Ohio jobs, rising revenue could shrink budget gapWritten by Associated Press | | email@example.com
Jobs, production and tax revenue are on the rise in Ohio, and so, too, is the state’s economy.
Yet state leaders warn of a looming budget gap, estimated at nearly $8 billion.
The anticipated gap has been the backdrop of Gov. John Kasich’s proposals to sell five state prisons, lease the Ohio Turnpike, severely limit the power of 350,000 public workers, and lift caps on new charter school start-ups and college tuitions.
Proposed cuts to state programs in his $55.5 billion, two-year spending blueprint have riled advocates for local school districts, libraries, children, and the poor — some of whom have urged tax increases to avert disaster.
Yet there’s an increasingly good chance the estimate will turn out to be too high.
“The numbers are very positive right now, there’s no doubt about it,” said David Pagnard, a spokesman for the state Office of Budget and Management.
News on Friday that Ohio’s unemployment rate dropped for the 13th straight month, to a two-year low of 8.9 percent, was just the latest sign the budget hole could shrink before lawmakers approve the financial plan by the June 30 deadline.
Projections heading into budget negotiations were far more grim. Last June, the Governor’s Council of Economic Advisors was predicting unemployment in the state would average 10.2 percent in calendar year 2011 and 9.7 percent in 2012.
But, as Ohioans head back to work, they drop off government-aid programs and pay more income taxes. In turn, that improves the state’s fiscal picture.
The state financial report released Tuesday also contained positive news.
March tax receipts were $157 million, or 13 percent, ahead of projections. It was the eighth consecutive month of better-than-expected receipts across most tax sources, the budget office told Kasich in its report.
A percentage increase in the number of jobs across the state, assuming an average salary of $40,000, would translate into about $2 billion in additional taxable income and $60 million in new tax revenue for state coffers, Ohio Department of Taxation spokesman Gary Gudmundson said.
He cautioned such a figure is just a “back of the envelope” calculation, not the complicated tax revenue analysis that prompts state projections to be adjusted. Also, falling unemployment and rising employment aren’t exactly the same.
“There’s lag time, and there are all sorts of variables that might go into that, as you can appreciate,” he said. “So it’s really not a correlation we can make easily.”
Ohio Department of Jobs and Family Services spokesman Ben Johnson said the same applies to government-aid programs, such as public assistance, children’s health insurance, and Medicaid.
But the department did see early evidence of the economic upswing in December, he said. That month, Medicaid enrollment declined very slightly for the first time since December 2007.
“We’re beginning to see those numbers level off, and even decline, as people come off the rolls and go back to work,” he said, noting numbers have crept back up since then.
House Finance Chairman Ron Amstutz, a Wooster Republican, said it is premature to use new unemployment numbers to change any of the figures his panel will use over the next two weeks to craft changes to the governor’s $55.5 billion, two-year spending blueprint.
Lawmakers will continue to work with the caseload and revenue projections from both the administration and their own analysts at the Legislative Service Commission, which was more optimistic in its outlook, he said Friday.
Amstutz said falling unemployment and rising revenues could change what lawmakers are ultimately able to afford.
“Well, the signs are positive, so that’s helpful,” he said. “Because one of the things you look to, to balance a budget going forward, is stronger revenues.”
Amstutz set April 15 as the deadline for receiving proposed budget amendments from House members. He said final updated figures –which will probably not come until June — will affect which of those changes representatives are ultimately able to approve.
“It depends on the comfort level at the end of the day that we have with how conservative those estimates are,” he said.
The House Finance Committee plans to begin deliberating on the amended bill April 28. Committee and floor votes are expected the first week of May. The bill would go from there to the state Senate.