CHICAGO - Ohio lawmakers may introduce as early as this week a bill authorizing a $1.57 billion economic stimulus plan that includes scaled-back plan to borrow nearly $1 billion as part of a compromise between Gov. Ted Strickland and Republican legislative leaders.
Republican Senate President Bill Harris and Republican Speaker of the House Jon Husted joined with the Democratic governor to announce the compromise earlier this month after Strickland agreed to trim his original $1.7 billion proposal, which included issuing $1.5 billion in new bonds.
The proposals come as the state confronts a weakening economy and flat revenues that could leave a deficit of up to $1.9 billion in the current budget. Officials say the plan could create up to 57,000 new jobs, many in the biomedical and renewable energy fields.
Under the compromise, the state would issue a total of roughly $970 million in bonds - translating into interest savings of about $500 million over five years as compared to the governor's initial plan, according to officials. Voters would only be required to sign off on $400 million in bonds under the new plan, compared to $1.5 billion under the original plan. That means, in part, that the state will be able to go to market more quickly - in some cases by late summer, said state debt manager Kurt Kauffman.
"We're trying to get the dollars out the door quickly in those places where we can," Kauffman said. "The caveat to that is that we're buying a smaller car."
The new plan includes a greater mix of funding sources, including bonds, future state revenues, and cash.
"Part of what [Republican leaders] were hoping to address was using other sources," Kauffman said. "Finding cash resources was a big part of that solution."
But state officials have already hit a snag when it comes to accessing that cash. Under the proposal, the state would use $230 million from the Ohio Tobacco Prevention Foundation fund - a move that would essentially drain the fund, which currently has about $270 million in reserve.
After learning of the plan earlier this month, the fund's members tried to shift the money to a nonprofit account in order to block state access. State legislators in response quickly crafted and passed legislation - which the governor signed within an hour after Senate approval - making it illegal for the fund to shift the money. Now the fund's members have sued the state over that legislation, saying it was pushed illegally through the General Assembly.
Kauffman said the state expected a legal challenge and has proposed that the $230 million from the fund not be spent until 2010 to allow time for the issue to be settled.
Under the compromise plan, voters would be asked to approve issuing $200 million in liquor-profit backed revenue bonds and another $200 million in general obligation bonds. The state would accelerate issuance of $120 million in public works funding bonds - instead of going to market annually with $120 million, the state plans to sell $240 million later this year to finance a series of local infrastructure projects across Ohio.
Another $184 million in liquor-profit backed revenue bonds would be sold to finance construction of advanced energy infrastructure and improving existing distribution sites. Ohio has a monopoly on liquor sales.
The Ohio Air Quality Development Authority would sell $66 million in bonds to fund coal research and development - under the plan, the bonds would also be backed with general fund revenues. The state's Department of Transportation would sell another $200 million in gas tax- and toll-backed bonds, which are part of the department's regular issuance but under the plan proceeds would be used to finance a wider series of projects, Kauffman said.
In non-bond funding, the state would invest an additional $370 million that would be appropriated in future budgets from the state's general fund.