With the financial fallout from the coronavirus pandemic devastating state tax collections, Ohio Gov. Mike DeWine announced “significant” cuts in state spending on Tuesday.
DeWine announced the pandemic is prompting the state to cut $775 million in spending over the next two months and that he will not immediately tap the $2.7 billion rainy day fund.
“We are going to need that money, the rainy day fund, for next year and possibly the year after,” he said. “It could be a cold, lingering storm.”
In line for the $775 million in cuts for the weeks ending next June 30: K-12 school basic aid, $300 million; Medicaid health care for the poor, $210 million; higher education, $110 million; other agency spending, $100 million; and other education items, $55 million.
State tax revenue ending in April was $776.9 million below estimates on which the state budget was built, the governor said.”
“If we don’t make these cuts now, the cuts we will have to make next year will be more dramatic,” DeWine said. These decisions were not easy. We did not make them lightly, but they are necessary. As many of our businesses are making adjustments in this difficult time, so must our government.”
All agencies are shouldering budget cuts with the exception of the state prison system, DeWine said.
Ahead of the governor’s daily virus briefing to Ohioans, state health officials announced 495 more confirmed and probable virus cases statewide and 79 additional COVID-19 deaths.
The numbers boosted the overall coronavirus case count to 20,969 and the death toll to 1,135 since the virus first surfaced in Ohio slightly more than two months ago.
The new numbers followed the 560 cases and 17 deaths reported Monday and the 579 cases and 17 deaths reported Sunday. Deaths can be weeks old before they are reported to the state.
Franklin County reported another 109 new cornavirus cases and three more deaths, boosting its totals to 3,097 and 87, respectively.
In hopes of limiting the size of an expected rebound in new virus infections, the state plans increased testing and contact tracing of people exposed to virus patients as it gradually liberates Ohioans from a stay-at-home order and reopens the cratered economy.
Many retail stores and service businesses can open a week from today with mandated virus precautions.
The ordered closure of nonessential businesses during the pandemic and the accompanying loss of nearly 1.1 million jobs devastated Ohio’s economy — and the state’s tax take — while also increasing demand for social services such as Medicaid health care coverage for the poor.
Ohio businesses, of course, can’t withhold income taxes on the wages of employees not working and can’t collect sales taxes on items and services that are not sold, fueling the state budget shortfall.
Forty-six percent of the state general revenue fund is covered by sales taxes, 39% by income taxes. Local governments also have warned of budget cuts due to their decreased collections of the taxes.
Slightly more than three-fourths of the state’s general revenue fund is spent on only four areas: primary and secondary schools (35%), Medicaid (24%), higher education (11%) and prisons (7%).
DeWine announced significant budget cuts were coming on March 23 amid the public health emergency, instructing his cabinet directors to begin identifying reductions he said could reach up to 20%.
The governor also imposed a state hiring freeze — except for positions critical to dealing with the coronavirus pandemic — and forbid promotions that would carry pay increases. He also ordered state agencies to award no new contracts. He continued those orders on Tuesday.
DeWine since has consulted legislative leaders on how much to cut where.
The first year of the biennial $69.8 billion state budget must be balanced by the end of the fiscal year by June 30, compressing the coming cuts and spending maneuvers into less than two months.
In the longer term, DeWine and lawmakers must deal with reducing spending, and potentially making tax changes, in the second year of the budget ending in mid-2021.
DeWine said the state’s $2.7 billion rainy-day fund is likely to be tapped to fill holes for next budget year. Former Republican Gov. John Kasich guarded the fund against spending while rebuilding it during his eight years in office.
Lawmakers previously authorized the state budget director to withdraw money from the rainy day fund with the approval of the Controlling Board, a spending-oversight panel principally consisting of legislators.
State government faces its worst fiscal crisis since the Great Recession began in 2008. Then-Democratic Gov. Ted Strickland and lawmakers delayed an income-tax cut, imposed 4.5% budget cuts on most agencies and drained the rainy-day fund from $1 billion to 89 cents. Hundreds of state workers were laid off.
Shortly after DeWine announced planned budget cuts on March 23, The Dispatch submitted a public records request seeking copies of the reductions recommended by state agency directors. The governor’s office failed to provide the records in the intervening six weeks.