School Cuts Delayed

Ohio Gov. Ted Strickland last week signed a bipartisan agreement that avoids dramatic school funding cuts by delaying a 4.2% income tax cut to help plug an $850 million budget shortfall in education funding.

The 4.2% decrease in the state income tax rate was to mark the final installment of a five-year, 21% reduction in the tax rate proposed by former Republican Gov. Bob Taft in 2005.

The agreement was announced late last week following negotiations between the Senate Republican leadership, the House Democratic leadership, and the Democratic Strickland.

The plan also requires that the state Board of Regents use new rules pushed by Senate Republicans that are aimed at saving on construction costs to build three projects.

"Across the country, some states have chosen to slash education budgets in an attempt to make it through the recession … We have again overcome political differences to achieve a bipartisan agreement to balance the budget and protect our schools from devastating cuts," the governor said in a statement.

Strickland last week warned he would call a special session over the holidays if legislators were not able to fill the hole in the state's two-year budget by the end of the week. He also warned of steep funding cuts to education if the income tax cut was not delayed.

The legislature passed a $52 billion 2010-2011 budget in July but a subsequent state Supreme Court ruling that a key gaming revenue source is subject to voter referendum left the budget $850 million short.

Standard & Poor's rates the state AA-plus with a negative outlook. Moody's Investors Service also maintains a negative outlook with a rating of Aa2. Fitch Ratings rates the state AA with a stable outlook.

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Ohio
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