Ohio Budget: Changes Are Underway In 2011

As predicted, there are changes to the state and local budgets included in Governor John Kasich’s budget titled "The Jobs Budget," which was released on Tuesday, March 15, 2011. The two-year spending plan cuts funding for local governments by $555 million, which has an effect of cuts of 25% in fiscal 2012, which commences July 1, 2011, and cuts funding 50% for the following fiscal year.   It’s no secret that the State is facing a potential revenue shortfall of as much as $8 billion to $10 billion entering this two-year budget.

The local budgets affected include the local government fund.  The local government fund comes from a variety of taxes levied by the state and was created to replace revenue that communities lost due to past state tax reforms.¹

Of promise in the budget just released is an increase in funding for the Ohio Department of Development, up 6.6%, to promote job growth in Ohio through the JobsOhio program, which is a public-private partnership created earlier this year to attract companies to Ohio.  The new budget also preserves an $800 million income tax cut, which went into effect in 2011, and offers $34 million in tax incentives.

While Gov. Kasich kept his promise not to increase taxes, his budget seeks to cover the deficit from spending cuts.  Acknowledging the impact on local governments, though, Gov. Kasich made reference to new sources of revenue to local municipalities from upcoming casino operations.  The budget plan now goes to the state legislature, where lawmakers will weigh in on Kasich's proposals. 

With no crystal ball to identify what will come with time, in our economy, timeliness is key to filling the holes created in local municipal budgets.  If the Department of Development is successful – with the additional dollars allocated to JobsOhio – local cities may anticipate an increase in local income taxes from new jobs created.  It’s predicted that income taxes, which have been down for many years in a row, will be up slightly next year. 

Beyond relying on predictions and future jobs for income tax revenues, municipalities need to find ways to cut expenses.  An age-old option is to outsource job tasks to third parties at lower costs for more specialized services that may produce better results.  Local governments need to keep their focus on core disciplines, functions or operations and make alternative arrangements to outsource other areas.Weltman,

Weinberg & Reis, Co., L.P.A. understands the intricacies involved with the collection of all types of government claims and is committed to helping generate revenue while maintaining the highest degree of professionalism.  We offer services ranging from letter programs, fee driven legal executions, contingency collections and litigation, and bankruptcy representation to foreclosure services.  We also offer secure, on-line access to all matters outsourced so each claim can be accessed remotely by the governmental client that referred the claim.  We generate revenue through collection recovery, allowing you to put government dollars to work improving the lives of residents.

Sara M. Donnersbach is a Partner in the Cleveland office where she manages the Governmental Collections, Healthcare Collections, Commercial Utility Collections; and Landlord/Tenant Collections groups.  She can be reached at 216.685.1039 or sdonnersbach@weltman.com.

1 - Crain’s Cleveland Business, January 3-9, 2011, Cities Brace for Impact as Budget Cuts Loom, Page 18.