HungerNetOhio #6.12: Bridging Partisan Differences over Responsible Governance

Here we go again! Just three months after the Governor authorized the 2010-2011 State budget, less than a month after having it shot down as illegal, and over two weeks after he announced his second thoughts on a rebalancing state finances, Ohio's fiscal “checks and balances” are again front and center at the Statehouse.

At the end of the day on Friday, Armond Budish, the Speaker of the House announced his support for the Strictland revision and scheduled legislative hearings to begin on Monday.  So, this afternoon and continuing likely all day Tuesday, testimony will be received from proponent, opponent and interested parties.  The House could vote after the second day of deliberations.

The rejection by the Supreme Court of his original remedy of generating revenues through video slots in race tracks forced Governor Strickland to come up with a new plan for balancing this precarious budget.  To replace the loss of projected gambling money, he suggests delaying the last of five cuts in the state income tax, saving the State up to $850 million.

In addition, the Speaker is also introducing a parallel provision for cutting legislators' pay by 5 percent. The salary reductions wouldn't take effect until 2011 because the Ohio Constitution prohibits pay adjustments during legislators' current terms. Savings in the House would amount to about $379,000 a year.

Before brewing the slots scheme, the Statehouse response to the deteriorating budget situation had been callously one-sided, relying almost exclusively on budget cuts which over the course of the spring amounted to $3 billion in all. The governor now argues correctly that the state risks too much by cutting more deeply - jeopardizing the investment in education and asking the poor and vulnerable to bear a heavier burden.

His adapted plan to postpone the final phase of the tax translates into Ohio households paying essentially the same amount in taxes as they paid last year. Worth reiterating is that Ohioans still would enjoy a 16.8 percent reduction in income tax rates since 2004.

The governor's framework invites bipartisan action on this short-term solution. If contrary to this particular plan, legislators are encouraged to present their own practical alternatives (as well as for the next biennium when the $6 billion or so in one-time money disappears, including federal stimulus funds, and the state budget deficit will deepen dramatically).

Republicans, who initiated the idea for cutting legislators' remuneration, have suggested reducing the number of state agencies reporting to the governor from 24 to nine and in the process cut the state work force by 11,000. This ultimately would save about $1 billion a year.  Whereas, a Cleveland-based think-tank offered a timely reality check last week, unveiling a proposal that calls for the governor and lawmakers to begin addressing the structural deficit now by restoring the top tax rate of 7.5 percent on income above $200,000 and adding a new rate of 8.5 percent for income above $500,000.  And a collection of human services advocates have persistently introduced a bevy of revenue-generating ideas for reducing the devastating impact on the most needy Ohioans.

SHORT CUT:
For those who insist, "JUST TELL ME WHAT TO DO!"

LONG SUIT:
For those who plead, "GIVE ME MORE DETAILS"

Quick Overview

To put this into perspective, on July 13th State lawmakers hastily voted to approve HB 1, the biennial budget. The Democratic-controlled House voted 54-44 for the budget, while the Republican-led Senate approved it by a vote of 17-15. Overall, Democrats more enthusiastically favored the plan while Republicans generally opposed it, decrying its spending levels, reliance on one-time federal money, and the speed with which it was pushed through the Legislature. __Ohio was forced to resort to two separate weeklong spending plans which threatened services and created administrative headaches after leaders failed to reach a compromise by the end of the fiscal year June 30. (by being “on the shelf” also costing the State millions of lost federal dollars). __The compromise resolved an impasse between Strickland and Senate Republicans over the governor's plan to install slot machines at Ohio's seven horse-racing tracks to raise an estimated $933 million. Strickland signed an executive order to expand the Ohio lottery to include the slots, and the Legislature would acknowledge his authority to do so in the budget bill._ The rest of the state's $3.2 billion budget deficit was addressed through cuts to state programs or accounting maneuvers.

On July 17th the Governor signed it into law. Those who administer Ohio's social safety services said they had been slashed beyond reason.

Contingency Ideas from legislators

Since early August, the HungerNetOhio been in touch with all of the 31 members of the House Finance Committee and, as of tomorrow, will have visited nearly every office.  With a general recognition of budget's precariousness, we have tried to engage legislators in imagining contingency plans if and when either revenues from the video slots didn't materialize and/or tax collection failed to live up to optimistic projections.  Including in these interviews church representatives, food pantry volunteers and clients, and staff from impacted agencies, we, in effect, conducted a survey of recommendations for keeping the ship of State afloat when it (predictably as evidence now) begins to “take on water.” 

The results reveal wide and contentious views forecasting the upcoming debate over the Governor's proposal. Fundamentally philosophical, it pits classical divisions between Democrats and Republicans, liberals and conservatives, progressives and traditionalist over the role of government in our lives.

No too surprising collisions emerge and are typified in the contrasting political approaches of Rep. John Adams a Sidney Republican, and Rep. Mike Foley a Dayton native who's now a Cleveland Democrat. Adams is a conservative who believes less government is good government. Foley's a liberal who doesn't mind a targeted tax hike now and then.

Adams and Foley have blatantly different alternatives to the Budish plan.

Adams, Minority Whip and third-ranking House Republican, said rescinding a tax cut, particularly retroactively more than nine months into the year in which it takes effect, is a tax hike. He called the plan “too little, too late.” Adams basically wants to blow up state government and put it back together again as a leaner operation. Last February he introduced legislation to reduce the number of state agencies reporting to the governor from 24 to nine and in the process cut the state work force by 11,000. This ultimately would save about $1 billion a year, he said. No hearings have been held.

Meanwhile, Foley last week, along with Rep. Robert Hagan, D-Youngstown, introduced legislation to hike income tax rates on the wealthy to bring in about $1.4 billion more over two years. The plan would restore a 7.5 percent tax rate on income over $200,000. It also would create a “half millionaire tax” - a new tax rate of 8.5 percent on income over $500,000. “We've got real revenue problems that are going to be hitting us in the state in two years time,” said Foley. “A progressive tax system is something we really need to be thinking about and pushing.”

Other House Republicans have given no indication they will support the plan. Most are miffed by being “kept in the dark” and “outside the loop” of efforts to contribute to a better plan. Self consciously a marginalized minority, they are in little mood for accommodating the opposition or compromising their ideals. House Minority Leader William G. Batchelder, R-Medina, said his members will continue to push for money-saving legislation dealing with government reorganization and Medicaid fraud. "Very clearly this tax change is not helpful in attracting business and industry," he said, adding that the legislative pay cut is a "gotcha." "Clearly (the pay cut) has political appeal, but it doesn't offset the fact that taxpayers are going to have to have a retroactive tax passed," he said.

For the most part, Democrats are nervous about being unnecessarily and unfairly accused as “tax and spenders” in the next election. While many feel the state went too far in cutting taxes five years ago and that spending reductions are necessary but insufficient on their own, they will be up against the conservatives' mantra which Republican will certainly feature in this dispute. Yet, most are relieved that the Governor finally came forward with something that recognizes the value of looking squarely at the hard choices.

Strickland, walking his own tightrope, doesn't want anything to do with the Foley-Hagan plan and considers the others unrealistic.  At this point in the national recession, the governor believes his proposal to freeze income tax rates at last year's rate would be a better option to protect local school districts from devastating cuts. As part of that tax overhaul in 2005, the income tax was cut 21 percent over five years. The final year of that cut started Jan. 1, and would be reflected in next year's tax returns. A family of four earning $60,000 would pay about $85 more if the tax cut is postponed than if lawmakers did nothing. But because of an increase in the personal exemption, that family still would pay $7 less on their 2009 taxes than they paid for 2008.

A hand-full of lawmakers on both sides have suggested that it is time for a fiscal summit.  They fantasize bringing everyone together to seek common ground about the role of governance in the state. Outside the pressure toward specific legislation, they contend that they would do well to get better acquainted across the aisles the divide and, as in this instance, antagonize them.

Docking Lawmakers' Pay: useful or symbolic?

Budish sees the 5 percent pay cut to state legislator salaries would convey a message of shared sacrifice. The idea is plucked from a GOP bill that has 32 Republican co-sponsors. "That's approximately what the state employees have taken recently as a pay cut, and it seemed to be a fair amount," Budish said.  The pay cut would reduce the base salary of a lawmaker from $60,584 to about $57,555, saving the state $379,000 per year. Most legislators earn more than the base through committee and caucus leadership positions.

Now Ohio facing a huge deficit and requiring the best thinking and commitment from everyone. Got better ideas? Put them forth! Now!


PRIMARY REFERENCES AND LINKS

Legislative Contacts

You're Ohio house of representative member: http://www.house.state.oh.us/

Research

“Governor's proposal to delay the final year of a planned cut to Ohio's individual income tax” by Jon Honeck, Center for Community Solutions:
http://www.communitysolutions.com/images/upload/resources/IncomeTaxStatement100109.pdf

Commercial Activity Tax wobbles its way into full effect
Report finds weak CAT revenues are socking Ohio's State budget by Zach Schiller, POLICY MATTERS OHIO
http://www.policymattersohio.org/BoostingRevenue2009.htm

Articles

“Hearings start Monday on postponing tax cut, reducing lawmakers' pay”
http://www.daytondailynews.com/news/politics/hearings-start-monday-on-postponing-tax-cut-reducing-lawmakers-pay-351853.html

“Dems propose delay in tax cut: State lawmakers' pay would fall 5%”
http://www.dispatch.com/live/content/local_news/stories/2009/10/17/Budget17.ART_ART_10-17-09_A1_F7FD75A.html?sid=101

“Plan to delay Ohio tax cut backed”
http://news.cincinnati.com/article/20091016/NEWS0108/910170359/1055/NEWS/Plan+to+delay+Ohio+tax+cut+backed

“Strickland plan to suspend tax cut gets speaker's backing”
http://www.cleveland.com/news/plaindealer/index.ssf?/base/news/1255768286217420.xml&coll=2

“Budget plan includes 5 percent pay cut for Ohio lawmakers”
http://www.daytondailynews.com/news/politics/budget-plan-includes-5-percent-pay-cut-for-ohio-lawmakers-351854.html

“Ohio lawmaker backs tax-cut suspension: House Dems to call for pay cut for legislators”
http://www.ohio.com/news/64659027.html

(Edtl) Red state: Ohio faces a budget deficit now, and a massive one in the next biennium
http://www.ohio.com/editorial/opinions/64687427.html

“Conservative, liberal representatives offer budget solutions”
http://www.daytondailynews.com/news/politics/conservative-liberal-representatives-offer-budget-solutions-352625.html

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