrator Gary Kubic.
Bad fiscal news: Reese said counties across the state are bracing for a double-shot of bad fiscal news. Legislators are projecting a 6 percent annual reduction in local government funds to help cover a projected $1.5 billion shortfall.
The plan being proposed by Senate Republicans would also include a two-day reprieve from paying sales tax on footwear and clothing, probably in March, which could affect counties that levy their own sales taxes.
The state is likely to require counties to pick up funding for programs that will no longer get state money, Reese said. But with the county taking in less money, taking on more financial responsibility will be heavy burden.
"It's just more and more unfunded mandates. They're sending it all down to the local level and we're left to deal with it," he said, noting that the county's sales tax revenue is about 5 percent lower than last year.
Interest earnings: Compounding the problem is that interest on investments is down considerably from last year, said Treasurer John Reardon. And like Reese, he expects things to get worse before they get better.
"Moving into 2002, there is a legitimate concern," Reardon said. "Interest rates are at 2.4 percent and going down. I think it could be as low as 1.9 percent in January."
He was referring to STAR Ohio, a mutual fund offered through the state treasurer's office. Interest at the beginning of this year was more than 6 percent, he said.
Interest earnings is the second-largest source of revenue for the county, Reardon said. The county still has some investments from last year earning about 6 percent interest, but those will eventually mature and have to be replaced with something else.
"And that something else is way, way lower," Reardon said.
The average rate for investment earnings last year was about 6.5 percent, but has fallen this year to about 4.5 percent, Reardon said. He expects it to drop to around 3.5 percent next year, resulting in a loss of about $3.5 million a year.
"My sense is that there is going to have to be some belt-tightening around here next year," he said.
Cutbacks: Cuts are being planned in the Department of Job and Family Services, which was already faced with losing a sizable chunk of state funding for its Temporary Assistance for Needy Families program.
That allocation is based on the number of people on the welfare rolls, said Dee Crawford, JFS executive director. The number of people has decreased because of new state rules requiring clients to get a job and get off public assistance.
But Crawford said there is still a need for money to pay for support services like transportation and child care for people so they can keep their jobs. Without state funding, that money will have to come from the county, she said.
But the with the county in dire financial straits, she's wondering where the money will come from. And to make matters worse, Crawford said she's recently started to see an increase in the number of people coming back into the welfare system, which will be a further drain.
Crawford said she's already planning to cut funding for discretionary programs and some contract services in an effort to free up money for other more critical programs.
"That's not a pretty picture for the holidays, but that's the way it is here," she said. "We've got to do something to spur this economy. We need jobs that pay more than $5-$7 an hour."
Reese said one bright spot is that car sales have picked up, largely because of zero-percent interest offered by dealers as an incentive for people to buy. The sales tax from such big-ticket items will help pick up some of the slack.
Reese said the County Commissioners Association of Ohio has fought hard against the proposed budget changes and will continue to lobby against them.
"That's the best thing we can do at this point," he said.
bjackson@vindy.com