PLEASE CIRCULATE THIS BULLETIN TO YOUR COUNCIL, DEPARTMENT HEADS & STAFF

The long tussle over fixing an estimated $1.5 billion hole in the state budget, ended last week when the House and Senate voted Wednesday on a compromise conference committee report on HB 405. With that action, the work of the House and the Senate for 2001 came to an end. Barring the crazy and unpredictable the General Assembly will now be in recess until January. A full schedule for next year's Session days is included in this Bulletin.

The final version of HB 405 reflects a clear decision on the part of the Governor and the General Assembly to listen to you and all local officials who took the time to appeal the need for local government assistance. Though LGF and other local government funds took a hit in the final version, that reduction pales in comparison to the $160 million cut that was proposed in the Senate version of HB 405.

Under provisions of the final HB 405, a $10 million reduction will occur in the early 2002 distributions. That reduction reflects the fact that the state will not have an income tax reduction factor in this year's state income tax. In the past, when such a factor existed, the state reimbursed local government funds for the loss resulting from such a reduction. Without the $10 million reduction, the state would have reimbursed the funds again this year, even though the reduction factor didn't exist. This anomaly would have occurred because original budget figures for local funds were based on a frozen figure which included last year's reimbursement. This concept was a part of the Governor's, the House's and the Senate's plans and was not objected to by the League.

The funds will also incur another small reduction indirectly because the dealers in intangible tax was repealed in the final version of HB 405. In the future, dealers will no longer pay their traditional tax and will, instead fall under the state's corporate franchise tax. In 2000, the dealer's in intangible taxes amounted to $13.9 million to the undivided local government funds. In the switch to the corporate franchise tax, it is estimated that dealers will only generate $1.8 million.

In the end, those changes were put together with additional cuts in state agency spending, a $256 million dip into the state's "rainy day fund," a $260 million diversion of tobacco settlement funds, permission for the Governor to take the state into the Powerball or another multistate lottery and the front-loading of taxes on auto leases to make up the bulk of the final HB 405 fix.

The final vote on HB 405 was 53-45 in the House and 18-14 in the Senate. The votes were mostly along partisan lines, with some Republicans breaking from the majority decision mostly over expanding the lottery.

We want to thank (and hope you will thank), your members of the House and Senate and the Governor for this final outcome. There were many issues in the bill. Many who were supportive of not cutting local government funds did not vote for the final bill on issues other than that. Others who voted for the final version still may have wanted larger cuts in local funds. But, overall, the system worked. Legislators and the Governor listened and were helpful. We should tell them that we appreciate that.

Beyond that, our appreciation for the work of Speaker Larry Householder on this issue is great. The Speaker stood firm for local government from the start to finish of this effort. He should be congratulated by all of us.

And as for you, give your self a hand too. Local officials did a great job of talking and writing to their legislators and the Governor to make the case for local government funding. Without your efforts, LGF and other local funds were in deep jeopardy.

Congratulations and let's hope, for everyone's sake, that the economy picks up, the school funding controversy gets resolved and this is the last budget adjustment the state will have to do in this biennium!

Mayor Sally Beals of Centerville was elected to the National League of Cities Board of Trustees this past week at the group's annual meeting in Atlanta. Mayor Beals will serve a two-year term with NLC. The Mayor is also a member of the OML Board of Trustees.

Congratulations and good luck, Sally.

The group supporting a repeal of SB 5 (the annexation bill) through referendum got word last week that there initial efforts fell short of the needed signatures. Secretary of State Kenneth Blackwell informed the group on Wednesday that so far the group's petitions contain 137,695 valid signatures. That is 63,558 short, according to Blackwell. The group was also told that they will have to come up with 30 additional counties in which they have qualified signatures equally 3% of the last gubernatorial vote in each county to qualify the issue.

The group now has until December 17 to supplement their filing with those additional signatures and counties. The effective date of SB 5 is still on hold until at least that date.