OML LEGISLATIVE BULLETIN

No. 5                                                 February 21, 2003

The Ohio Senate passed this week its version of HB 40, the state's attempt to close its budget gap prior to June 30, the end of the state's fiscal year. Passed by a margin of 18-15, the bill contains language that would allow the Governor to cut local government and library funds by $30 million before June 30. That cut, along with reductions made stemming from HB 405, represents a reduction in all local government funds of 8-10%, in our estimation. That cut would precede what the League expects to be another $30 million "reconciliation" cut in July of this year.

Reconciliation cuts occur when the state's revenue estimates are too high and extra dollars are sent to local governments in the months preceding the twice-a-year reconciliations. Actual revenues are used in reconciliation to either send local governments additional money, if estimates were low, or to cut funds if too many dollars were transferred.

Because the Senate's budget did not enact new taxes, as requested by the Governor and rejected by the Ohio House, two things are likely to occur. First, without the Senate version containing new taxes, the House is likely to concur in Senate amendments when the House reconvenes on Tuesday. That concurrence may come despite the House's original rejection of the cuts to local government funds.

The second thing that is likely to occur is more budget cuts. Governor Taft has deemed the Senate version of HB 40 as inadequate to meet the budget gap currently facing the state. After the Senate action on HB 40, he announced that the Senate solution was $160 million short of meeting the problem. Given that shortfall, he said he has no other choice but to cut primary, secondary and higher education aid and senior citizen programs by $160 in the final months of the budget.

Although HB 40 bars the Governor from making cuts to education, the Governor said he will make those cuts prior to signing the bill or will simply veto that part of HB 40.

Although this looks like a done deal, it is never over until its over in a budget. Your calls and e-mails to your members of the General Assembly and the Governor could have an impact on the issue of cuts to local government assistance. Municipal and other local government budgets have been hit hard by the downturn in the economy, downturn in estate taxes, downturn in investment earnings, downturn in state assistance and increases in everything from homeland security to health insurance premiums. For the state to resort to "trickle-down" budget deficits by cutting local government funds is ridiculous and unfair. The House saw that. The other two partners in state government budgeting refused to recognize that issue.

Your calls or e-mails to your members of the General Assembly are critical to turning this situation around. The members have, through testimony and other communications, heard from the League on your behalf on this issue. But they need to know how these cuts, on top of previous reductions in local government funds, will impact your city or village. The formula in place for the Local Government Fund and the Local Government Revenue Assistance Fund already create reductions in state aid for local governments. Our aid from the state goes up or down as the state revenues go up or down. That has been the pact between state and local government in Ohio for decades. To slash additional dollars away from the formula, in the middle of municipal calendar year budgets, is to slash away from the security and services of everyone's hometown. Legislators need to hear from you if we are to strike these cuts from HB 40.