CHICAGO — Ohio will eliminate up to 2,700 jobs and expand electronic gaming as part of a plan to eliminate a budget shortfall that could reach $2 billion by 2009, Gov. Ted Strickland announced yesterday.
Under his budget reduction package, the state would implement $733 million in cuts — most of which do not need legislative approval — and would dip into the state’s $1 billion rainy-day fund if “conditions worsen,” Strickland said yesterday in a press conference held from his office.
“The decisions that I’ve made today will be disruptive, frightening and painful for many state employees,” he said. “But I would not have made any decision regarding budget reductions that I did not feel was absolutely necessary.”
The plan comes a week after a revised fiscal analysis revealed Ohio faces a shortfall of between $750 million and $1.9 billion through 2009. Under various scenarios, the shortfall could be limited to $733 million if revenue growth is low, $1.3 billion if growth is zero, and $1.9 billion is a recession occurs, according to fiscal forecasts. Strickland’s proposals address the lowest-estimated shortfall.
The deficit is due to a deteriorating state economy, including weak housing and job markets, lower-than-expected tax collections and rising costs.
“We concluded it would be hugely unwise to dip into the rainy-day fund without taking these steps to find savings,” Strickland said. “I don’t know exactly what’s going to happen with the national economy or the Ohio economy. If further reductions become necessary, at that time it would appropriate to look at the rainy-day fund.”
Staff will be cut from nearly every state agency, though cuts will vary depending on the agency. Additional cuts will come from orders to control costs from traveling, printing, purchasing, and other areas. The state will close two mental health hospitals and reduce or eliminate some programs, and the governor’s office will cut 25% of its budget the first year and 16% the second year.
“We tried to have some rationality behind the decisions that were made and not simply make across-the-board cuts,” the governor said.
Ohio is hoping to raise an additional $73 million in fiscal 2009 by expanding electronic video games, including Keno, into bars and taverns, said budget director J. Pari Sabety. Although the General Assembly last year outlawed video slot machines, the governor argued that this latest proposal is an expansion of the state Lottery system, not independent gambling.
Strickland said he would keep in place tax reforms approved in 2005, which are estimated to cost the sate $502 million of reduced revenue in 2008 and $1.3 billion in fiscal 2009. The state will also maintain a freeze on higher education tuition through 2009, a higher funding formula for local school districts, and a homestead property tax credit.
Ohio officials plan to release the state’s two-year capital budget by late spring despite the deficit, according to the governor.
“My expectation is [the capital budget] will proceed and we will deal with it in an appropriate manner at the appropriate time,” Strickland said.
Ohio’s fiscal year begins July 1.
