Plain Dealer agrees, Kasich budget is at least $193 million in the hole


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Well that didn’t take long. With several posts here and here, from this humble little website, and several more over here, it looks like the lame-stream media has finally picked up on the fact that Kasich’s budget is already out of balance. This morning the Plain Dealer published an article with one brilliant headline: “Ohio Gov. Kasich could face budget shortfall unless Washington provides bailout”.

Ohio Gov. John Kasich needs a favor from Washington to avoid a $193 million budget shortfall, according to records and interviews concerning a little-noticed aspect of his first budget.It’s uncertain whether he’ll get it. Yet the freshman governor assumed when he released his two-year budget in March that the money — a break on interest payments that Ohio owes the federal government — will come. He’ll have to find cuts or savings elsewhere if Washington doesn’t grant his wish.

Yep, that’s right folks, the same candidate who couldn’t stop nailing then Gov. Strickland every opportunity he could for using one-time stimulus dollars finds himself in an awkward position. He can either accept the bailout from the feds on the interest payments or and find $193 million somewhere to cover the shortfall. Given that this budget is balanced by using tons of one time money anyways, something tells me Kasich will be right there, with his hand out, waiting for the Feds to give him the money.

None of this is for certain though.  Originally President Obama had proposed these interest loan forgiveness measures in his original budget but no one can say whether they are going to be included in the final agreed to budget for 2011. In fact, if you listen to the Republicans in Congress there is probably little chance this gets included in the budget or done in time for Kasich’s budget.

“I recognize that states are facing tight budgets during this slow economic recovery,” said Rob Portman, a Republican freshman senator from Ohio. “However, I am concerned that the Obama administration’s proposal will harm our economy by raising taxes on job creators.”

The taxes Senator Portman is talking about  were included in the original proposal from President Obama. The budget proposal came with a stipulation that if the states accepted these interest payment write-offs they would have to enact certain unemployment compensation reforms, including raising the payroll tax that is used to collect money for the unemployment compensation fund.  And why would the Obama administration want to do that? Because the reason the state of Ohio owes $2.5 billion to the feds is because our unemployment fund ran out of money to pay claims during the recession and these reforms would make it solvent again.  Or, what some people call, being fiscally responsible.

It will be interesting to see how this plays out.  As we have mentioned in previous posts, OBM assumed the payments to be as high as $300 million and then used the presumed write-offs to balance the budget shortfall. If Kasich doesn’t get his bailout where does he go to make up the shortfall? Wherever it is, I’m sure local governments and school districts are just waiting to see how much more he can bleed out of them.

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