Things are looking up for state budgets

JULIE CARR SMYTH

Asso­ci­ated Press

COLUMBUS — Dur­ing the dark­est days of the Great Reces­sion, Ohio didn’t have enough in its rainy day fund to buy even a candy bar. It held a bal­ance of exactly 89 cents.

Today, the emer­gency fund has swelled to $247 mil­lion. A nearly $8 bil­lion state bud­get gap has been closed. Unem­ploy­ment has fallen from a high of 10.6 per­cent to 7.6 per­cent. And all three credit rat­ing agen­cies judge Ohio to be stable.

After a few rough years, Ohio and other strug­gling states have begun to regain their finan­cial foot­ing, largely through a com­bi­na­tion of painful spend­ing cuts, higher tax rev­enue because of the rebound­ing econ­omy, and cre­ative ideas such as the sale or lease of pris­ons, office build­ings, roads or other assets.

“It’s def­i­nitely com­ing back,” said state Rep. Ron Amstutz, chair­man of the Ohio House budget-writing com­mit­tee. But he was quick to add: “There’s still a lot of pain out there. I don’t think we should be crowing.”

A recent National Asso­ci­a­tion of State Bud­get Offi­cers sur­vey found 43 states passed bud­gets for fis­cal year 2012 that will spend more gen­eral rev­enue than the year before.

Michi­gan went from a decade of fac­ing billion-dollar-plus deficits every year to hav­ing a bal­anced bud­get and even a $457 mil­lion sur­plus. Repub­li­can Gov. Rick Sny­der achieved that in part by cut­ting spend­ing on uni­ver­si­ties and schools.

Idaho sliced off roughly one-fifth of its bud­get dur­ing the reces­sion. Today the state has a $130 mil­lion sur­plus. Min­nesota, like­wise, has gone from a $6.2 bil­lion deficit to a pro­jected surplus.

How did Ohio climb out of the hole?

Repub­li­can Gov. John Kasich and the GOP-controlled Leg­is­la­ture cut sub­si­dies to local gov­ern­ments and school dis­tricts, shrunk the state work­force to a 25-year low, and came up with $1.5 bil­lion in sav­ings by stream­lin­ing Medicaid.

Ohio also sold a prison for $73 mil­lion and is con­sid­er­ing leas­ing the Ohio Turn­pike. And it essen­tially traded 25 years of future prof­its from Ohio’s state-run liquor stores for an imme­di­ate lump sum of $1.4 bil­lion. Sim­i­larly, Kasich’s pre­de­ces­sor, Demo­c­rat Ted Strick­land, raised $5.4 bil­lion by sell­ing off the state’s share of the nation­wide tobacco settlement.

Kasich and Strick­land together over­saw six straight years of state bud­gets with­out sig­nif­i­cant tax increases.

The improv­ing econ­omy also played a big role: It has pro­duced 60,000 jobs in an employ­ment upswing over the past seven months. The come­back has been led by the health care sec­tor, which includes heavy-hitting research hos­pi­tals such as the Cleve­land Clinic and Ohio State Uni­ver­sity Med­ical Cen­ter, and by retail growth and a bump in auto man­u­fac­tur­ing and oil and gas drilling.

Money com­ing in from taxes is still below pre-recession lev­els, and Kasich is propos­ing an interim bud­get that cuts an addi­tional $30 mil­lion in spend­ing. But he is opti­mistic enough that he is call­ing for a mod­est income-tax cut to be paid for by a tax increase on the gas-drilling tech­nique known as fracking.

Alto­gether, the bud­get offi­cers’ asso­ci­a­tion cal­cu­lated that states have called for $667 bil­lion more in spend­ing in fis­cal 2012 than the pre­vi­ous year. That remains $20 bil­lion below what states bud­geted in 2008, before the recession.

“We’re begin­ning to see rev­enues grow, but they went down very, very far, so they have a long way to go to get back to pre-recession lev­els,” said Eliz­a­beth McNi­chol at the non­par­ti­san Cen­ter on Bud­get and Pol­icy Pri­or­i­ties. The orga­ni­za­tion esti­mates that will take seven years.

Posted by AP News on Mar 29 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.