Ohio faces $640M in budget cutbacks

By Marc Kovac

Ohio has seen declines in its two major revenue sources: personal income tax and sales tax.

COLUMBUS — The state will have to cut an additional $640 million from its budget for the current fiscal year — and it faces a shortfall of $7 billion for the coming biennium.

“Basically, over the next two years, Ohio will confront the most serious erosion in revenues that it has experienced in the last 40 or 50 years,” state budget director J. Pari Sabety said Monday.

Sabety, Gov. Ted Strickland and Lt. Gov. Lee Fisher met with reporters Monday in the governor’s Cabinet Room to outline the updated state budget projections and give notice of the challenges facing the administration and lawmakers in coming years.

Among the economic trends affecting the state’s operating budgets:

UNationally, 1.2 million jobs have been lost in the past year. “On a monthly basis, job losses may reach 300,000,” Sabety said.

UConsumer confidence has fallen to its lowest level in 40 years — “since records have been kept on consumer confidence. And retail sales have declined by 2.8 percent,” Sabety said.

UThe housing crisis has resulted in the loss of $4.3 trillion in household wealth in the past year. “Every $1 lost in household wealth reduces consumer spending by 5 cents over the next two years,” Sabety said.

UThe state already has cut $1.3 billion from the current biennial budget through cash management and spending reductions. An additional $640 million will have to be cut before the end of the current fiscal year. The state’s work force has been reduced to 60,540 from 63,568 as of March 2007 as part of $1.27 billion in budget cuts.

U Ohio has seen declines in its two major revenue sources: personal income tax and sales tax.

On the former, Sabety said, “We have watched a continued erosion in workers’ wages that has been far beyond our expectations. ... It means most Ohioans will bring home less in wage and salary income ... in the year 2009 and 2010 than they did in previous years. This has never happened in Ohio history.”