Lancaster’s dilemma: Kasich budget in a nutshell
In case you haven’t been following the coverage of the Lancaster city budget troubles, it’s worth catching up. The story fairly well encapsulates what the Governor’s budget is all about – cuts in state aid to local governments that are already facing declining tax revenues, impacts to vital public services like fire and police, job losses and tax increases at the local level.
Lancaster, a city of 37,000 in Fairfield County, southeast of Columbus, has a general fund budget of $23.6 million in 2011. Thanks to declining income tax revenue and cuts from the state, the City faces a $1.25 million shortfall in 2011 and $2.5 million in 2012. The Mayor has proposed a plan that would put a .25 percent income tax increase on the November ballot and eliminate 25% of the city’s fire department, nearly 10% of the police department and cut several other positions in city government.
One of the city’s three fire houses will close and the number of medics will be reduced from three to two per shift, moves that all agree will drive up response times in emergencies. The tax increase is also facing stiff competition on the November ballot, with voters also facing property tax levies for street repair and schools. Voters only recently approved an income tax levy in 2005 to expand fire services.
All in all, the City — run by Republicans, by the way — is faced with an unappealing choice of reducing services or raising taxes. And voters will be confronted with the prospect of three tax issues on the fall ballot. Next time you hear the Governor and GOP say that this budget was balanced without tax increases, or local governments simply need to show fiscal discipline and do more with less, keep Lancaster in mind.
If S.B. 5 is rejected and collective bargaining rights are retained as they have been for nearly 30 years, this alone will not secure the jobs of government employees. In fact, the ability of unions to set wage increases and force government to bear most of the burden of healthcare costs and pension costs means that per employee labor costs will continue to rise significantly. So the issue is one of revenue. Because Ohio’s economy made a step change in this recession, it is unlikely that a modest recovery (even if we get one) will bring in enough revenue to fund government employees. Logically, then, the union leaders and Ohio Democratic Party need to start laying the groundwork for a large tax increase, if only to restore aid to local governments. However, union leaders refuse to mention that possibility because it is very unpopular. So if no new revenue is forthcoming, but per employee costs are going to rise, then logically there will have to be fewer employees. So many government workers are going to lose their jobs if Issue 2 goes down to defeat. Now many union leaders will tell you that is OK – that maintaining higher wages and pushing benefit costs onto government is worth the layoffs. I’m not sure where the general union membership stands on that, however.
Another thought – Governor Strickland was able to appeal to Washington for $8 billion in stimulus funds to close the gap on the second biennial budget of his term. Ohio’s economy was already producing a lot less revenue at that time, but Governor Strickland was able to hold off on difficult cuts because of the stimulus. It was clear to everyone that a second stimulus was not coming the 2012-13 biennial budget, so the choice was going to be $8 billion in cuts, or an $8 billion tax increase to maintain the status quo. I’m pretty confident that Governor Strickland would have been able to raise no more than $1 billion in extra taxes, if that, had he been re-elected. Not even a democratic house would have been able to raise $8 billion in taxes on an Ohio economy suffering structural collapse.
So the cut in aid to local governments was probably inevitable given the economy. It doesn’t matter that Lancaster had a Republican or Democratic city council. I don’t see how the aid to local governments could be restored to 2008-9 levels unless a large tax increase was passed statewide, or it was pulled out of Medicaid. Because Strickland was defeated, Democrats are suffering zero political damage for the budget cuts. If the economy starts to improve, they could waltz into office, bump up spending just a little and get a lot of credit for restoring services.
I’m trying to be totally objective here, so if there is some revenue source that could have prevented these cuts that I didn’t understand, please explain it to me!