Experts say plug budget hole without cutting funding to schools
June 29, 2010
The looming state budget crisis has become a political elephant in the room, with state leaders largely avoiding the topic ahead of November’s elections. Case in point, a state panel charged last September with recommending solutions to the crisis held its first meeting just yesterday.
Passing the FY2010-11 operating budget was a contentious and drawn-out process, and enacting the next budget is likely to be much harder. Taking such realizations into consideration, The Center for Community Solutions has released a report offering a plan to tackle the crisis. Thinking the Unthinkable: Finding Common Ground for Resolving Ohio’s Fiscal Crisis urges lawmakers to act in a bipartisan fashion and offers a plan to close the budget gap through a series of tax increases and targeted spending cuts.
The Center’s calculations on the severity of the deficit confirm a $6 to $8 billion hole. The authors assert that a deficit of this size cannot be reduced by relying solely on taxation or spending cuts and will require legislators and the governor to seek a “balanced approach” that combines both practices. Toward this end, a three-part framework of tax increases, reduction in tax exemptions, and reduction in expenditures is presented.
Tax hikes are always a particularly bitter pill to swallow in an election year, and as such the report offers a variety of options to increase state revenue. These range from raising income taxes on the wealthiest Ohioans to increasing the state sales tax by half a cent. It also explores a number of reductions in tax expenditures. Tax expenditures (more commonly referred to as tax exemptions, tax breaks, or “loopholes”) add up to a significant portion of Ohio’s revenue and several methods to scale them back are provided.
The most notable part of the framework outlines ways to cut state spending. Virtually all of the recommended cuts come from state services – primarily Medicaid. Costs in Medicaid are described as spiraling out of control, and the report offers possible technical and legislative fixes to allow the state to slow Medicaid growth while still meeting federal spending mandates. Under the report’s plan, many other areas of state spending would receive a targeted reduction in funding of 10-20 percent, depending on the amount of the budget shortfall.
In regard to education, the report calls for preserving formula funding (the basic per-pupil amount that a school receives from the state) for K-12, early childhood, and higher education, meaning that despite the state and national fiscal woes, primary funding for most public schools would go untouched.
It’s particularly useful that this plan is scalable for different deficit amounts and budget priorities. This makes it an interesting template for state leadership to examine as they determine the best way forward. At a time when few are willing to publically discuss the budget crisis, any food for thought on the issue is certainly helpful.