Strickland calls on agencies to reduce spending

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Ohio Governor Ted Strickland (D-Lisbon)

Economists forecast a $733 million deficit if the economy grows slowly.

COLUMBUS (AP) — The state is predicting a budget shortfall between $733 million and $1.9 billion in the current two-year budget, and state agencies must propose spending cuts in the days and weeks ahead, Gov. Ted Strickland said Wednesday.

Strickland said he would protect programs he considers critical, such as expanding state health care to more low-income children, but predicted difficult choices ahead.

State economists forecast that the budget will face a $733 million gap if the economy grows slowly, $1.3 billion if there is no growth, and $1.9 billion if it goes into recession.

The high figure represents 3.6 percent of the state’s two-year, $52.3 billion budget that began last July and goes through June 2009.

In 1982-1983, there was a $534 million deficit on a $6.7 billion budget — an 8 percent gap that was plugged with a hefty income tax increase. Other considerable deficits have happened roughly every decade since, with budget gaps just before and after the 2001 terror attacks comparable to current predictions.

It is not yet clear which programs Strickland will look to cut, but he said he would protect a higher education tuition freeze, health care access for more low-income children and a plan to bring more renewable energy jobs to the state.

“We do think they are significantly important, even critical, to Ohio’s future,” Strickland said. “We’re not approaching it in a meat-ax way.”

Both Strickland, a Democrat, and Republican House Speaker Jon Husted said raising taxes to cover the projected deficit was not an option.

State economists began predicting a budget crunch in November, as forecasting figures showed a weaker economy than was predicted when lawmakers settled on the current budget in June.

Strickland shared their current estimates with legislative leaders in a briefing Wednesday.

The U.S. economy has slowed recently, and there is debate about whether it has entered into a recession. The Federal Reserve responded with an emergency rate cut designed to spur spending to thwart a recession or lessen the effects of one. The Dow Jones Industrial Average has lost hundreds of points since trading began at the turn of the year.

“We all know what’s happening with the national economy, and all of those things are impacting Ohio’s economy,” Strickland said in an interview with The Associated Press. “We’ve got to look for efficiencies and ways to tighten belts.”

Strickland said economists consulted by the state say the national economy has a better than 50-50 chance of going into recession. He welcomed a proposed national stimulus plan that would infuse cash into the economy through taxpayer rebates, saying such a move could help Ohio avoid the more dire shortfall projections.

“This is a time for appropriate action at the federal level, and I hope that’s forthcoming,” Strickland said.

The state has at its disposal a $1 billion so-called rainy-day fund that is designed to plug shortfalls during budget emergencies. It is an option for Strickland, but he will first look to see what state agencies can eliminate from their budgets.

Depending on the path Strickland chooses, he may be able to make the necessary cuts using executive authority. But he also may need approval for agency cuts from specific legislative committees or the full Legislature.

Husted spokeswoman Karen Stivers said Husted considers the rainy-day fund a “very real option.”

“He doesn’t see this as cause for alarm but certainly sees this as something we need to address within government,” she said.