Budget deficit to reach $600M

COLUMBUS (AP) — Income-tax collections for April were $322 million below projections as the economic recession continues to hammer Ohio, opening up a budget deficit for the current year that will reach at least $600 million, state officials said Tuesday.

Lawmakers whose concern has been focused on the difficulties of balancing the next two-year budget will now have to turn some of their attention to the two remaining months of the current fiscal year. The state’s $948 million rainy-day fund — thought to be a savior for the next two years — is now one of very few options to help plug the current budget hole.

“Clearly the size and scope of the gap that has emerged before us may require us to consider the rainy-day fund,” said Pari Sabety, Gov. Ted Strickland’s budget director. “The reality is at this point in the fiscal year there really is not much room for us to reduce expenditures.”

Agencies have about $3.8 billion in spending left for the next two months, but about $3.5 billion of that represents fixed expenses such as debt-service and Medicaid payments that can’t be changed, Sabety said.

Sabety said the governor continues to oppose tax increases to address the current deficit or challenges in the next budget, something legislative leaders of both parties agree with. Senate President Bill Harris, an Ashland Republican, also said expanded gambling was not an option.

If lawmakers are forced to use the rainy-day fund now instead of later, they will have to cut more than $900 million from the budget the Democratic-controlled Ohio House passed last week. And if revenue continues to come in below estimates in May, lawmakers from both chambers negotiating a final budget plan will be forced to cut even more.

Republicans in both chambers have been criticizing the House budget because it relied on even more optimistic projections than the ones from Strickland’s budget office. The House, partially based on these optimistic projections, added $622 million in spending to Strickland’s budget plan, which Republicans were already criticizing as unsustainable.

The House made a “serious mistake” in passing a budget that wasn’t balanced, which may force the Senate to start from scratch in crafting a new plan, Harris said.

“We’ve got to make decisions that are not going to be popular with a lot of people, including a lot of our members,” Harris said. “But we’re going to do what’s right for this great state. And we’re going to take responsibility to do that.”

Harris also added that creating an annual budget, instead of the usual two-year budget, was one of “many options” the Senate would look at.

House Speaker Armond Budish, a Democrat from Beachwood, defended the House plan in a statement.

“The budget passed by the House last week aimed to invest in our priorities and protect those hardest hit by this tough economy,” Budish said.

April’s $322 million drop in income-tax revenue compared with estimates represented a precipitous fall compared to March, when revenue was only $40 million off from estimates. Officials said they thought the projections made last December were pessimistic, but that the continued decline of the economy has made even those predictions optimistic.

Through April, income-tax revenue is a total of $397 million off estimates. Sabety said the budget gap could reach $900 million or more for the current year depending on how the economy performs.

Strickland’s administration has already trimmed $1.9 billion from the current $52 billion budget through cuts and accounting measures. In April, before the House passed its budget plan, Strickland called on state agencies to stop contract work, limit the purchase of supplies and re-evaluate travel for the remainder of the fiscal year and for the next two years.